Americans are upset about what they feel was a bailout of irresponsible banks and their senators brought that message to Washington, with Senator Jim Burning (R-Ky) claiming that “A vote for Ben Bernanke is a vote for bailouts.”

While I understand Senator Burning’s comment, I don’t agree with it, or just about any other opposition to confirmation of a second term for Bernanke. By the time Bernanke took over the Fed in 2006, the housing crisis was already far past the point of no return. That may not be known to most Americans, but it’s absolutely clear to any of us who were waist-deep in the real estate and mortgage businesses and saw the foundation being laid for the current state of the economy as far back as 2000. Mortgage lending in the United States came to a screeching halt in 2007; it’s unlikely Bernanke could have done much to avert the crisis, even if he’d recognized and began implementing counter measures his first day in office. That said, Bernanke takes responsibility for not recognizing the extent to which the problem had grown by the time he took office and for not acting sooner.

What many Americans, and of course their soon-to-be-up-for-re-election Senators are upset about is what they perceive as Bernanke’s “bailout” of the very same banks that got us into this mess in the first place. While I absolutely agree that banks shouldn’t be “bailed out” when they take actions that lead to their own demise, I can’t agree that the actions the Fed took in early 2009 could be considered a bailout of those irresponsible banks. Did those banks get something they probably didn’t deserve? Sure. But the bottom line is that the extent of the economic damage would have been far worse had we allowed those banks to fail.

There were a lot of regulation problems that allowed those banks to get as large as they did and to be in a position to drag down the economy in the event they failed, but the stage was set long before Bernanke took office. His so-called “bailout” of wall street was really just the lesser of two evils…either let those banks fail and plunge the economy even deeper into financial meltdown or prevent those banks from failing and lessen the blow.

I’ve heard Bernanke say that he didn’t like the choices that were available to him at the time, but he feels the Fed took the correct action considering it’s options; and I have to agree with him.

All we can hope moving forward is that there are regulations put in place that prevent such a situation from happening in the first place. But as far as Bernanke’s performance goes, I think he made the best choices considering his options at the time and any senator who claims Bernanke didn’t act in the best interest of our economy either is either completely clueless about how the economy works or is pandering to his constituents for re-election.

Source: MSNBC

Remember when you purchased your home? Maybe it was your first home or maybe you were a seasoned pro and the allure of walking through the doors of your new dwelling no longer excited you. Regardless, you undoubtedly knew that your home was an investment and in 5 to 10 years along with some improvements, you could stand to make some money on your purchase.

Unless you’re an economist, an investor, or other financial professional, there’s a good chance that you didn’t know that home prices were rising much too fast. You didn’t know that just around the corner a blowout would happen.

The Recent Economic Meltdown

In 2008 the blowout occurred. The economy had a severe meltdown and home prices dropped rapidly. When the dust cleared, you went to bed in a home that had lost half of its value or more. You were paying a mortgage that, if you paid the entire 30 years, you would most likely still lose money.

To compound the problem, you may be one of the 9.5% of Americans who were unemployed. You were a victim of the bad economy. You were considering sending your house keys to the mortgage lender and walking away.

The Economic Stimulus Plan

On March 4th, President Obama came to the rescue. As part of the stimulus plan, Obama made it possible for people to refinance their home loan at a 4.5% interest rate. This was done in the hopes of keeping people from walking away from their mortgages.

This interest rate has limitations. It has to be a refinance or a first home purpose. This keeps the real estate investors from using this rate to buy homes as investments. With more than a 3 trillion dollar price tag, the Obama administration wants to minimize the cost as much as possible.

Additionally, as part of the stimulus package, Obama was hoping that with lower mortgage payments, consumers would use their extra money to make purchases. This would help stimulate the economy. While that hasn’t happened on a large scale, it has helped to keep people in their homes.

If you are one of those who has lost your job or is considering walking away from your home, talk to your lender. This program, and others, may be able to help you make your home more affordable.

Saturday morning, out came the wrench. Turn after agonizing turn, I watched the bolts that secured the training wheels loosen. Soon enough, my dad told me to get on the bike and give it a try. I gingerly pedaled a few times and found it not to be as impossible as I thought. Before I knew it, I was riding my bike with only two wheels.

My confidence overtook my skill. A car was coming so I pedaled towards the side of the road where I hit a storm drain and fell. Six stitches and a skinned up arm and leg later, I never wanted to see that bike again. According to my parents, it was more than a month before they could convince me to try again.

Confidence in the Economy

You might be in the same state of mind. The economy is your two wheeler. You were investing part of your pay check each month and felt like your retirement was on track. Maybe you had some money in the stock market for your child’s college education. Then, like me, your confidence was gone in an instant. The economy went down faster than I did when I met the storm drain and before you knew it, much of your investment is gone and now you don’t know what to do.

You Haven’t Actually Lost Money Yet

Let’s fix the biggest investing myth running through the uninformed right now. Unless you closed your accounts and cashed out, you haven’t lost any money. It may be valued lower than what it was but you haven’t lost a dime of your money.

Hold on to your chair because I’m about to make you very happy. You only have to do one thing to get your money back: Wait. The economy is on its way back and all you have to do is nothing at all in most cases. You’re going to get all of your money back if you wait. It might be 5 to 10 years, but you were investing for the long term anyway, right?

Invest More In a Down Economy

Next, don’t stop investing every month. Compared to the not-so-distant past, all investments are on sale. You can buy more stock for less money. This is when you invest more, not less. Just like at the mall, when something is on sale, buy as much as you can. Don’t worry, if you’re investing for the long term, you won’t lose your money.

Finally, making your own investing decisions with money other than company sponsored retirement plans is possible if you have the time and desire to do a lot of weekly reading and research. If not, you may want to get help from a financial adviser, or even better, find an investing club in your area.

I eventually got on my bike again. Things worked out much better the second time because I didn’t give up. Don’t give up on your money. Sometimes the best thing to do is nothing at all.

It may be the new normal. The advent of computer or electronic based trading has allowed for millions of stock transactions per second and with the 24 hour fast paced news cycle available to us in many different formats, the stock market has changed in two important ways.

Stock Market Changes

First, market volatility has increased. With the potential for millions of transactions per second, stocks can move up or down by multiple percentage points in minutes and second, electronic based trading has allowed for anybody to be involved in the stock market.

Market Volatility

Let’s take a look at volatility. Who do you know that seems to be overly sensitive? They react to everything. Maybe they scream during scary movies or get angry over seemingly meaningless things. Although you may not refer to them as volatile, stocks are the same way. Some are more volatile than others. In financial terms, we call highly volatile stocks, high beta. A high beta stock reacts severely to market conditions.

Not only have stocks become more volatile but the stock market has as well. Over the past couple of decades, we can see swings in the market that happen much more quickly. This happens in large part because large stock trades can happen rapidly. Large investors can buy and sell millions of shares of stocks with the click of a mouse. It only takes seconds and trades this large can move a stock up or down dramatically.

Adding to this volatility is the 24 hour news cycle. On any given day you can watch one of the financial news networks and get a first hand glimpse at how fast a news report can move a stock or the entire market up or down. It only takes seconds.

You might be thinking that this kind of volatility is the enemy to your investment portfolio. You may be right but if you are a trader, somebody who holds stocks for a short period of time, you thrive on it. Traders sometimes hold stocks for only a few minutes. They use the market volatility to their advantage by buying a stock when it takes a dramatic swing down and then sell it when it corrects by going higher.

This can make the trader a lot of money but the statistics are stacked against the day trader. The long term gains that day traders make are less than impressive. The only exception are the professionals who are often using tens of millions of dollars per day and some advanced trading techniques to make money.

Investing or Trading?

For the part time investor who isn’t working in the investment field, the best way to make money is to be an investor. Investors are regarded as people who hold stocks for a larger period of time. Often that means years but many investors are now holding their stocks for one year or longer.

One rule that has never changed is the fact that the market rewards patience. For those with a long term approach based on a belief that true wealth happens over time, the stock market, regardless of the 24 hour news cycle, will reward.

So Many Realtors

I can think of four of my friends who, one day were in a certain career and a week later, were pursuing a career in real estate while still others are enjoying their time as a part time Realtor. My point is this: there seem to be a lot of Realtors in the marketplace so when it’s time to find one, how do you separate the good from the bad?

First, you have to understand that there are different types of Realtors for different needs. A coworker of mine found what he considered to be a dream home. The problem was that his family still lived in their current home and hadn’t even put it on the market. He had to sell it quickly.

Because of his abbreviated time frame, he went shopping for somebody who was a full time Realtor with a lot of contacts and known for selling homes quickly. She had been a part of the real estate business for more than 25 years and was able to sell his home in less than a week. Of course, the commission she charged was higher than some agents but she dealt with a certain niche market.

You may not be in a hurry. You may have decided in plenty of time to sell your home. You’re in the market for somebody who will work hard for you and sell your home near the asking price in a reasonable amount of time.

Should You Hire a Realtor You Know?

First, if you’re like me and know a few Realtors personally, you may think twice about hiring them. Just like you would with any other agent, it’s best to take recommendations from people that you trust. Did this Realtor come enthusiastically recommended?

Interview the Realtor

Ask the Realtor for their recent sales records. How close to the asking price were they able to sell their previous clients’ homes? How many days were those homes on the market?

What is their marketing plan? They should have a clear plan for marketing your home. They should offer you suggestions on how to stage your home, items that need improvement, and they should present you with research that they did to come up with a value on your home.

Last, as we all know from our personal lives, sometimes two people with different personalities don’t mesh. If you are water and the Realtor is oil, the bottom line may be that they are talented and have a great record but you two simply don’t mix. Don’t hire them. There are plenty of other Realtors that may work better for you.

Remember that they will be get paid an average of 6%-7% of your home’s value to sell it for you. Expect that they will work hard. If they aren’t, don’t be afraid to sever ties and find somebody else.

Don’t take my word for it. As I write this article, the stock market has had a dramatic move up. In fact, over the past 7 days, there have been triple digit gains in the Dow Jones Industrial Average. As I watch the financial news channels, nearly all of the stories talk about how the recent economic downturn may be over and recovery and prosperity may be here to stay.

This isn’t the first time that the stock market has run up fast. In early 2009, the market had a 30% run up in value in a short period of time. One particular day, the financial reporters talked at length about how the recession may be over. The next day, less than 24 hours after the stories of happy days are here again, the stock market dropped in value. It was a big drop. Triple digits, in fact.

To say that nobody expected this to happen would not be true. Everybody knows that there are always temporary bumps in the road. In fact, sometimes they are large and dramatic corrections. What were stories about the recession that was no more, in less than 24 hours, turned in to stories about how bad the economy was and how we were all fooled by the latest bull market.

Analysts filled the websites and airwaves with stories about how the economy was entering another period of free fall and investors would be well advised to take their money out of the market and ride out the storm.

Don’t forget that while responsible journalism is to report the facts, gaining and keeping viewers and readers is big business. Getting top advertising rates depends on the number of viewers.

I watch the financial networks each day and gain valuable information from them but as an investor I also recognize that creating emotional stories that sound an alarm will keep the viewers coming back. My investing decisions need to be made through my own research or the opinion of somebody who has gained my trust over a long period of time.

Here’s the bottom line. I know many people who invest based on what the guest commentators on the financial networks have to say. Sometimes it works out well but other times they lose money and feel betrayed. Take the knowledge that you gain from the news and add it to the list of facts to consider. Don’t make decisions based on it.

Today, I want to use this word in the context of your finances. What does it mean to hold financial discipline? For those who have achieved the financial freedom that you wish you had, what are they doing or what did they do to get there?

Things the Wealthy Know

Would it surprise you to know that the #1 and #2 things that the wealthy do are things that require no education, no high paying job, and no specialized skills? That means that you can do it too!

First, they know that they must stay disciplined by staying out of debt. When I eat a lot of fatty foods, I know that my waist line is going to pay. My lack of discipline is going to cost me. When you are in debt, it costs you. You pay money, often a lot of money, to be in debt.

Lots of Interest

On just $4,000, you could pay more than $30 per month in interest. What would you do with an extra $360 a year? Over the course of 30 years, that is nearly $11,000. If you would have invested that $360 each year, you would have made at least 3% annually compounded. How does an extra $20,000 sound for retirement? (Depending on the type of investment.)

Most people have much more debt than that. Statistically speaking, there is a good chance that your credit card debt is over $10,000. With a little financial discipline, you could have more than $60,000 extra dollars when you retire by just paying off your credit card debt. That’s not even taking in to account the big house that you don’t need, the car loan, the boat, the expensive hobby, all the vacations on credit, you know where I’m going.

Here’s the bottom line. Don’t take my word for it. Do some research. The reason you aren’t as rich as you want to be is because you are in debt. Debt costs a lot of money. Warren Buffet, the greatest investor of our time said recently, “I would be poor and my company bankrupt if I was borrowing money at a 20% interest rate.”

Financial Discipline is a Full-Time Job

Here’s where the discipline comes in to play. I have seen numerous articles from “experts” who say that during a down economy you should stop try to pay down your credit cards and save your money. They say that you may need that money in the future.

Here’s my answer to that: Continue paying down your credit card debt and if you find that you need that money in the future, charge it to your card. The undisciplined money manager doesn’t let circumstances sway them from the goal.

As I write this, we’re still in the grasp of an economic downturn. Nearly 10% of our population is out of work and millions are filings for bankruptcy. The only debt I have in my life is my home. I have not felt any financial crunch from the recession and if I did lose my job, I have enough money saved that I could support my family for almost a year without working. I have taken the money that I used to pay in interest and deposited it each month. Debt equals freedom.

What was the second thing that the wealthy did to get wealthy? They were patient. Accumulating money takes time so for every dollar you save, give your self a pat on the back. Be proud of yourself. You did good today.

It was in 4 boxes, each one being a little heavier than the last. When we opened the box, what I saw was a whole lot of metal. It was thick, heavy, bulky, and the keyboard made a really loud clicking sound every time a button was pushed. I can still feel the crisp, clickety sensation of that old IBM model M keyboard.

Things have changed

Things are much different now. A computer less than a half inch thick can do many times the amount of work in a fraction of the time. Computer prices continue to fall and, according to analysts, it is only a matter of time before we see computers priced at less than $100.

Like all purchases, we are always looking to get the most for our money. If you’re in the market for a new computer, you know that there are a multitude of options, brands, and styles. How do you find what’s right for you?

Choosing the right computer

First, have no fear. It is a little known fact that many computer companies outsource the parts. Often the raw materials that are used to make it run are from the same company regardless of the brand that you buy. That’s good news because you can feel good about the fact that if you stay with a brand name computer, it is probably going to do just fine so don’t get too caught up in which of the brand names to choose.

Like all electronics, the fastest and biggest doesn’t always equal value. Unless you are doing specialized work, somewhere in the middle of the bells and whistles spectrum is going to work well for you.

Specialized needs are something different. If you are a graphic designer, architect, engineer, or have another profession that relies on large scale software, you should talk to somebody in your industry but you will most likely need a higher powered computer.

“It was so last year” is ok for the average user. Don’t pay for the latest and greatest technology. Often software is not written for the newest, most advanced computers so don’t waste your money. Let the price come down before buying. Also take a look at discontinued models for even more savings.

Don’t buy a bunch of accessories you’re not sure you need right away. You may find a printer on sale right now, but your child may end up using the computer lab exclusively for printing, and in these tight times, none of us need to be spending money on things that end up not being used.

Impulse buying is alive and well with computers. Designer laptop bags, and top of the line software can be purchased later, after you know for sure that you’re child will need it. In fact, there are free alternatives to most software in nearly every genre, you just have to know where to look.

Like anything else. Do your research. Look at consumer reports, size up the deals, and go try out the different models.

Maybe you’re one of them. If so, congratulations on getting a part of your house back! Your days of freedom are getting closer and closer but along with buying your college bound child a brand new laptop computer, you have another job to do that is far more important. You have to have, “the talk.” No, not the birds and bees talk, hopefully you already had that one. I’m talking about the money talk.

Bankruptcies are up

In fact, 1.5 million filings this year are forecasted. More and more people are finding themselves too deep in debt to get out and bankruptcy is their only option. Among the many problems, though, is that it ruins your credit. It will likely be about a decade before your credit recovers. High interest rate credit cards and the dream of owning your own home shattered are only a few of the realities that come with bankruptcy.

College is more expensive than ever

Did you know that the average college student graduates with 2 to 3 credit cards? Did you know that the rate of bankruptcy among recent college graduates is quite high? Between college debt and for some, more than $15,000 in credit card debt, it takes quite a toll on the graduate who expected to get a job right out of college but found the market to be dry.

While there may be a lot of important “talks” to have with your son or daughter before they head off to college, one of the most important ones is about money. Tell them to just say no to those free T-shirts just for signing up for a credit card. Tell them that you will gladly buy them a new T-shirt if they need one that bad.

Tell them that the best gift they can give to themselves is forward thinking. While college graduation seems like a long way off, it will only be a few years before they are walking in another graduation and if they graduate and don’t have a job lined up, the credit cards and student loans could be a problem. It’s imperative that the college student graduate with the least amount of debt possible.

Prepaid, prepaid, prepaid

As parents, consider getting your child a prepaid credit card that you can reload and track their expenses. Tell them that as long as they are responsible spenders you will finance a certain percentage of their day to day expenses.  Make a financial lesson out of their college experience.

Start early

Finally, if you’re just starting out on the journey of parenthood, start saving for your child’s college education as early as possible. Consider a 529 plan that allow you to invest for their education. Have enough money available so they can go to college with not only their tuition paid but some of their expenses. I’ve even heard of making study time a part time job. Pay them to study so many hours per day and have them show you evidence of their work.

Fight college debt as aggressively as you can. It will help your child learn about financial management while allowing them to graduate with little to no debt.