Debit versus Credit

Please, Do Your Own Research

I have friends who are completely anti-Obama. I’m OK with that. What I’m not ok with is when people make up their minds about things that they heard somewhere without ever bothering to find out themselves if it’s true or not. A little disclaimer: I’m leaning more towards Obama at this point. My mind is not made up yet, however, and will not be until probably a week before elections. I like to keep an open mind about things and I don’t know everything about either of the candidates campaigns yet. What I do know about them is that from what I’ve read and researched myself I prefer Barack Obama. He seems to be a better match than John McCain for our country and its’ needs. Like I said, this could change. I don’t agree with everything he’s preaching, but I agree with a majority of it. I think that’s the proper way to choose who to vote for, right? Who cares if the candidate is male, female, black, white, Cuban, Asian, Mexican or Puerto Rican. The point is that he or she is trying to do whats best for our country and that you agree with them.

I have two purposes for this post. First of all I want to get across my point that an uninformed decision is a bad decision. Period. Secondly (and relating to the first point) I want everyone to know about an untruth which has been going around about the Obama campaign. The reason for this? It’s a pretty important topic and I absolutely can’t stand all of the hate going around. It all goes back to my first point, of course. Do your own research before making up your mind.

So What If Your Girlfriend Is An Obama Hater

Here’s a quiz for you. Let’s say your significant other doesn’t like a certain presidential candidate and they feed you all of this information about him/her. Do you a) agree with your significant other or b) research it and make up your own mind. If you answered with “b” then good for you. If you answered “a” then please reconsider option “b.” Make sure that before you ever make any decisions that you always research and make up your own mind. This is one of the primary lessons that I’d like everyone to pick up on here at Debit versus Credit. This can be applied to every aspect of life, whether politics, finance or even your job.

Let Me Refute A Falsehood About Obama

I keep seeing information go around about how Obama is going to make everyones life miserable by raising taxes. This is a half-truth. Taxes will most likely increase under Obama’s leadership, this is true. However to blatantly spread lies about how even the poorest in the U.S. will have to take on a larger tax burden is completely unaccurate. I’d like to correct this misconception, so that people might be able to make a clearer decision. Obama will only be raising taxes for couples making more than $250,000 in taxable income and for single filers making more than $200,000 in taxable income. Income tax brackets will not change other than for these numbers. That leaves a huge majority of U.S. citizens right where they currently are with taxes. In fact they might even pay less taxes because Obama wants to introduce more tax credits for lower and middle class Americans.

Please don’t take my word for it. Also don’t think I’m trying to convince you that you MUST vote for Obama. Vote for whoever you feel most strongly for, but only after doing the research. Good decisions probably shouldn’t come that easy. Click Here if you would like to read more about what both McCain and Obama plan to do with taxes.

July 29, 2008
I Want To Invest In Solar
There’s big money in Solar energy. Huge money. Just think about it. The world is moving towards alternative forms of energy and right now the most accepted alternate form is solar. It’s relatively cheap and the technology has come a long way. The only downside is the amount of “acreage” that solar consumes in order to produce enough power to match an existing power plant. I don’t know how much more, but I’m sure it’s a lot.

With that being said I’m highly interested in investing in Solar Power. I just don’t know how. There’s a lot of solar companies out there and they’re not all likely to be around in 5 years when the industry has matured a bit. Of course you have your “lower-risk” money making stocks such as that of First Solar (FSLR) but it comes with a hefty price tag: $264.09 as of the close of markets on July 24th. That gives them a P/E ratio of 105.5! Doesn’t sound like such a good deal, does it? One little slip up in the Solar power industry and that stock could theoretically tank quickly. Keep in mind this is supposed to be one of the “safer plays.”

So why do I want to invest in something that sounds so absolutely voilatile? Simple. For two reasons.

I like to invest in things I use and believe in. I am a fan of green energy and likewise solar. I hope it succeeds and I hope that we can begin to use more of it over the next several years.

I recognize the potential. With greater risk comes the possibility of greater reward. Investing in the “right” solar company could make me much more wealthy and put me that much closer to my financial goals.

I came across an interesting article at stockpickr.com while researching solar today. It lists 5 stocks that could (keyword being could) have huge gains. I don’t know much about any of them with the exception of First Solar. Here’s the list:

Trina Solar (TSL)

First Solar (FSLR)

Canadian Solar (CSIQ)

Yingli Green Energy (YGE)

ReneSola (SOL)

Here’s the link to the article outlining the stocks as well as the reasoning behind why the author thinks they could soar. Like I said before I really don’t know what to think myself. I want to get involved in Solar investing. I just need to learn more about it so I don’t make a stupid mistake.
July 25, 2008
Let’s Talk About The Late Countrywide
If you own a home, pay attention to any of the business and financial news or have ever owned a home you probably know who Countrywide is. They are of course “America’s number one home loan lender and no one can do what Countrywide can.” Well Countrywide is no more as they’ve been purchased by Bank of America. It’s the end of an era. An era defined by the run-up in house prices and subsequently the decline of the U.S. housing market. There are a million reasons why Countrywide might be to blame for some of this housing crisis we’re facing and probably a million more why they are not at fault. The fact of the matter is that we are in a recession (so to speak) and that housing is the primary cause of said recession. So what’s Countrywide have to do with it?

Charged With Lying To The People

Countrywide (and now BofA by extension) is essentially being blamed for lying to the people and being unethical in their lending practices. Here are a few of the arguments against them, according to a recently filed lawsuit by California Attorney General Jerry Brown

Beginning in 2004 company executives loosened and possibly ignored lending standards and flattered home buyers into thinking that they could afford more house by offering low teaser rates not clearly defined.

Applied intense sales pressure for underwriters to process “60 to 70 loans per day” which made it all but impossible for them to take into consideration the borrowers ability to repay the loan.

Loan officers frequently overstated how much borrowers earned or “led the borrower into overstating is or her income without explaining the risk of default with a loan he or she could not actually afford.”

It’s obvious there were some shady practices going on at Countrywide over the last several years. The real question is how much has it really hurt the market? Do you have a Countrywide loan? I want to hear from anyone who has one and especially any one who has been hurt by an adjustable rate loan sponsored by Countrywide.
July 24, 2008
Don’t Fret About Your 401(k)

I’ll be the first to admit that losing money is hard. I’ve lost a decent chunk of change over the past several months, not only in my individual stock investments but also my 401(k) and a mutual fund. However I’m here to tell you that you need not worry over it. The stock market has its ups and downs and right now it’s just on a down note. Here are the top four reasons why you should not worry about your 401(k) and why you should continue to invest.

1.) The markets average around 10% a year over the long run.

Short-term markets have their ups and downs. Some years they lose a good amount of their value and some years they do nothing but gain, gain, gain. It’s difficult to be tolerant of the risks involved in short-term trading so in order to maintain sanity its best to maintain a long-term view of things. Just remember that your 401(k) might be losing money now, but when its time to retire you should have earned a nice large return off of it.

2.) Don’t forget about the law of dollar cost averaging.

Here’s an important rule to remember. Dollar cost averaging refers to the ability to reduce risk in an investment by investing a certain amount on a regular basis, rather than investing everything all at once. This way if the investment doesn’t do so well you don’t lose all of your money. This rule can also keep you from massive gains, but for those who are less risk-tolerant its truly a blessing.

3.) Economic worries are dragging down the market; these will eventually fade away.

Right now we are in a recession, so to speak. At the very least the American consumer believes we are and that right there is good enough to create one. Naturally these economic fears are taking a toll on the financial markets and the stock exchanges. Be patient and continue to invest and eventually the economy will be back on track and so will your investments.

4.) Buying now will increase your long-term returns.

Some great stocks are severely oversold at this point because of recessionary fears. This can lead to huge decreases in any funds you might be invested in. Buying more now while these markets are down will allow your returns to be much higher than they otherwise might have been if you were to just sit still. So don’t worry about your 401(k) or your other investments. Just continue to invest and things should start to look up.

July 23, 2008
Don’t Fall For Fraud Schemes

You’ve heard the saying: If it’s too good to be true, it probably is. In this case it was regrettably much too good to be true. It came back to bite someone in the ass and it bit quite hard. Let me explain.

I had a member come in today to talk to me about their account which was overdrawn by quite a bit. They were curious if there was anyway to file a dispute on a returned check. Unfortunately when a person deposits a check into their account they take full responsibility for it and in this case it hurt when it came back unpayable – it hurt bad. I don’t know the full story but I’m guessing that my theorizing is pretty close to what happened.

What Happened?

My members were probably looking for a way to make some easy money online. They might have heard about these secret shopper jobs where you get paid to spend another person’s money and then evaluate the service/products that they purchase and receive. They probably spent some time on the web searching for a way to do exactly this. They probably came across a website that looked legit and promised an easy job and easy money. Naturally they signed up for it and pretty soon they got a “cashier’s check” in the mail with some pretty simple instructions. Never mind the fact that the letter that came with the check has ridiculous spelling and grammatical errors. Or the fact that the company was requesting that my members wire back to one of their “agents” 81% of the amount of the check. Apparently this wasn’t enough of a warning.

Out $2,500 Dollars

What happened next? Well after my members followed the instructions on the letter and deposited the check into their account they went ahead and sent a MoneyGram wire to the “field agent” as part of their secret shopper test. Their assignment was to evaluate the MoneyGram service. Naturally this would require a wire transfer in excess of 80% of the amount of the check. Well shortly after the check was deposited and the money was wired the check was returned. They checked their account balance one day and saw that their account was overdrawn in excess of $2,000 dollars. Well there’s nothing I could do for them. They fell for it, I hate to say. We’re not going to take the loss, so naturally we pass it on to them since they deposited the check in the first place. I feel bad for them, but I can’t believe that they fell for it. The moral of the story? Don’t trust anyone, especially when it sounds much too good.

I’m going to be attaching a pdf of the document. You can find it at the bottom of this post, with a link called “fraud-letter.” Check it out. Read it. Memorize it. Don’t ever fall for it. If it sounds too good to be true (and repeat after me) it probably is.

fraud-letter

July 22, 2008
One Hundred Pushups

Have you heard about the One Hundred Pushups Challenge? I linked to it previously on one of my weekend reading posts. I also mentioned that I’d be bringing it up again because I’d like to take the challenge. Well consider this the beginning of my own personal One Hundred Pushups Challenge. I just – five minutes ago – finished taking the initial test. I was able to do 29 good-form pushups. This puts me in rank 3. Over the next six weeks I’ll be following the program to a t and at the end of the six weeks I should be able to – nay, I WILL be able to – do 100 consecutive push ups!

What does doing pushups have to do with personal finance? It’d be foolish of me to say that it has everything to do with it, but it’d also be foolish of me to say that it has nothing to do with it. Test after test has been undergone to see how much more healthy someone is that is in good shape versus someone not in good shape. Exercise allows our bodies to maintain good health and not only in our bodies, but our minds as well. Therefore I find a challenge to build strength and endurance very relevant to personal finance. Being in shape should allow for less disease and sickness which should allow for fewer doctor visits, prescriptions and possibly even lower health-insurance premiums. Not to mention the fact that a sharper mind might very well allow you the chance to get that promotion you’ve been looking for at work.

Take the One Hundred Pushup challenge with me. You might just be surprised at how well you feel and how relevant to your finances it can be.

July 17, 2008
Young Ignoramuses

How’s this for a hotly debated topic: Should credit card companies be punished for soliciting to youth and college age students? There’s many an argument out there in favor of punishing these companies for “hard-selling” their product to ignorant youth. I’d wager that there’s probably just as many arguments saying that these companies have no control over if someone misuses their credit card and gets in over their head in debt. After all the credit card company only provided the loan – it was the recipient who used more than they could easily repay. I tend to agree more with the second position. There’s only so many excuses that one can make for their lack of sound financial responsibility. I say it’s about time that we stop blaming everyone else for our own mistakes.

Hard Marketing – Hard To Say No?

I’ll not pretend that these credit card issuers don’t try to hard sell their products to students. Being a student myself I’m aware of the different attempts that marketers will make in trying to promote their credit card. They tout its features and even offer free gifts just for filling out and signing a credit card application. While I don’t necessarily agree with these hard marketing tactics I don’t feel that it is the root cause of so many college-age kids getting into too much debt. It may be hard to say no to these marketing tactics. I’ve had difficulties in the past saying no. It seems like such an easy way to get a free t-shirt or maybe a concert ticket. Not saying no, however, doesn’t automatically cause the applicant to have unmanageable debt. They do that to themselves.

Financial Illiteracy Rates Must Be Through The Roof

Why is it that financial education is so unimportant to so many people? It’s hardly taught in formal educational institutions. It’s sometimes taught by parents, but oftentimes so many parents are illiterate themselves. It’s not like the information is just completely unavailable though. With the mainstream appeal and availability of the Internet it’s easy to learn just about anything you could ever want to learn about. You’ve got sources such as traditional news sites, financial blogs and even education websites. With so much easy access to information there really isn’t an excuse for students – or anyone else – to be so ignorant. I strongly believe that personal finance should be taught at educational institutions. Children should learn at a relatively early age what makes the world go round and how to use it (money) to their advantage – rather than to their disadvantage.

Don’t Blame Anyone But Yourself

It’s obvious that a huge number of college-age youth are disadvantaged on strictly financial terms. After all why else would a College Freshman sign up for a credit card and be approved for a $2,000 dollar limit, only to have that card maxed out within a year and have no way of repaying it. It’s ludicrous. Sure maybe the credit card companies shouldn’t have solicited to someone with such little income. That’s a completely different issue though. If you don’t have the means to repay a loan – and credit cards are loans – then why would you borrow?

July 16, 2008