Well, this was a pretty dramatic week for the mortgage market. There are banks taking more multi-billion dollar losses and the federal government preparing to increase loan limits for FHA loans and other loans that can be secured by Freddie Mac and Fannie Mae.  Oh and then there was the interest rate reduction by the Federal Reserve.

All of this is opening up things for the banks to reach out to people and refinance them secured with government money.  The banks have lost a huge amount of money and getting you to refinance could just be the thing they need to make some money and get closer to profitability.

Now before you go and get all patriotic sacrificing your hard earned wages and savings to refinance your house and bail out the banking industry, please, please take your time and review the deal very very closely.  Read every document, shop every offer and rate around.  If the deal goes south and they attempt to flip you into something that is less than desirable bail out.

DO NOT GO THE PAPERLESS ROUTE!

That is probably the most important lesson that mortgage borrowers have learned.  Demand to have your income verified.  Make sure they go over your tax paperwork even.  Do not let them push you into a more expensive loan that gives you a higher interest rate just so that you do not have to do as much paperwork.  This is one of the things that tricked many a borrower, yours truly included, over the last few years.  I was fooled once, but many people were fooled several times.  That promise of less work and an ‘easy refinance’ comes with a real financial cost.

We have all learned to ignore the freebies, the toasters, the camping gear, the karaoke machines and coffee grinders.  Now we have to learn to ignore the easy refinance and choose the road that is more difficult.

Oh and one other tip, don’t refinance before the end of the month.  Many people expect the fed to drop rates one more time!

This morning you might hear about President Bush’s Tax Cut stimulus plan.  He is releasing a newly revised stimulus plan today that would provide $800 for individuals and $1600 for married couples.  Bush hopes that this tax cut will achieve the same results that tax cuts in 2001 achieved as they helped to stave off a recession.  Back then the checks rolled in August and people spent the checks right away, buying lots of goods to help boost the economy either out of recession or in a way that cut it off before it really began.

I for one can and will use the money, but the reason why I will use the money is the same reason why this tax cut will not help the US avoid a recession.  I am going to take that full check and drop it on one of my credit cards.  That is the area where I have a need for an expense reduction both in monthly interest charges as well as in monthly payment requirements.  I am not going to go buy a new Wii or TV or clothes or any other stuff.  The reason is that I just bought a bunch of stuff for our household last month.  It was called Christmas and many Americans are going to do the same exact thing.

January is typically the month where people buckle down to pay off their holiday debt, bills, travel expenses etc.  This is not a spending month, this is a paying off debt month.

In the long term this tax cut is actually no tax cut at all.  Its more like a 1 year wash 2nd year tax increase.  That is because the tax cuts Bush wanted to make permanent are being completely abandoned to push this deal through.  So the money that we might benefit from today, basically comes out of our own pockets next year.  The year after that we pay more as well.

Now as  a general rule of thumb, when it comes to the government I’ll take a bird in the hand any day as its rare when the government actually delivers two in the bush, even when its Bush that is the one delivering.

How to Use Bush’s New Tax Credit to Save Your House from Foreclosure

Now I am going to put this money on credit card debt.  If you are working to save your own home from foreclosure, you should consider a different option.

A couple years ago if you had been given $1600, the smart money would have been to put that money into a directbuy home improvement, boosting up your kitchen, adding a bathroom or anything that might return you a home sales price of another $10k.  This year we are looking at falling home prices and possible foreclosures.  If you have a closing that is in trouble and the buyer is asking for some extra stuff, you might use the money to save the deal.  Unfortunately, that’s not likely for most people.

Odds are that if you are trying to save your home, you are better off using this money to make another payment and negotiate a refinance deal under one of the new FHA plans that is designed to help people on the cusp of trouble that have not yet defaulted.  If that isn’t an option, you might use the money to pay closing costs on an old fashioned (non-government backed) refinance. 

If you are not in trouble, you might invest the money in the stock market.  At about 12,000 the stock market is looking like a value play.  If stocks are not your thing, you might use the money to make an extra principle payment on your home or home equity loan.  This could save you money over the life of your mortgage.

Use the money to Get Green

If you wanted to remain true to the spirit of the tax cut, you might even use say $300 to go invest some money in LED light bulbs.  Upgrade the bulbs in your house with these energy saving bulbs and you will decrease your electric bill for the long term.  You can still use the remaining money to pay down debt, or just park that money in a rainy day fund.  Heck you could even bury some of that money in the back yard!

Can you live in a diamond ring?  Can a diamond ring keep you or your kids warm and dry?

The answer is no.  So why would you waste money on a Christmas gift this year that does you no good?

I’d suggest that instead of wasting money on diamond rings, you should consider doing one of the following things that will actually help you protect your biggest investment, your home.

Quite simply, make an extra house payment this month.  Save the money on presents you do not need and drop a grand or two on your house.  This is good for your own finances as it increases your equity, reduces your total interest expense and helps the US economy by putting money in the sector of the economy that needs it the most right now.

If you are not sure about your own finances as you look 3-9 months into the future, then take that same couple thousand dollars that you might spend on Christmas and park that money into a 3 month CD.  Renew that CD every 3 months, and if by chance you come up short for your house payment, this becomes your financial reserve for a rainy day.  It might just save you from foreclosure.

Similarly, if you want to help your finances tremendously, pay that money towards your credit card debt, do not spend any money on your credit cards and reap the rewards.

Lower fees, easier process, less credit checks or income verification, all of those things probably mean that you are going to pay a higher interest rate on your mortgage.  Lendors are like the mob in that they always take a sure bet, and their bets can be assured when they charge you enough interest to profit!

This video is a little dated, but the concept can definitely be extrapolated even in today’s mortgage crisis world.  Just because the industry is in ‘crisis’ over sub prime, it doesn’t mean they are not going to have a profitable year.  If Las Vegas could come up with a great idea to run into ‘financial trouble’, I’m sure they would like to go to capital hill for a bail out too!

I was reading an article on Military.com this afternoon titled seven ways to cut Child Care costs. They had some good tips but it struck me that they had only listed seven ways. I have three children and after going through some budget readjustments over the last year we have had to find a number of ways to cut child care costs.

Child Care expenses for us easily topped our house payment as an expense!

I’ll start off listing their 7 ways and then add my own additional ways.

1. Employee Discounts — Check with both your employer and your daycare provider to see if there is a discount available based on your company. For example used to work for Motorola and they had a partnership with takers across the country that enabled me as an employee to get a certain discount based on my salary. The general idea was that employees that burned lower salaries or wages would receive a bigger discount than those employees that had higher salaries.
2. Telecommute — An obvious way to lower your child care costs is to telecommute and watch her own kids. Now when you’re watching your own kid you definitely will not be as productive as as you might be if your kids were in daycare and you were working at home alone. However you can creatively rearrange her schedule such that you can watch your kids during the day, work at night then when your spouse is home and proceed from there.
3. Flex hours — by rotating your schedule just a bit media couple hours one way and your spouse a schedule another way by a couple of hours you might be able to cover the entire period that is currently being used for child care. Even if you can cut your child on the halftime you might feel to save money.
4. Community programs — see if there are community programs that you can enroll your child and it don’t cost money. Or the possibly cause less money. Then you might be what makes up daycare with the community programs.
5. School Programs — see if your state sponsors a school program. I lived in Georgia where they had a lottery program that funds prekindergarten education for four year old children. This is pre-K. and not daycare, but it’s paid for by the state. That definitely saves you money and it prepares you child for kindergarten, see if your state has a similar program. Some states cover select children in some states cover all children. In addition some states cover children with special needs.
6. Use Operation Military Child Care (OMCC) — the military provides childcare fee assistance for National Guard and reserve troops that are placed on active duty and deployed when their children are not in DOD licensed childcare programs already. This is also available to active duty members of the military
7. Relatives — if you have family members are capable of watching your children, you might see if they can do that. It will definitely save you money and to give your children time and opportunities to bond with other family members. Even if they could only watch your child a few hours for a couple days a week that might help you reduce your childcare bill.

Those are the ways that military.com mentions that she might be a little reduce job care bill. Here are some additional ways that might help you:

1. You could attempt to renegotiate a better childcare rate. Sometimes you can negotiate a slight discount or even a temporary discount to save some money.
2. You could volunteer at your child’s daycare potentially in exchange for discount.
3. You might even barter your own services in exchange for daycare services.
4. Make sure that you are utilizing depending care savings funds to save money on your taxes as it relates to daycare.
5. You should also make sure that you are utilizing the childcare credit allowed for an income tax law.
6. If you have an infant, try and make the extra time to pump breast milk instead of buying formula. This does require extra work as you know at the pulpit but you can freeze it and make sure that your daycare is stocked with the right type of milk. Formula is very expensive and this can definitely save you a lot of money and based on my experience and research it’s healthier for your children.
7. Potty train your children early. This is not easy but the sooner you can potty train your children, the fewer diapers you’ll have to buy. If you can make the time to train your children to use the potty it can save you money.
8. On occasion you can take turns watching your neighbor’s children and in exchange they can watch yours from time to time. This can save you the cost of a babysitter, and on those days when schools out but you have to work, you can even take turns staying out with a group of children while your neighbor works and alternatively, having your neighbor stale with all the children while you work.
9. Plan your vacation sets up the fallen school holidays. This is not always possible, but if you can make it work or lease plan to telecommute on these days you might be a little save yourself the expense of putting your children into afterschool care during those holidays.
10. Don’t pay for your daycare with a credit card, pay with cash or check you don’t need to pay interest on daycare. If you have a rewards debit card, such as a PayPal card, then you can get a 1% cashback savings when you pay for daycare with your PayPal debit card. If you pay for daycare and it costs you $400 a month for two children, that is close to $5,000 for the year. A 1% cashback discount is $500 and that’s a hefty savings!
11. Don’t bounce checks with your daycare. If you don’t have the funds don’t write the check. You don’t need to pay a bounced check fee to daycare.
12. See if there’s a scholarship available for the your child care program. Alternatively see if there is a grants available for any type of financial systems that you might be able to use towards childcare.
13. See if you can get a discount for paying in advance. I wouldn’t advise paying more than three months in advance, , however you could potentially get a bit of a discount if you pay three months in advance. It doesn’t hurt to ask especially at the financial means to do this.
14. Don’t have anymore kids. I say this half jokingly, but there is a truism here. My wife and I have three children over stopping in two. Our third child was a bit of a surprise, she was a good surprise, however financially additional children especially infants are expensive. If you have the luxury of planning, consider that child care is expensive. Put together a family plan of how you anticipate paying the expenses that will come from a new child in the family. Planning can only help you take better care of your children. Birth control however can save you a great deal of money and childcare.
15. Pay Your daycare bill on time. Pay on time so that you don’t have to pay late fees for paying late, but don’t neglect my rule above and bounce a check.
16. Use generic diapers and wipes. Unless your child has allergies, generic diapers and wipes can work just as well as daycare setting. You can oftentimes save 30% on generic diapers and wipes compared to premium brand-name diapers and wipes.
17. Choose a daycare that’s close to your home or centrally located between your job and your home. You don’t want to have to spend more time, or gas, traveling back and forth to the daycare. Pick a daycare that’s close and convenient and don’t go out of your way if you don’t have to.
18. Do everything in your power to keep your house clean and keep your children healthy. Children often times get sick at daycare and bring it home, or get sick at home and take it to daycare and get the other kids sick. Sick kids are expensive. Keep your kids healthy keep them clean and if your pediatrician agrees make sure they take their vitamins. You need every advantage you can get!
19. See if your state offers any tax credits for daycare or childcare programs.

That’s all I can think of right now, I’ve had children in day care or childcare for the last nine years. Some of these lessons above I’ve learned the hard way and some of them I’ve just recently learned, I’m sure there are many more so if you have some ideas or thoughts on how other people could save money on childcare please share them here and I will be happy to publish them and give you credit in any way that I can.