Stash some cash for emergencies

As I mentioned in my last post, I knew the personal finance books I received for Christmas would yield some good fodder this blog. Here's the first interesting tidbit to share.

In The Wall Street Journal Complete Personal Finance Guidebook, Jeff Opdyke recommends stashing a few hundred dollars cash in a very secure spot in your home, just in case the power goes out in your area for an extended period of time. Though M and I have started using cash on a more regular basis, we get that cash from an electronic ATM. Plus, we're still pretty tied to using our debit card to pay for things.

Other than big snowstorms or the occasional flooding, natural disasters are rare in South Jersey, but having some cash around to pay for groceries in an emergency isn't a bad idea. Now I just have to find a secure place in my home to keep it (something I won't be writing about here).

By the way, the Carnival of Personal Finance is up at My Personal Finance Blog. Check it out if you have a chance.

Personal finance books under my Christmas tree

In our house, celebrating Christmas has become a month-long affair. With in-laws and siblings down south, a daughter attending college in Boston, and a blended family in general, M and I have been involved in family gift exchanges the last two weekends. We have three exchanges to go before the year is through (counting Christmas morning).

All the early exchanging makes the holidays a little more hectic , but it has perks. For instance, I've already gotten two things on my gift list: Jane Bryant Quinn's Make the Most of Your Money, and The Wall Street Journal Complete Personal Finance Guidebook, by Jeff Opdyke.

Author, author
Both books are tremendous resources for just about everything personal finance-related, from excellent writers. Jane Bryant Quinn is one of the most well-known personal finance experts around. I interviewed her once for my job, and she's as classy as she is money-smart. (Interesting notes I didn't know about her until now: She helped develop Quicken, the personal finance software I use, and her stepdaughter is Martha Quinn, one of the original MTV video jocks. Source: Wikipedia)

Jeff Opdyke is The WSJ's Love & Money columnist. He doesn't have the long list of credentials of Jane Bryant Quinn, but he has been covering personal finance and investing for The WSJ for more than a decade and has a real knack for clear, non-intimidating finance writing. (Interesting note about him I didn't know: He works for The WSJ but lives in Baton Rouge, Louisiana.)

Everything personal finance
I'm already halfway through the guidebook. It's a "lighter" read than JBQ's book, both in tone and weight. Mr. Opdyke covers all the basics of personal finance, from banking to investing to insurance, in less than 250 pages. My daughter Jess got it for me (because she "admires my passion for finance"), an irony because I think it's ideal for someone like her--young, busy, and just starting out in life. It also has a companion workbook (sold separately).

Ms. Quinn's book has been staring at me from the top of dresser the past two weeks. It covers the same ground as the guidebook and much, much, more, and in greater detail. It's more than two inches thick and 1,000 pages, including appendixes. However, it's well-organized and easy to navigate. Just don't try to stuff it in your special someone's stocking.

For me, perhaps the greatest gift from both of these books: Fodder for an abundance of personal finance ideas and thoughts to share with you here at The Coin Jar in the months ahead.

Good personal finance advice for your ears

I love my iPod. Listening to podcasts of radio shows from Dave Ramsey, Crown Financial Ministries, and Charles Stanley make my hour-long commute to and from work an education rather than just a grind. (In fact, I rarely listen to music.)

I'm going to add another show to my podcast favorites: "The Color of Money" from National Public Radio (NPR). It airs every week on NPR's "Day to Day" show. Michelle Singletary, the personal finance columnist for the Washington Post, is the primary contributor. The segment covers the usual range of topics, from saving for retirement, college, etc. to tips on starting a business.

Maybe the best part about it: It's informative and short, about four minutes long. Plus, with the podcast, no endless NPR fundraising segments to sit through in the fall and spring.

A Penny Saved hosts Carnival
The list of submissions to the weekly Carnival of Personal Finance seems to get longer and longer. This week's carnival is at A Penny Saved, and since there are so many choices, here are a few from the bottom of the list you otherwise may not have seen:

• The pursuit of the perfect savings rate at "My financial journey."
• 13 ways to save on gasoline, at "How to save money" (though you need to live near an Indian reservation for one tip).
• How persistence will make you rich someday, on "Money Smart Life."

Red storm rising for many homeowners

The predictions are coming true. And faster than many financial experts expected.

People are losing their homes. In droves.

"Americans who have stretched themselves financially to buy a home or refinance a mortgage have been falling behind on their loan payments at an unexpectedly rapid pace," The Wall Street Journal recently reported. "The surge in mortgage delinquencies in the past few months is squeezing lenders and unsettling investors world-wide in the $10 trillion U.S. mortgage market.

The article notes that most of the defaults stem from people that had a questionable ability to pay from the start. However, it appears that the trend is spreading to other parts of the mortgage market as well.

A report on ABC's Good Morning America said that more than a million families have lost their homes to foreclosure in the first 11 months of this year. That's up a whopping 43% from the same period a year ago. In the state of Georgia alone, foreclosures have increased 100%.

An early increase
The apparent culprits of much of the foreclosure activity: non-traditional loans, such as interest-only and adjustable rate mortgages. As housing prices soared through 2005, millions of homebuyers took out these mortgages--which have low monthly payments in the beginning, but that can jump substantially after a few years--to keep their home purchase "affordable."

I remember watching a news report about a year ago that cautioned about the risks of all these homebuyers taking out non-traditional loans. The reporter brought up the possibility that, when homeowners' payments increased in three, or four, or five years, we could see many people losing their homes because of an inability to pay.

Well, the increase has come early. For instance, $1.2 trillion in adjustable rate mortgages will adjust upward in the coming months, the Good Morning America report said. The impact on already stretched homeowners is proving to be pretty big.

Evaluate other options
If you've been able to make your monthly payments on an adjustable rate or interest-only mortgage, now's the time to evaluate other options. Consider refinancing to a 30-year fixed-rate mortgage, which currently runs at about a 6% interest rate per year--historically, still a very good deal. You'll surely face some upfront refinancing costs--and make sure there isn't a pricey prepayment penalty in your mortgage contract--but those costs can be worth it over the long run.

However, you may find that going to a fixed-rate loan--even a 30-year one--means you can no longer afford your house. Generally, housing costs (mortgage, interest, taxes, and insurance) should be 25%-35% of your household's monthly net income. If refinancing causes your mortgage payment to eat up 40% or 50% of your net income, you've bitten off more than you can chew.

In that case, it may be time to call your realtor. Which is better than dodging calls from creditors and eventually seeing your family's home auctioned off in a sheriff's sale.

Not too early to think of 2007 personal finance goals

2006 is almost in the books. So what are your personal finance goals for 2007?

More than one-third (37%) of American workers said they plan to pay off credit card debt next year, and a third plan to put a set amount of money into savings each month. That's according to latest Principal Financial Well-Being Index, a survey of U.S. working adults at businesses with 10 to 1,000 employees and sponsored by the Principal Financial Group®.

Those are great goals to have. Add to those starting an emergency cash reserve, or increasing your reserve amount to six months of living expenses. Or keeping better track of how you spend your money. Or making sure you and your family have enough life insurance.

For my wife M and me, I'd like to see us get better at setting and living within our monthly cash budget. We did great our first month in October, but weren't as disciplined in November and through this month so far. Next year, I'd like to shoot to stay within our monthly budget for at least six consecutive months.

I also want to finalize our wills. This was a 2006 goal that I set just a few weeks ago , and I made a good start using my company's online estate planning document service. But I ran into a couple snags, so completing it will have to wait a little longer (sorry, M my sweet!).

Two other big objectives: Paying off the last of our student loans and a personal loan we took when we had CJ Jr. If we reach those goals--a good possibility--then we could start up our kids' college savings contributions again and making extra payments on the mortgage--two things we cut back on when we went to one income last June.

Last, but not least: Buying a highly used but reliable van (with cash, of course). This goal is heavily dependent on whether our family size shows signs of increasing in the next couple months, Lord willing.

Yes, I should have plenty of personal finance experiences to blog about in 2007.

Research: Thinking about money increases selfishness

I didn't have to go far to find an intriguing post in this week's Carnival of Personal Finance, hosted by Money and Values. Just the second one listed, actually.

Laura Young, host of "The Dragon Slayer's Guide to Life" blog, highlights some interesting research featured in the November Science magazine on "The Psychological Consequences of Money." A study conducted by a team from the University of Minnesota shows that just the thought of money tends to make folks more self-centered, selfish, and less willing to help others.

I feel like I've known this fact for years, especially being a sports fan. As the contracts for professional athletes and televising events have gotten bigger, so have the egos and self-centeredness of the players and league executives, across all sports. It's nice to see some solid scientific data to back it up.

A holiday gift for your kids that will last a lifetime

I'm probably missing a marketing opportunity here somewhere.

Occasionally I notice that people find my blog by googling "coin jars." Which got me to thinking, if you're looking for one last small gift to round out your child's holiday goodies, why not consider giving him or her a coin jar?

A search of Amazon.com produces a choice of four kid-friendly coin jars, ranging in price from $12.99 to $49.95. (I'm not counting the Qing porcelain coin vase included in the search results as fit for children. Also, note that two of the jars are virtually identical; one just costs $2 more because it's endorsed by Discovery Channel.) All are electronic, counting the coins as your child puts them in and displaying the total amount saved. One even counts and wraps the change for you.

I like the idea of motivating kids to save by showing them immediately how much their quarters and pennies have added up to. But I also think you get a big bang for the buck with children by dumping a bunch of coins out on the floor and helping them patiently count up their loot (reinforcing their math and money skills along the way). Either way, you're sure to get a "Whoa!" or an "Awright!" when they see the total in the end, which will leave a good impression of the value of saving on their minds.

Granted, an electronic coin jar isn't as fun as TMX Elmo or Nintendo Gameboy Advance. But those gifts will last from maybe a couple weeks to a year. The benefits of being a good saver will have the shelf-life of a lifetime.