Subprime: The Business Falling Faster Than Britney Spear's Career

Subprime lending has received a considerable amount of attention from the major media lately. While I think that some of the negative attention is deserved, like everything the media needs a scandalous story and evil character to go after in stories. These lenders aren't without fault, but people are looking past the real issue.

Land contracts with balloon payments have been around for years in the lending biz. While I think excessively large increasing payments are ethically questionable. The biggest problems are 1) the lack of basic financial skills we possess as Americans, 2) people borrowing beyond their means and buying more house than they need, 3) eager lenders with relaxed lending standards.

Cheap, easy to attain financing is a great thing and one of the keys to people living the "American Dream." The problem recently has been that companies have extended this financing to people who were buying "investment property" or homes that their cash flow would not support. While the economy was growing fast and property values growing faster this generally wasn't an issue. As housing inventory increased the problems began. The subprime lenders had a problem in two respects first many people receiving loans were less than qualified and as the housing market turned and payments increased they were on the hook for payments they couldn't afford.

So why don't I think the problems going on now aren't the fault of lenders?

• Whether at subprime rates or market rates, unqualified people will receive loans -- they may just pay extra for the risk associated.
  
  
• Basic finance skills aren't taught in the U.S. Schools have a vested interest in teaching for tests which determines their funding. The vast majority of U.S. households are buried in "Bad Debt" with no signs of changing soon. Teaching fiscal responsibility needs to start at an early age. Americans do bestow the glory on those who take risks, but there are many more risk takers to fail than succeed.
  
  
• People need to educate themselves. There are a slew of resources online, some better than others, they can help you learn about any number of topics. Personal finance is no different. Banks are required to disclose in plain English the payments and interest rate of a loan. If you are taking out a loan and can't determine if the monthly payments outpace your monthly revenues you need to seek assistance or not take out the loan.

There are always cases of predatory lending companies, but I'm talking merely about companies that lend to borderline individuals. Not those that make loans to people who are clearly incapable of ever repaying. I am also not trying to imply that bad things don't happen to good people. Real life happens and people can lose a job, fall into bad health, or fall on hard times. I think people need to be accountable for their own actions. Too often in the society we live in people are quick to point the finger rather than look in the mirror.

What do you think? Am I way off base?

Is it Really Worth it to Move That Money? Interest Rate Chaser Calculator

If you are considering moving funds from one account to another for an increased interest rate I found a tool that might be of interest. It lets you play around entering your current return, new return and the amount of time your funds will be unavailable. The calculator then spits out the total time you need to hold the investment to break even. I actually found this while doing some research for myself after being frustrated with the REALLY slow transfers in and out of HSBCDirect. It's a good bank, but the bank must be making an absolute killing off the float from keeping your transfer "pending." Their policies might be enough to make me send my money back to ING or E*TRADE who are significantly faster. Based on my calculations it is 1) worthless to move more money into HSBC to chase their 6.00% new teaser rate and 2) takes nearly two months to make it worth your while to move say money from ING's 4.5% APY to HSBC or ETRADE's 5.05%.

Anyways, check it out. The calculator might be handy if you are say considering moving from one online bank to another or some other for of investment.

Link:

Interest Chaser Calculator

Making Money With Adsense 10 Tips

It's no secret Google has been wildly successful and a lot of that success can be attributed to Adsense. The deceptively simple program lets people bid on keywords to sponsor either on the Google search page or on millions of website on the internet (and to your right on this blog). There is also a ridiculous amount of people that think they can slap together a site, throw some adsense on there and be rolling in the cash. While this is obviously not the case, every little bit helps even if it is a few pennies at a time. So, lets take a look at some things you can do to improve your site's (or blog's) traffic and hopefully adsense earnings.

1) Increasing Traffic and Visibility: Easier said than done, but you have to boost your presence to get traffic. Exchange links with other sites, get your site listed in directories, search engines, and create meta tags. It can also be beneficial if to use trackbacks and actively post comments on other sites (note however, if you are spamming Google has some of the best email spam filtering software in GMail I have ever used and I'm sure they have a way to detect this built into their system).

2) Use the Web 2.0: The usual suspects, reddit, stumbleupon, del.icio.us, digg, etc. Word of mouth can drive people to your site without you doing much work provided the product is good.

3) Don't go Crazy with Adsense: You are limited to three Adsense "units" on your page but that doesn't mean you have to have other ad programs all over the place. Remember there is a point when your site looks like a billboard and people stop believing you are pushing out content for a reason.

4) Create Good Content and Understand that it takes time: You won't make Alexia's rankings overnight and it takes time to create a user base.

5) Include a Search Box: Searching is second nature for many people. I'd much rather type in a few keywords than slog through 10 pages of links or posts. If your information is hard to find people will go elsewhere.

6) If You Have a Blog use Technorati and Feedburner: I was suprised at how much traffic I received from Technorati once I started religiously tagging my posts. Feedburner is a good because it pings sites for you (see below), allows people to quickly find your feed, and lets you keep a rough tally of the number of people subscribing to your site.

7) Follow the Hot Zone: I'm not overly concerned about making a few extra bucks with this site so you will be able to see I don't adhere to this advice well. However, Google has created a nice "heat map" showing where advertisements typically fare the best based on where users are attracted on a website.
8) Pings Are Your Friend: If you have a blog frequently use services like pingoat.com that will 'ping' other blog services to check if you have updated content.

9) Get Some Data: Visit Statcounter.com and sign up for a free website counter. It's invisible and will give you an idea of what kind of traffic you have at your site and how people are finding your site. It may also give you ideas if a certain page is generating a lot of interest.

10) Optimize Your Ads: Visit Adsenseblacklist.com, the site will create a list of sites you can paste into the adsense block list. This list will clear out a lot of the sites that advertise on Adsense for a penny or two per click and are nothing more than a bunch of advertising links. If people are clicking an ad and leaving your site it might as well be for something they can find useful.

Links:

More tips at RealityWired , Problogger series, and tips "from a 12 year old"

DRIPs a Good Idea for College Students?

When you think of the things you might have purchased or do purchase as a college student beer, music (unlikely), food, and housing probably come to mind. Safe to say DRIPs don't come to mind for many people, if they know what one is at all (a dividend reinvestment program which generally allows fractional share ownership).

How about DRIPs as a smart investment for college students? I don't know about you when you were in college, but I didn't have expendable income to be throwing around investing. Look at the staggering average amount of student loan debt people come out of undergrad with these days or the costs or any professional school. If you can afford that kind of tuition and still have money in the bank then maybe this is a good idea for you.

I remain unconvinced that this is a practical solution, mostly because the article suggests that you start with $200, then make payments of around $50 a month. For the average college kid - who isn't still living off mom & dad's credit cards if we can clarify here - $50 a month is a good chunk of change. True it might only be the equivalent to a cable payment or cell phone bill, but if you are making minimum wage and not working full-time substantial none the less. Let me know what you think.

Wikipedia - DRIPs

Source article at Forbes

Tax Time: Big Time Write-offs

If you have a home business or office you can legally write-off a lot of things you might not expect (provided they have a use related to your office). Like most laws, tax laws use the terminology that is vague at best and baffling to most. Luckily there are CPA types who love this stuff that the rest of us find mind-numbingly boring.

To write off an item it must be "reasonable and customary" and connected to a trade or business. The good thing is that as the CPA says in this article, "there's almost nothing that isn't deductible under the right circumstances." This article describes tax write-offs for car, mileage, educator expenses, big screen TV, and higher education expenses. While it might be a good start, a better place to get deductions obviously is to call up your local CPA.

MSN Money: Taxes