So should you refinance now to lock in the best rate on your mortgage? If you were planning to do so anyway, sure. But the bigger question is whether refinancing makes sense for you in the first place.

In some cases, refinancing almost always makes sense. Let’s say you have an adjustable-rate mortgage (ARM). ARM’s are extremely risky, as your rate and monthly payment can increase greatly when the loan adjusts. In a split second, your manageable $1500 monthly payment can turn into a crippling $3000 payment. If you have an ARM, you should refinance to a fixed rate as soon as possible, period.

If you already have a traditional, fixed-rate mortgage, you’ll need to do some calculating to determine whether it’s worthwhile to refinance. Here is some key information you’ll need to know: 1) how long you expect to own your house, 2) what rate you can expect on your new loan, and 3) how much you expect to pay in fees. A lender can help you estimate the last two.

Once you have estimated these, you are ready to calculate your break-even point. This is time it will take for your monthly savings to exceed to amount you will pay in fees to refinance. Here’s how:

1. Use a mortgage calculator to estimate your new monthly payment.
2. Subtract the new payment from your current payment to see how much you’ll save per month. For example, if your current payment is $1500 and your estimated new one is $1350, your monthly savings is $150.
3. Divide your estimated refinancing fees by your monthly savings. In our example, if the refinancing fees are $2745, we divide by our monthly savings of $150 for a breakeven point of 18.3 months. This means it will take us about 18 months to break even on this refinance.

If we plan to keep the house much longer than 18 months, it makes sense for us to refinance. Otherwise, we stay with the current loan.

Other factors like taxes can complicate things a but, but calculating your breakeven point is a good rule of thumb for deciding if a refinance is a good move for you. If so, then don’t wait to lock in your rates. They have nowhere to go but up.

The truth is, mortgage life policies are nothing more than life insurance that costs four times too much.  Just get a plain vanilla term life insurance for the right amount (10x your salary) and your beneficiary can pay off the mortgage when you die. If you are stuck with a mortgage life policy now, make sure you have a good term life policy and then cancel the mortgage life.

Readers, what do you think? Did you get stuck with one of these policies and regret it? Or do you think they’re worthwhile? Share your thoughts!

At this point in our journey out of debt, my husband and I had paid off a couple of smaller debts and were pressing forward on the larger ones.  We came to realize that “pressing forward” often meant one step forward, two steps back, but we were determined to finish the job.

We had many reasons for wanting to get out of debt, but one of the greatest was my desire to be a Stay-at-Home Mom.  We needed both our incomes to make all our monthly payments, and that meant I had to keep working.  We had a great babysitter for Bub, but that wasn’t the same as being home with him myself.

On top of that, we wanted another child, but the thought of leaving a new baby with the babysitter was very. . .upsetting.  If we could pay off our debts, we could get by on my husband’s salary and my part-time job teaching online classes–and I would get to stay home with the kids.  That was an extremely powerful motivator.

I wanted another baby in the worst way. Bub wanted a baby brother in the worst way.  I can’t tell you how hard it was to hear him pray for God to send him a brother, knowing that one wouldn’t be coming any time soon.  All because of our STUPID DEBT!  I started to get mad at the bills (in a good way).  I saw them as thornbushes standing between me and my second child, and I wanted to hack them away as fast as possible.

So we kept hacking away.  Another bill paid off.  Then another.  Now the car payment was the only debt left. Unfortunately, it was also the largest.  But we kept on hacking.

What we really needed was a better tool to hack with. More on that next time.

However, I’m not exactly going it alone. I’m using Investools. If you’ve ever been to a Get Motivated seminar or seen Phil Town on CNBC, you’ll know the tools I’m talking about. (Hint: Remember the red and green arrows?)

Now, please keep in mind that I have no affiliation with Investools and am not being paid to write about them. In fact, I have researched Investools online and found that many people are put off by their heavy-handed sales techniques. I probably would be put off as well, but I didn’t follow the usual route to getting access to the “good stuff,” meaning the educational material and Investor Toolbox.

It seems that Investools wants you to attend a two-day workshop, in which they spend half the time teaching you about investing and half the time trying to upsell you on extremely expensive investor education.  We’re talking upwards of $20,000 for the PhD program.  The PhD program may be wonderful, but I don’t have that much cash lying around, and I don’t want to listen to some slick cheerleader pressure me to put $20,000 on my credit card so I can partake of this wonderful program.

Rather that enroll in one of their courses, I just subscribed to the website (it’s $159 for 6 months) and am using the excellent educational materials they have online–starting with the Investing Foundations course. I have learned a great deal from it.

The basic premise is to pick stocks that are fundamentally sound, and then use technical indicators to time your entry and exit points.  Three green arrows means it’s time to buy; three red arrows means it’s time to sell.  This isn’t day trading–generally you will hold a position for several weeks or months before selling.

On Monday I used the tools to pick out my very first stock portfolio. I bought AAPL, CKSW, FUQI, and HDB based on fundamentals and indicators from the toolbox. I also bought GOOG as more of a long term investment because it appears undervalued, although my entrance timing was not great. All but HDB have gone up, and the portfolio as a whole is up 3.6% in just three days.

I may be having beginner’s luck, since the markets are having a good week. However, I must point out that the arrows were very accurate in predicting when the stocks were about to jump. It certainly wasn’t any great knowledge or skill on my part.  So I think I’ll keep using Investools and report back in a few months.

So, readers, do any of you use an investing suite or online research service?  Was it worth the money?  Can you do as well on your own for free?  Please share.

Note: This is Part 4 of my “Get Out of Debt” Journey series. You can find the other posts in the series here.

My husband and I had finally gotten serious about getting out of debt and had been slowly making progress for several months. Although we faced the usual difficulties that come with living and breathing, we soon discovered that the biggest obstacle was ourselves. Our own enthusiasm and motivation were starting to fade, and we were getting a little sloppy about sticking to our budget. We needed a support system to keep us on track.

At the time, I was participating in an online forum that focused on credit cards and consumer debt. The folks on that message board gave me another set of accountability partners, in addition to our classmates in Financial Peace University (FPU). Having a support group is extremely important to anyone pursuing a long-term goal, whether it’s weight loss, getting out of debt, or getting a college education. The great thing about the online forum was that many of the posters were further along in the process than I was, so I got to seem them do a “victory dance” when they finally paid off that last bill. It was very motivating.

Sometimes I had to post messages to my online friends to psych myself up. Here is one post of mine from 2004 to show you what I mean:

“Before now, we’ve been making extra payments willy-nilly, then slacking off every time something came up. Problem is, something’s always gonna come up. But starting now, we’re getting lean and mean.

No more eating out every time we get tired. We’re putting $100 a month in an envelope for “blow money.” When it’s gone, no more fun and games until next month.

The Dodge Neon needs a new air conditioner. It will have to wait. I only drive five miles to work, and I can stand to be hot for ten minutes. Fixing it will be our reward once the other car is paid off.

The Ford Taurus could use some dent repair and a new paint job. Tough. It can wait until the credit card debt is all paid off.

No more using the Emergency Fund for non-emergencies. I have about $200 in my Paypal account that we can use for Christmas. Any other non-budget items will have to be negotiated at a family conference. According to the snowball calculator, we can be debt free (except the house) in about 18 months. Yippee! Now for the hard part–DOING IT!”

We had a couple of smaller bills that we were able to pay off within a few months. It felt so good that I took one “Paid in Full” receipt and hung it on the refrigerator for several weeks. It made me smile every time I looked at it.

But I also had a much bigger motivator to keep me going.  I’ll tell you about it next time.

Note: This is Part 3 of my “Get Out of Debt” Journey series. You can find the other posts in the series here.

At this point, we had our starter emergency fund ($1000) in place and were ready to tackle Baby Step #2 in our Dave Ramsey-style Total Money Makeover. We had figured out a budget that more or less worked for us, and were excited to have finally made some progress.

In FPU class, Chet and I learned about the Debt Snowball process. The idea is this: Make a list of all debts except the mortgage, smallest to largest. Throw as much money as possible at the smallest debt until it’s paid off, making only minimum payments on the others. Once the smallest debt is paid off, take the money you had been spending on that payment (plus any other money you can find) and attack the second debt. Repeat until all debts are paid off.

The idea is very simple, but very effective. It was extremely liberating to have a step-by-step plan to focus our energies, instead of spreading it out over several different goals. It helps you stay motivated and not get overwhelmed by a dozen different financial goals you “should” be pursuing. Instead of a dozen, we had ONE goal–one bill to pay off. All our extra time and money went toward that ONE tiny goal. When it was done, we moved on to the next one.

The process was simple in theory, but difficult in practice. For example, the air conditioner gave out in my car. Do we shell out $450 to replace it so I can be comfortable on my ten-minute commute to work, or leave it alone until we get some bills paid off?

We lived in a new house with no automatic garage door openers. Do we buy some, or keep paying off debt, grit our teeth and keep manually opening the doors for a while?

When I came home from work tired and didn’t feel like cooking, should I dip into the debt snowball money for a nice restaurant meal, or just suck it up and cook something?

People often criticize Dave Ramsey for advising people to pay off smaller bills first instead of bills with the highest interest rate.  It doesn’t make sense until you follow a family through the process.  We need to feel those little wins, especially in the beginning.

The fact is, getting out of debt was a tough slog for over a year. We were working extra jobs and selling stuff, but not getting to “enjoy” the money. It all went to paying off bills, or at least that was the plan. Sometimes we messed up. Sometimes we gave in and blew money that had been budgeted for something else.

But we got back on the wagon and kept trying. I tried to find ways to get excited again when the initial “rush” started to face away. More about that next time.

The good news is that cooking for a large group doen’t have to break the bank. Budget cooking for a crowd is possible if you follow a few simple tips.

Plan ahead.
Mark the date on your calendar as far ahead of time as possible, and start planning your menu immediately. Clip coupons that correspond to your menu and watch the grocery store ads. The best grocery deals happen when you combine sales with manufacturer coupons. You can buy your nonperishable or frozen items (don’t forget that fresh meat can also be frozen) in advance this way.

If guests offer to bring something, let them.
I agree with Miss Manners that it’s rude to ask guests to bring food to your party, but it isn’t rude for them to offer–or for you to accept their offer. No need to turn down free food!

Consider “big pot” meals.
Spaghetti, chili, stew, chicken and noodles, red beans and rice. . .they taste great and use inexpensive ingredients. They are easy to make in large quantities, and as an added bonus, they’re also easy to clean up.

Other inexpensive treats.
Here are some other party goodies that don’t cost a fortune:
-deviled eggs
-pasta salad
-tuna salad
-homemade bread or rolls
-snickerdoodle cookies
-shortbread cookies

What are some of your favorite ideas for budget cooking for a crowd?

What do you think about using cash to help manage spending? If you’ve tried it, how did it work for you?

To quickly recap Part 1, my family was $25,000 in debt with no savings, and seriously stressed out. Chet and I had enrolled in Financial Peace University, and were excited about the prospect of becoming debt free. 

Our first class got us even more motivated. We met others who were in similar circumstances . . . some a little better, some a little worse. Our instructors had recently completed the class themselves. They explained that the concepts had greatly improved their lives and hoped the same would happen for us.  Then we watched the first video. Dave Ramsey gave an overview of the program, and we learned that our class would consist of seven Baby Steps. Step One was to get $1000 in the bank for a starter emergency fund.

Dave told us we needed to  put $1000 aside within one month. At the time, I thought he was crazy. We could barely pay all our bills, so how could we come up with another thousand bucks within a month? Then Dave told us how to do it. Sell a bunch of old stuff. Work extra hours or take a second job. Cut expenses. Or preferably all of the above.

So we did just that. We had some college textbooks lying around that we sold on Half.com. I took a second job teaching for the University of Phoenix. Chet taught summer school. We got on a written budget and cut back on expenses like eating out. I started clipping coupons and stockpiling groceries when they went on sale.

Within a month, we had scraped up $1000. We were proud to report to our classmates that we had completed Baby Step One. Now we could get serious about attacking the debt. Or so we thought.

Due to the recession, hotels and airlines are prepared to negotiate hard for your travel dollar. Priceline  makes it easy to name your own price and get the most bang for your buck. You can use the link below to get started. Happy negotiating! 

Save up to $325 on your Vacation Package at priceline!

If you don’t have health insurance due to unemployment (or any other reason) you need to get insured. Even if you’re afraid it will be expensive or you won’t be accepted, the simple truth is that you can’t afford NOT to have health insurance. Here are a few reasons you should not delay another minute before you get started.

Reason #1: The Clock is Ticking
If you lost your job recently, you have exactly 62 days under the HIPAA law to find new coverage in order for your pre-existing conditions to be covered. That isn’t much time! You need to get a certificate of creditable coverage from your former employer to prove you were previously insured. It can take up to six weeks to get approved once you apply, so you have very little time to waste. What this means is that you need to start applying for coverage NOW.

Reason #2: COBRA is expensive
If you asked your Human Resources department for the cost of continuing your coverage through COBRA, you likely were shocked. . .and not in a good way. The price includes both the portion you were paying and the portion the employer was paying. There’s no other way to say it, COBRA insurance is expensive stuff. You can almost always save money by buying your own individual coverage. Why? Because you can customize your own plan when you buy an individual policy, and won’t have to pay for things like maternity coverage if there’s no chance of you getting pregnant, or for smoking-related illness if you don’t smoke. If you’re young and relatively healthy, the price will be even lower. Also, you can set your own deductibles and co-pays when you buy medical insurance. If you are willing to take on a higher deductible, your premium will go down.

Reason #3: A Medical Emergency can lead to Bankruptcy
Did you know that medical expenses are the leading cause of bankruptcy in the United States? It isn’t hard to see why. A prolonged hospital stay can easily run $50,000. Without medical insurance, could you afford to pay a bill like that out of pocket? Most people would have to file bankruptcy, and see their credit scores trashed as a result. Don’t let that happen to you.

In short, you need health insurance. The good news is that the internet can make the process go much more quickly and easily for you. Sites like EHealthinsurance.com and Netquote can compare quotes from all the major insurance companies in just a few minutes. I especially like EHealthinsurance.com because it lets you electronically sign your application, which speeds up the process even more. The sooner you apply, the sooner you can get accepted. Now go do it!

By Jim Saccacio, RealtyTrac Chief Executive Officer

If you feel like the escalating costs of real estate have priced you out of the market, think again. It may be time to investigate the vast opportunities available in the foreclosures market.

For people willing to do a bit of homework, the foreclosure market offers some of the best opportunities available in real estate today. Experts point toward significant growth in available foreclosure properties, so there’s never been a better time to line up your resources and educate yourself about this previously hidden market. It’s not unusual to save from 10 to 30 percent of the market value on a foreclosure property, and certain properties offer savings of 50 percent or more! There really are bargains out there. You just have to know where to look.

Web-based services such as RealtyTrac give consumers access to foreclosure and pre-foreclosure information that was previously available only to professional real estate brokers and investors. Today, homebuyers can use these services to identify and research potential home purchases, as well as to find the tools and professional resources they need to help them close the deal.

The keys to a successful foreclosure property purchase are diligence and patience, along with taking an educated approach to investing in this market. RealtyTrac CEO Jim Saccacio offers five tips to help you close a deal on a foreclosure property:

1. Learn about the different types of properties and the foreclosure process. Not all foreclosures are the same! You need to educate yourself on the difference between the three basic types of properties, including notice-of-default (NOD), notice of trustee sale (NTS), and real-estate-owned REO, as well as the positive and negative aspects of buying at each stage of the foreclosure cycle. As a rule of thumb, the best savings can be made at the pre-foreclosure stage, where home owners can avoid a foreclosure and lenders can save the time and cost involved in going through the process. Another critical point in the process is immediately prior to the auction date, when all parties might be most open to a last-minute solution.

2. Secure financing early. It’s important for a buyer to be pre-qualified before engaging in discussions with a seller. This ensures that the buyer is in a financial position to purchase the property, and is in the strongest possible position to negotiate. Sites like Lending Tree can get you pre-qualified quickly while interest rates are still at historic lows.

3. Engage a real estate agent as a “buyer’s representative.” There’s a distinct difference between a buyer’s and a seller’s representative. Buyer’s representatives have the home buyer’s interests at heart, and are charged with finding the right property and negotiating the best price for their clients. Picking the right real estate agent will make your life much easier. Ideally, select an agent who specializes in the foreclosures market and has specific experience in REO properties.

4. Do your homework. Purchasing foreclosure properties is somewhat more risky than buying traditional real estate properties. But, with that risk comes reward in the form of much higher potential savings. With the right examination and due diligence, buyers can significantly reduce the risks. As with any purchase, timing is everything! But, it makes sense to give any property under consideration a thorough examination, including determining its condition and value, finding out the amount in default and the remaining loan balance, and running a legal investing report to make sure the property is free of any financial liabilities. Of course, it never hurts to foster a positive relationship with the seller!

5. Make a realistic offer. If you want to be taken seriously as a buyer, you must be realistic when preparing an offer. Lenders aren’t likely to give properties away, particularly in a real estate market where prices continue to rise. Additionally, homeowners in financial distress may be difficult to deal with, particularly early in the foreclosure process. An educated buyer—one who knows how much is owed on the property and what its market value is—can usually come up with a realistic offer; one that offers significant savings, while meeting the requirements of the lender.

To help fill in the some of these little-known gaps, I’m starting a series of posts about how my family actually did it. So without further ado, here is the first installment.

Part 1: How we started

The year was 2004. At the beginning of our journey out of debt, my family consisted of me, my husband Chet, and our three-year-old son “Bub.” We had approximately $25,000 in credit card and car debt, and we weren’t happy about it. At the time, Chet and I were both working outside the home, and we were living paycheck to paycheck. We were extremely lucky not to face any serious emergencies at that time, because we had less than $500 in savings.

We weren’t poor. We had good jobs and a 2000 square foot house, but we had a negative net worth anyway. In other words, we were broke.

Credit card minimum payments and car payments ate up about $600 per month of our take home pay. By the time we paid our house payment, utilities, food, and insurance, we had little if anything left over (or so we thought. . .more about that later). Nothing to save for emergencies. Nothing to invest for retirement. No college fund for Bub.

Our paycheck-to-paycheck lifestyle also created an extreme amount of stress. We fought about stupid things like how much to spend on clothing (because we had no money set aside for that, DUH!), whether we could afford to eat out or not, and how much to spend on gifts for family members. An unexpected car repair or a flat tire felt like a bomb exploding and blowing our fragile situation to smithereens. Paying the copay for Bub’s ear tube surgery was a major ordeal that took months to pay off. Our lives might have looked happy on the outside, but the stress we felt was huge.

I began reading The Total Money Makeover by Dave Ramsey and found that many of the ideas made sense. Debt is not a tool, I learned; it’s an unfortunate circumstance that should be avoided. Some of the advice seemed rather shocking at the time. I don’t need to have a car payment? Life insurance is not a good investment? Credit Cards are not a great way to earn airline miles? Fascinating stuff.

Then our church started offering Financial Peace University, a course and support group developed by Dave Ramsey’s organization. Since we approved of Dave’s basic principles already, we figured it was worth trying out. We might learn some interesting tidbits and make new friends. . .and maybe even reduce our debt a bit.

When we arrived at our first class, we thought we were pretty serious about getting financially fit. Turns out, we had no idea what “serious” really meant.

Stay tuned!

I just discovered a fun way for kids to learn about money management without even using real money. It’s called Moola Monsters, and it’s a set of trading cards that you give your kids for doing chores or as rewards for good behavior. The kids can then spend them on privileges or treats, save them for something bigger, or invest them (put them away for a set amount of time and get them back plus extra).

The cards themselves are extremely cute. Each one features a happy, non-scary monster with a special gift, like athletics or peacemaking. A Bible verse also appears on every card.

I tested them out on my three-year-old, with great results. The kid has been giving us a terrible time in the car–getting out of his car seat, pestering his brother, and other typical car mischief. We have started promising him a Moola Monster at the end of each trip if he follows the rules, and his behavior has definitely improved. We haven’t even told him about ways to spend the little critters; I think he just likes collecting them.

Other parents have come up with more creative ways to use Moola Monsters, such as:

• Having kids use cards to purchase junk food; healthy food is free
• Using the cards as currency to purchase computer time, Wii time, or TV time. Better behavior=more recreation.
• Using cards as rewards for physical activity
• Using cards as payment for household chores. 

Of course, getting tokens for good behavior is nothing new, but this system is nice for several reasons. The cards are easy to keep in your wallet or purse, which means you can provide quick rewards on the go. Kids can keep their cards in a wallet or coin purse. Very convenient!

I always try to mention negatives as well as positives for any product I review. I can only see two drawbacks with Moola Monsters. My older son, age 8, is used to getting real money for chores. He has said he wants to keep it that way. Of course, we could trade cards for cash, but that’s an added hassle. Also, I couldn’t tell if the cards are printed with non-toxic ink or not. I got concerned about that when I caught the little one chewing on a card.

Otherwise, I think Moola Monsters are pretty cool! We will definitely continue using them and look forward to setting up our own household token economy. You can check them out at http://www.moolamonsters.com/.

• You can Name Your Own Price on hotels and flights
• If the price drops after you book, they’ll refund the difference!
• Great last-minute deals
• Lower prices than other services like Expedia or Travelocity

I recently stayed at a three-star hotel in Dallas for $65. You can get steals like that all the time on Priceline. Give it a whirl and you’ll see what I mean. Have a great holiday weekend!

Although some people swear they use credit cards as a budgeting tool and don’t overspend with them, I am NOT a big fan of credit cards in any form. Here are a few reasons why I don’t like them:

• Even if you pay them off every month, most people spend 15-20% more with a card than they do with cash.
• You might accidentally miss your due date and get hit with a nuclear bomb in the form of late fees and jacked-up interest rates.
• Even if you always pay on time, credit cards are very sneaky and will often play dirty tricks–like moving due dates, changing terms of service, or “losing” your check to get you to pay late fees or interest.

The only smart use I can see for credit cards is to use a balance transfer to lower your rates on credit card bills or car loans you already have. In that case, you aren’t borrowing any more money, just paying less interest on your existing debt. My family did several balance transfers when we were paying off debt, and it helped shorten our payoff time by several months. But if you do get a new credit card, please don’t make any new purchases with it! The object of this game is to pay it off as soon as possible, not dig yourself into a deeper hole.

Don’t get me wrong, people can and do use credit cards responsibly. But credit card companies are often sleazy and play games that I just don’t want to play. They can keep their airline miles and reward points as far as I’m concerned. I’d rather have peace of mind instead.

Not knowing the whole story behind your question, I will tread very carefully here. . .like I used to do in marching band when we had to march behind the horses.

You mention having a good-sized emergency fund, but not whether you have any consumer debt such as credit cards or car payments. If you do, you should absolutely not make any nonessential major purchases until you pay them off. Otherwise, keep reading.

My rules for making any major (over $500) nonessential purchase are as follows:

1. You must be out of consumer debt and have an emergency fund of 3-6 months expenses.
2. You must pay cash for it (no financing your friend Flicka).
3. You and your spouse must agree on the purchase, or at least work out a tradeoff where each spouse gets to spend the same amount of money on a major nonessential item. You get a horse, I get a 48-inch LCD TV.

So that’s my financial take on things. I assume you’ve already addressed the logistical concerns like where the horse will live, who will feed the horse and clean out its stall, and whether you have time to ride/exercise it.

If you’ve read all this and still have a hankering for a horse, then giddy-up and ride-em cowboy.