Have You Considered Eating Less?

“Have you considered eating less?”

A blunt doctor recently asked a friend of mine this question. (Really, it wasn’t me!)

Apparently the doctor inquired in a tone that was neither judgmental nor rude, which is no small feat. Although his question ignored the fact that there are many reasons people are overweight, there was something refreshing about its straightforwardness and simplicity.

My friend’s experience got me thinking about the parallels between overeating and overspending.

Most of us mere mortals have to be thoughtful about what we are eating if we want to lose weight. Similarly, we need to be mindful of our spending if we want to reduce our debts or save more.

Dare I ask: Have you considered spending less?

Buying Cars and Annuities

What do buying annuities and buying cars have to do with each other? Not much actually, but I’ve recently responded to questions about each on the new personal finance website, Dimespring.com. Check out my answers at the links below:

How much should I save before buying a car?

Is a variable annuity right for me?


Talking Mortgages with Kim Clugston

I recently interviewed Kim Clugston, Vice President and Senior Mortgage Officer at the Bank of Ann Arbor. We discussed the local real estate market, current interest rates, how to shop for a mortgage or refinancing, and the expansion of the Home Affordable Refinance Program, among other topics.



Links to resources mentioned during the video:


Please note that this blog post and video are for educational purposes only and should not be construed as advice specific to your situation. You should get advice from a legal, accounting, or investment professional before deciding what course of action is appropriate for you.

Recommended Reading: Debt-Free U

One of my financial planning colleagues recently suggested I read Debt-Free U by Zac Bissonnette. Although I was in the middle of three other books, I decided to buy Debt-Free U since I wanted to try out an e-book on my new iPad.

At first, I thought the book was about general debt reduction. Turns out that Debt-Free U is focused on paying for college without going into debt. (The U in the title stands for University.) The full title is Debt-Free U: How I paid for an outstanding college education without loans, scholarships, or mooching off my parents.

The author, Zac Bissonnette, challenges our society’s conventional view on the value of a name-brand college education and on the wisdom of taking out student loans to pay for college. He argues (with supporting data) that post-college success has more to do with the student’s work ethic than which college she attends.

For example, let’s say that your child is smart and diligent enough to get into both Stanford University and the University of Michigan where she qualifies for in-state tuition. Is it worth it for you and her to pay nearly $30,000 more per year* to go to Stanford? Not according to Mr. Bissonnette. (Although he might rethink that after a long winter in Ann Arbor.)

Debt-Free U efficiently covers a lot of ground and will help you think through:

  • How much you can afford to pay for college (spoiler alert: not your “Expected Family Contribution” from the FAFSA),
  • Which colleges provide the best value, and
  • How to pay for college (spoiler alert: not loans).

If you have kids who are nearing college age, Debt-Free U is required reading. I also recommend it to parents of young children who are just getting started planning for college expenses. It may just change your view on how you will pay for college. It changed mine.


* Peterson’s Undergraduate and Graduate Institution Databases

Skimmers, Jitters, and Complaints

Below are the interesting personal finance links I have come across since my last post:

Underwater Mortgage Refinancing

I received this question recently from a reader who is wondering what her options are for refinancing her underwater mortgage:

A recent announcement by underwater by offering either a principal reduction or an interest reduction. I called our mortgage company’s modification department — CitiMortgage — and they didn’t know anything about it. What do you recommend that I do next? And, what do you think of companies like the Guardian Group (https://www.guardiangroupna.com/) that offer to buy your mortgage and sell it back to you? Is this a legitimate way to get a principal reduction?

For help answering this question, I turned to Kim Clugston, Vice President and Senior Mortgage Loan Officer at Bank of Ann Arbor. She explained that few banks are actually offering loan reductions and that they are not required to do so. Each lender can offer “work out” programs to its customers, but the lender makes up the rules.

Ms. Clugston further explained that the Obama Administration created standard refinancing programs through the Making Home Affordable plan as part of its Financial Stability Plan. Making Home Affordable refinancing at current market rates is available to all lenders if the mortgage is held by Fannie Mae or Freddie Mac. Check here to find out if your mortgage is eligible.

The rub for most homeowners is that the new loan cannot be for more than 105% (Freddie Mac) or 125% (Fannie Mae) of their home’s current appraised value. Moreover, principal is not forgiven under these programs and second mortgages cannot be rolled in.

Regarding companies offering to buy your mortgage and sell it back to you, Ms. Clugston pointed out that the Making Home Affordable website’s homepage currently has a warning against foreclosure rescue scams. The site warns: “Do not sign over the deed to your property to any organization or individual unless you are working directly with your mortgage company to forgive your debt.”

If you have an underwater mortgage, I recommend that you research Making Home Affordable and check your eligibility for its programs. You can also get free help from housing counseling agencies approved by the U.S. Department of Housing and Urban Development. Ultimately, you will likely need to work directly with your loan servicing company if you are an eligible and good candidate for refinancing.

Please note that this blog post is for educational purposes only and should not be construed as advice specific to your situation. You should get advice from a legal, accounting, or investment professional before deciding what course of action is appropriate for you.

Ideas and Links from the NAPFA Conference

I attended the national conference for the National Association of Personal Financial Advisors (NAPFA) in Chicago this week. NAPFA is a professional organization for financial advisors who are committed to Fee-Only and comprehensive financial planning. Below are some of the new ideas and time-tested reminders that I took away from the conference.

Estate Planning

  • If you are the parent of a minor and you do not have a Will, a court will determine his or her guardian. Please prioritize putting a Will in place if you are in this boat.
  • You may need to appoint a short-term guardian in your Will if the primary guardian for your minor child does not live nearby. This will prevent your child from ending up in the care of an agency until your primary guardian arrives.
  • A presenter recommended the book Who Gets Grandma’s Yellow Pie Plate for help in determining how to divide assets in your estate plan.
  • Use an attorney who specializes in estate planning to draft your estate planning documents. You wouldn’t let your general practitioner perform brain surgery on you, so don’t let your real estate attorney draft your estate planning documents.
  • Visit www.martindale.com and www.actec.org to find attorneys in your area who specialize in estate planning.
  • Use this checklist provided by the American Bar Association to think through decisions you will need to make in your medical directives.

Property Division in Divorce

Debt Management

Healthcare Reform

College Education Savings

  • A speaker, Jean Chatzky, recommended paying for college education in thirds: 1/3 from savings, 1/3 from cash flow while your child is in college, and 1/3 from student loans taken by the student. She feels that this approach allows the student to have some skin in the game. Research has shown that students who pay for part of their tuition take college more seriously.
  • In 2011, all colleges that participate in Title IV student financial aid programs will required to have net price calculators on their websites.

Please note that this blog post is for educational purposes only and should not be construed as advice specific to your situation. You should get advice from a legal, accounting, or investment professional before deciding what course of action is appropriate for you.