Lazy Man and Money

Tips on Investing in Non-traditional Options

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In today’s tough economic times, people are seeking to make investments that ensure the most return on their money. This calls for smart and sensible decisions pertaining to where and how to make the investment. Occasionally, it might also require that you look past the traditional investment options i.e. stocks, bonds, and mutual funds.

Non-traditional investment options are increasingly gaining traction among individual investors.

In addition to the group of investors seeking to diversify their traditional investment portfolios, a new crop of investors is increasingly putting money in investments well out of the mainstream as their primary investments.

Non-traditional investments are particularly attractive as they provide the investor with:

  1. Greater investment portfolio diversification beyond the traditional options
  2. Greater risk management options
  3. Access to investments and markets ordinarily inaccessible to regular individual investors

Devoid of the “head spinning” complexity of regular investments today, non-traditional investments are proving a worthwhile venture.

Some of the popular non-traditional investment options include:

1. Collectibles – Collecting things, albeit not a new activity, is fast gaining popularity as an investment option. People are increasingly buying collectibles with an eye on their potential returns.

While this form of investment could give substantial returns, working knowledge of the niche is required. Collectible prices have been known to fluctuate over short periods of time so it is important that one invests in them with “money they could afford to lose.”

2. Jewelry – People are increasingly looking at jewelry as a form of investment rather than focusing on its ornamental value. Businesses like www.frontjewelers.net are helping individuals generate more investment options by offering them franchise opportunities.

It is safe to say that jewelry as a money minting investment can only get better with time.

3. Real estate – Property is arguably the ultimate tangible asset. In contrast to other tangible assets, the price of property performs more consistently and there are numerous ways to invest in the industry. Some of the real estate investment options include:

  1. Investment in rental property – In this option, you acquire a real estate investment at a value substantially lower than the market value. The property is then rented out to tenants. To make the investment pay off, the you look at the price of the property appreciating and mortgage amortization.
  2. Owning your own home – This is a much simpler way to invest in real estate. You live in the investments. For payoff, you look at a combination of mortgage amortization and price appreciation.
  3. Real estate investment trusts – REITs let you invest in massive income-generating properties. Unlike the other real estate options, REITs do not buy real estate properties with a view of reselling them but to increase their real estate portfolio.

    REITs could be alternatively referred to as trust funds with high yields that invest in very big properties and sell on big markets.

4. Peer to peer lending – In the recent past, there has been a considerable growth in the number of lending clubs on the internet. These lending clubs help bypass all the bureaucracy involved in banks as loan intermediaries. The lenders also make good returns on their investments.

[Editor’s Note: I think I’d stick with the later two. After the Beanie Baby crazy of 1996 and its collapse, I’m not big on collectibles. I don’t know the first thing about valuing jewelry. I can look up the price of gold, but I judge the qualify of craftsmanship or style to make it worthwhile.]

Clever Ways to Improve Your Personal Credit Score

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Your credit score has a huge impact on your financial status. Lenders use these scores to determine if you qualify for a loan, as well as the dollar amount of the loan and the rate of interest. Improving your credit score can lower your cost of borrowing by hundreds or thousands of dollars over the life of a loan. Here are some tips to improve your credit score.

Do the basics first

Make sure that you’re doing the basic steps to improve your credit. Start by taking a hard look at your current debt levels and spending habits. Create a monthly budget for yourself. The budget doesn’t have to be fancy- you can it write down on notebook paper.

To create a budget, review your recent bank and credit card statements. Look at the detail to determine where you’re spending. One easy way to cut down on spending is to reduce dining out. How much are you spending a month on that activity? If you have a plan to buy groceries and prepare meals, you’ll avoid eating out at the last minute.

This article explains that maintaining a savings account can help you repair and improve your credit score. A savings account shows potential lenders that you have financial self-discipline.

When you create that budget, include funds that go into savings each month. Make that savings account a priority. Investment professionals refer to this practice as “paying yourself first”. Set up an automated transfer from your checking account into savings each month.

Limit your credit use, and pay on time

Try to limit the amount of credit you use. Your budget will include the monthly payments you need to pay toward debt. The less debt you have (in total dollars), the lower your monthly payments will be. If your payments are a relatively small part of your budget, they won’t put a strain on your finances.

Make sure that you pay your debts on time. This article explains that payment punctuality and credit use levels account for 65% of the (credit) scoring equation. Not only do you need to budget the payments, you also need to pay them by the due date. Set up the due dates for your debts as an automated reminder on your phone or computer.

Find errors and follow up

As stated previously, your bank and credit card statements document your spending. Take a look at those documents when you receive them. Reconcile your bank account within 5 days of receiving the statement. Compare your credit card receipts with your card statement. If you find errors, follow up with your bank or credit card company quickly.

Individuals, as well as businesses, sometimes neglect this type of follow up. Say, for example, that your credit card firm posted your payment as being late. You can show that the payment was automatically sent from your bank account on time. The credit card company may be able to correct their records before reporting the late payment to any credit card bureaus.

Fixing incorrect data

If you find that incorrect credit information has been reported to a credit bureau, you have some options. Many credit repair companies, such as creditrepair.com, offer consumers tips to help fix their credit on their websites. These firms can help you understand the credit reporting process, and how credit bureaus are obligated to remove inaccurate information.

Use these tips to improve your credit score. A higher credit score can sharply reduce your cost of borrowing for years down the road.

Refinancing Your Home Through the VA

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If you are struggling with the interest rates and payments on your current loan, are looking to refinance, and are a veteran, active service member, you might want to consider looking into the loan options available through the Veteran’s Administration (VA). If you are a spouse, or surviving spouse, of a veteran or service member, you could also qualify for a loan guaranteed by the VA.

The biggest advantages of refinancing through the VA is that you can refinance up to 100-percent of your home’s value, even if you don’t have equity, and you don’t have to pay for mortgage insurance.

There are three options available to eligible homeowners: The Interest Rate Reduction Refinance Loan (IRRL), Cash-Out Refinancing, and converting a Conventional Loan to a VA Loan.

The Interest Rate Reduction Refinance Loan (IRRL)

This option is available to borrowers who already have an existing VA home loan. The IRRRL allows you to reduce your interest rate to reduce the monthly payments on your loan. You can also use the IRRRL to shorten the term of your loan, so that you can pay it off faster.

The advantage to the IRRRL is that the VA does not require a credit check or appraisal for you to qualify for the loan. It’s also possible to get the loan without having to pay out-of-pocket for closing costs and other fees. However, the fees for the IRRL are generally lower than they would be for a conventional loan.

The disadvantage to the IRRRL is that you can’t use an IRRRL for a cash-out refinance. Also, you might end up paying more in interest if you opt to shorten the term of your loan, or avoid closing costs. You also cannot use the IRRRL to pay off a second mortgage on your home, without first getting approval from the second lender.

If you have an existing VA loan and do not need a cash-out refinance, the IRRRL could be the option for you.

Cash-Out Refinance

This option is available to borrowers who already have an existing VA home loan and want to borrow against the equity in their homes. You can use the cash-out refinancing program to get money to put back into your home, and you can also use it if you have a double mortgage to consolidate them into a single payment, and possibly at a lower interest rate.

Just like the IRRRL, you can refinance up to 100 percent of your home’s value, but you will need to pass a credit check and have an appraisal of the property. However, you won’t have to make a down payment or pay for private mortgage insurance, and there will be limits on the amount that you’ll have to pay in closing costs.

If you have an existing VA loan, a strong credit history, and need cash-back, a Cash-out Refinance could be the option for you.

Convert a non-VA loan into a VA Loan

The process of converting a non-VA loan into a VA loan is similar to a cash-out refinance. The difference is that you don’t already have a VA loan, so you also have to make sure you meet the VA’s eligibility requirements.

Once you meet the requirements, you’ll have the same advantages and disadvantages as someone doing a cash-out refinance on an existing VA Loan.

Getting a VA Loan

VA loans and IRRRL loans are both handled by private lenders like Lowvarates.com, who might also offer other refinance options the would allow you to use the equity in your home for a specific purpose, such as home improvement or debt consolidation.

If you have never applied for a VA loan before, you will also need to gather and submit the necessary documentation to get a Certificate of eligibility from the VA, which you will need to present to the lender.

Once you have proven your eligibility, the process of applying for the loan is similar to that of a conventional loan – the lender will do a credit check, appraise your home, and determine how much they can lend you. The only exception to this process in the IRRRL, for which there is no credit check or appraisal.

As you can see, there are a lot of advantages to refinancing through the VA, especially if you already have a VA loan. This is because the VA guarantees the loan, which gives both lenders and borrowers peace of mind. Because of that guarantee, you don’t need to make a down payment, you’ll have significantly lower fees and closing costs, and you can get some loans without a credit check.

If you are a veteran, active service member, or eligible spouse or widow(er), VA refinancing could be the best option for you.

Sometimes, Luxury is the Most Financially Sound Option

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[Today’s article comes from a new author, Megan Sullivan. She’s got a different perspective on personal finance, that I don’t necessary subscribe to, but I thought it was worth exploring. It’s probably because I’ve got two small kids, but I’d certainly value a couple of trips to Applebee’s. You’ll see what I mean in the article below.]

What makes something affordable? Is it really only a matter of the price tag? You might think so at first glance. But closer inspection reveals a more nuanced truth. If I offered you a used Yugo for $10,000, you might balk at the idea, and rightfully so, as the best of them didn’t cost that much when they were new, and actually being made. Whatever stock there is remaining has certainly not gone up in value. But what if I offered you a brand new Mercedes fresh out of the factory for that same $10,000? Suddenly, it is the most affordable thing you’ve ever heard of. What changed?

Affordability, cost effectiveness, and financial soundness (whatever term you prefer) are all relative. In a vacuum with nothing else available for comparison, those concepts are meaningless. So if you find yourself looking to make a big-ticket purchase, regardless of what you might have heard, there are times when the luxury item is the more financially sound decision. Here are a few factors to consider:

How Long Will It Last?

Back in 2006, nbcnews.com did a report on the life expectancy of the average automobile. Based on data from Consumer Reports, it was about 8 years. That is not particularly impressive when measured against the fact that 1995 Mercedes Benz parts are still being bought on aftermarket sites by happy owners of a 20 year-old vehicle. With reasonable upkeep, those cars are still going strong, with no signs of stopping.

In financial terms, what is a financially sound amount of money to spend on a car? A big part of the answer is dependent on how long you plan to keep it. If you are going to turn it over every two to five years, you should probably think about leasing. If you plan to keep it for a long time, and even pass it down to your kids, a luxury car that is built to last could make a lot more sense.

How Important Is the Experience of Using the Product to You?

Sticking with cars, do you consider driving a utilitarian function, or is it an experience worth savoring? If you are the type of person who only cares about getting from point A to point B, then utility is all that matters. You are unlikely to place a very high premium on experience. However, if the drive is more important than the destination, you may be willing to accept less utility for a greater overall experience.

Safely getting from point A to point B is a necessity. Any experience above that is a luxury. Perhaps that experience you seek is sudden acceleration, raw speed, or race-track performance. Those are still luxuries just as much as heated leather seats, mahogany accents, and foot-massaging floor mats.

If those are the experiences you desire, then you don’t save any money by purchasing something without those features. You will not be happy with your purchase. You might even buy a bunch of expensive, aftermarket modifications to try to get what you should have bought in the first place. There is no substitute for experience.

Does It Scratch the Itch?

How much anxiety and dissatisfaction are you willing to put up with over not getting what you really wanted? When a company offers an inferior product at a steep discount such as two for the price of one, they are hoping to make up for in volume, what they cannot offer in ultimate satisfaction. You don’t want two meals at Applebee’s. You want one great meal at Ruth’s Chris. You don’t want two Blackberry phones. You want one iPhone. You don’t want two Chromebooks. You want one MacBook Pro.

Accumulating a bunch of “reasonably priced” items that you don’t want is not nearly as efficient as getting the one thing that will satisfy you in the first place. The same is true for allowing price to trump experience and longevity. When it comes to making the most financially sound decision, sometimes the luxury item is the better deal.

Skint to Mint: How We Messed Up Our Finances and Came Out on Top

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[The following is a guest post from Maria Nedeva, owner of The Money Principle. I met her at Fincon a couple of years ago and we just hit it off. She’s the proverbial smartest person in the room, so I knew she was going to deliver an awesome guest post. When I read it, I thought, “This is exactly how we’ve been able to save hundreds of thousands of dollars over the last decade.”]

I have a story to tell.

But first I want to say ‘respect’ to Lazy Man. I’ve long admired the honesty, passion and moral stance of Lazy Man and Money: love the blog and like chatting to the man behind it. Oh, and I have wanted to guest post on it for about a year: I just never got the guts to ask. This is why I jumped at the opportunity when Lazy Man asked me to guest post. Of course I wasn’t going to miss talking to you.

And as I said, I have a story to tell.

In January 2010 we were approximately $160,000 (£100,000) worth in consumer debt. At the end of January 2015 we have approximately $160,000 (£100,000) worth of liquid savings and investments.

We went from financial ‘suck’ to ‘rock’ in five years.

People ask me how we did it and expect a story of epic struggle and sacrifice.

What they get is the story of a university professor who researched, learned, analysed and worked out hacks.

What they also get is the story of a woman who had had enough of debt and acted on every single hack she worked out.

That’s me!

Maria Nedeva, Owner and Mistress Supreme of The Money Principle.

Now you have to make a choice.

You can either go on The Money Principle and try to find your way around the nearly 800 blog posts I’ve written and published on paying off debt, money management, saving and investing, making money and retirement;

or…

… You can stick around and learn about the three things that helped us turn our finances around.

It’s your call but I’d stay put if I were you.

What paying off debt fast is really about?

People will tell you that paying off your debt, and more generally building wealth, is about living below your means.

Hard to argue with something as obvious.

Still, important as it is, living below your means is not enough. Here are four hacks you’d do well to remember:

Hack 1: To pay off your debt – and to pay it off in record time – you should watch your cash flow as a hawk. Oh, and your single point of focus should be how to increase your cash flow, not your debt.

Hack 2: Don’t strip spending down to bare necessities. Allow yourself some of the things you love and learn how to do them differently and much cheaper.

Hack 3: Learn how to make more money. Don’t wait for your big break. Just start doing something. Check out some ideas about how to make money enough to fill your fridge or to pay your monthly bills on The Money Principle. Trust me; babysitting is not even on the list.

Hack 4: Put every penny of your increased cash flow on your debt. Open a beer and watch it crumble.

That’s it. You have to do a lot of other things as well but these four hacks are what matters; the rest follows.

We paid off $160,000 (£100,000) worth of consumer debt in three years. You can do it too!

What does it mean to be a ‘frugal artist’?

Quite a few of my blogger friends are on the frugality side.

So is much of personal finance in the United Kingdom – frugality is respected and admired while making money and investing is seen by some as an expression of greed.

I never bought into the frugality mind set.

Don’t misunderstand me. I like to make my money go further just as much as the next woman; or man, for that matter. It is just that I like to stretch my dollar without losing quality of life.

And I like to make more dollars so that my money stretches even further.

I know, I’m weird like that.

I came up with the idea of ‘frugal artistry’ and have even written a manifesto for frugal artists.

In a nutshell, ordinary frugality and frugal artistry are different in the following:

Frugality as an art formOrdinary frugality
ThinkingComplex thinking accounting for a number of factors.Absolute thinking considering very limited factors.
ConcernsBroad concerns including quality of life and relationships.Narrow financial concerns.
Time horizonLong term prospects.Short term gains.

Put another way, making our bread saves us close to $50 per month. If it were only for the saving, though, I won’t do it. I do most of our baking because, apart from saving money, it helps me relax and is much healthier than buying bread with a ton of additives. This is what being a frugal artist is about.

Buying a cheap suit can be part of ordinary frugality. It saves you money in the short run but is very wasteful long term. One, cheap suits need to be replaced sooner and you may find that ultimately you spend more. And two, wearing cheap suits can jeopardise a promotion at work.

Becoming a frugal artist is worth it. This way, you can make your money go further without loss of quality of life.

What is the ERR strategy for money management?

The ERR strategy for money management is about three things:

  • Eliminate (waste);
  • Replace (what you do and/or how you do it); and
  • Reduce (consumption).

Using this strategy assumes you already have a budget. If you don’t have one, you should.

I came up with this strategy for money management to bring together three very important sides of keeping your budget as lean as a Hollywood starlet without depriving yourself. It was featured on LifeHacker’s blog Two Cents as a way to practice frugality.

I suppose it is.

Eliminating waste is about two things: not wasting food and not paying for things you no longer use or you can get cheaper without loss of quality. We, for example, cut over $3,000 of monthly spending by buying only what we cook, finding competitively priced insurance and planning our entertainment carefully.

Replacing activities and routines is about becoming a frugal artist. Can you impress your friends by cooking a three course French dinner rather than going to a restaurant? Do you have friends who have a summer house and can you borrow it for couple of weeks? Can you barter for some of the services you need (for example, do the neighbours garden if they babysit your kids twice a week)?

Reducing consumption is easy to understand. We all over-consume. We drive to the gym. We have rooms full of clothes we wear couple of times and discard. We over-eat, over-drink and over-indulge. Do you really need 30 pairs of shoes?

Go try the ERR strategy. You’ll shave off 20%or more of your monthly budget, I guarantee.

Finally…

Now you know my secrets.

Turning your finances around is not hard if:

  • You watch your cash flow and increase it continuously.
  • Teach yourself to be a frugal artist.
  • Apply the ERR strategy for money management twice per year.

You know what is the best part of all this?

Once you make the three things I was telling you about into habits while you are paying off debt these are easy to keep when you finish with the debt. And the wealth just keeps growing.

This is our story.

Care to share yours?