Twelve Non-Recourse States Lets You Walk Away From Your Mortgage

Paper Money PlaneRefinancing now is generally a wonderful idea as jumbo loans are back to all time lows in 2015. That said, what happens if you are so underwater on your mortgage that you feel it doesn’t make sense to continue paying anymore because you don’t think value will ever recover? Banks have become so annoyingly stubborn regarding allowing underwater homeowners to refinance, that you might have a better way.

Have you ever wondered why there have been so many foreclosures in states such as California, Arizon, and Nevada? I’ll tell you. If you live in one of the 12 “non-recourse” states of Alaska, Arizona, California, Connecticut, Idaho, Minnesota, North Carolina, North Dakota, Oregon, Texas, Utah, and Washington you are potentially in luck! If you so happen to own property in one of these states, and have substantial assets elsewhere, you can legally hand over the keys to the bank and exonerate yourself from the mortgage with no penalty against your other assets!

AN EXAMPLE OF GETTING IN OVER YOUR HEAD AND BAILING

The Government Passes A Renters Tax!

In good old fashion political jockeying, the House finally agreed to a budget and unknown to many, they also passed a Renters Tax!  The idea is for all Americans to participate in our simple tax system and shore up our huge deficit.  The new law states that starting October 1, 2011 all renters shall pay a Renters Tax equal to half the value of their rented home as determined by the government every year.  Landlords equally pay the other half.

Example: A nice 3 bedroom, 2.5 bath property is assessed at $500,000.  A taxation of 1.2% = $6,000 must be paid once a year.  Since the renter benefits from living in the home as well as the public parks, roads, libraries, and schools, the renter writes a check for $3,000 to the local state county tax board.  Meanwhile, even though the landlord does not enjoy any of the benefits of living in the home, s/he receives rental income, potential long term asset appreciation, and the option to move back in at his or her choosing.  As a result, the owner pays for half the annual property tax by sending in a check as well.  Perfect equality.  Both renter and owner have “skin in the game” and look to better their surrounding community.

THE GOVERNMENT BELIEVES WE SHOULD ALL PITCH IN TOGETHER

Nature vs. Nurture: How Important Are Parents To Our Success?

Yale law professor and mother of two Amy Chua penned an incredibly fascinating article entitled, “Why Chinese Mothers Are Superior” on the WSJ.  Professor Chua is a first generation American who went to Harvard undergrad and then to Harvard Law School.  As a tenured professor teaching at the most prestigious law school in the world, I feel for her kids first and foremost!  Think about all the expectations that are put on them since her husband, Jeb, is also a tenured law professor at Yale.

Let’s say you had parents who walked 10 miles to school every day.  Do you think there’s a snowball’s chance in hell that you will have a car in high school?  You might, but you’d feel guilty every time you get behind the wheel and your parents will likely remind you as well.  In the end, you’d probably compromise and either bike to work, have your parents drop you off, or walk yourself.

Here’s a non-offensive excerpt from her article where she justifies calling kids names such as “lazy”, “fatty”, “worthless”, “stupid”, and “disgraces” when they aren’t performing up to par:

“As a parent, one of the worst things you can do for your child’s self-esteem is to let them give up. On the flip side, there’s nothing better for building confidence than learning you can do something you thought you couldn’t.”  Amy Chua

I agree with her quote, but I definitely don’t agree with calling one’s kids names to shame them into conforming.  The main issue I have with Amy’s view is that she pits Asian mothers against “Western Mothers” who are by default deemed inferior.  I would be incredibly insulted if I was a Western Mother because who is Amy to impose her dictator-like ways on me.  Amy talks in stereotypes all article long about how Asian children always seem to be gifted in math & sciences and music.  Amy argues that it is in fact no coincidence since Asian mothers are such master motivators and disciplinarians.

NATURE vs. NURTURE

Don’t Be Afraid To Make New Year’s Resolutions

There seems to be a camp that believes that New Year’s resolutions are a waste of time.  Are you kidding me?  If you have no resolutions for the next year, you’re going to have a very unfocused way of making progress in whatever you want to do.  There’s another camp that says you should have very few resolutions so that you succeed in achieving your goals.

Well that’s fine if you have a difficult time tying your shoelaces and juggling more than several things at once over 365 days.  Wow, 365 days……. did you know that people have built billion dollar companies and cities in that time period?  You do right?  Well, what’s stopping you from making resolutions?

* You’re afraid to fail. No goals, no failure!  Very simple.  Easy to talk about how New Year’s resolutions are a waste of time instead.

* You’re lazy. You don’t want to put your goals out there because once you do, you know that you’ve got to try and accomplish them.

* You’re embarrassed. Who gives a damn what other people think?  And if you are embarrassed, just write them down in private.  Nobody is going to kidnap your bunny if you fail.

I have a lot of goals for 2011 because I have a lot of things I want to do.  Call me a motivated I guess.  But, each year that goes by is one less year I have to live.  Time gets more and more valuable the older you get.  Some goals are more important than others, such as seeing my parents 4X in 2011.  I’m not going to start crying if I still dress too casually for my own good.  But, I will be disappointed that I didn’t make a strong enough effort to look sharper.

USE “SAM” TO HELP YOU SUCCEED

Deep Thoughts On Twitter: Cold Food And Suffering

I clicked the 2 minute super nuke button on my microwave before leaving to park my car.  Moose was left outside after a late night of partying and I didn’t want the parking crazies to give me a lovely $70 ticket for blocking my own driveway.

Two minutes should have been enough sizzle time to keep my food toasty before I got back.  Eight minutes later (checked and read the mail too), I came back to ravish my leftover Pad Thai.  Oh, how disappointed I was and so I tweeted:

“If room temperature is considered warm, why does my food always get cold? #Deepthoughts as I ponder the meaning of life while writing.” via @FinancialSamura

My question was sincere, in the moment, and with no time to think.  I got a couple sincerely interesting responses.

The Four Different Ways To Spend Money By Milton Friedman

The reason why Warren Buffet is so great is because he’s able to distill the most complicated financial topics into very simple terms.  Lucky for us, there is someone like Warren in the economics world.  Regular reader, Investor Junkie who disagrees with the government’s unemployment insurance extension, but agrees with the cessation of rising taxes, highlights a fantastic video by the great economist Milton Friedman about four different ways of spending money.

Professor Friedman’s examples are simple and perfectly to the point.  In an environment where we are spending other people’s money on someone else (deciding how other people’s tax dollars are spent), we don’t maximize the value of the dollar because we simply don’t have much at stake.

Professor Friedman highlights that people spending someone else’s money on others is a “distributor of welfare funds.”  Strong words with a certain amount of truth wouldn’t you agree?  In “The Ultimate Solution To A Fair Tax Policy In America”, I discuss the concept of limiting the voting ability of the 47% of non tax paying Americans on raising taxes for the other 53%.   Don’t worry, voting rights for everything else is status quo.  The reason why I suggest this rational solution is because it makes sure the country isn’t overrun by those who have their cake (don’t pay taxes) and get to eat it too (enjoy the benefits).

One can easily see an America where 90%+ of citizens don’t pay taxes and stick it to the 10% rich because it’s rational to look out for your own interests.  It’s up to balanced people who believe in equity to continue fighting for those who perpetually get unfairly blamed for our economy’s problems.  It really is ironic, because if everybody studied hard in school, volunteered their time to help others, and were self-sufficient (doesn’t have to be wealthy), America wouldn’t have nearly the amount of problems we have now!

The 4 Ways Of Spending

1) Spend your own money on yourself.

2) Spend your own money on somebody else.

3) Spend somebody else’s money on yourself.

4) Spend somebody else’s money on somebody else.

Readers, do you agree or disagree with Professor Friedman’s thesis that the 4th way of spending is the worst way of spending?  If you do agree, why do you think people feel it’s OK to spend other people’s money as they wish?

Regards,

Sam @ Financial Samurai – “Slicing Through Money’s Mysteries”

Follow on Twitter @FinancialSamura and subscribe to our E-mail or RSS feed.

The Ultimate Solution For A Fair Income Tax Policy In America

With the Bush tax cuts set to expire next year, there’s going to be a big debate during the mid-term elections this November!  But, should there really even be a tax debate?  It’s obvious that we should NOT raise taxes on small business owners and higher income, hard working Americans in a nascent economic recovery!

Everybody knows roughly 47% of Americans pay no federal income taxes.  Hence, the ultimate solution for tax legislation is to strip away tax voting rights for the 47% of Americans who pay no tax, but who still get to enjoy the benefits of other people’s contributions.  If you’re one of the 100+ million Americans who pay no income tax, isn’t it good enough to enjoy free public schooling, nice roads, friendly firemen and police officers protecting your neighborhood?  Being thankful is a great disposition to have.  Being greedy is not.

An Example Of A Family Making $120,000 Paying No Taxes:

Book Review And Giveaway: “Secrets Of A Stingy Scoundrel”

Author: Phil Villarreal was a syndicated film critic (one of the best jobs on earth) and is a general reporter for the Arizona Daily Star.  Phil contributes to OK! Magazine and blogs at becauseitoldyouso.com.

Publisher: Skyhorse Publishing, Inc.  244 pages in soft cover.  $12.95.

Summary: “Secrets of A Stingy Scoundrel” is a hilarious book that has been reviewed by many personal finance sites already.  Hence, I’ll take a slightly different approach.

First of all, Phil is one proud cheapo who is potentially helping millions of Americans (if they buy his book) save thousands of dollars a year.  Second of all, the breadth of stinginess is impressive, with nine chapters: Personal, Eating, Relationships, Household, Finance, Leisure & Entertainment, At The Workplace, Corporate Cataclysm, and Gross, Mean and Just Plain Wrong.

Why Becoming Debt Free Is Not A Great Idea!

 

We Don't Need No Medicine!

We Don't Need No Medicine!

I’m pleased to bring you a guest post by faithful reader and commenter, Larry Ludwig (bio below).  He writes a thought provoking piece about challenging the norm of becoming debt free.  You’ll be smarter after reading this, guaranteed!  Enjoy, and as always, feel free to debate away!  Rgds, Financial Samurai

You’ve heard the financial gurus like Dave Ramsey perform pasectomies on his show and Suze Orman with her numerous “I have 50k in debt” guests.  The gurus all say, debt is bad, credit is evil, and being debt free is nirvana, yada yada yada.  While I do think as a whole Americans have too much consumer debt, the goal of being completely debt free is actually a terrible idea. Let me be specific: buying things that depreciate with debt is bad, that big screen TV, new clothing or car.  Most of the financial gurus do not make this distinction and make all debt to be “evil”.

I believe Rich Dad/Poor Dad Robert Kiyosaki has said it best, “There is good and bad debt and being debt free is more risky than having good debt.”.  Now before you go off on my recommendation of Robert and his questionable background, I believe his statement is sound and correct.

The primary reasons are:
•    Opportunity Cost
•    Asset Allocation
•    Inflation
•    Tax Deductions
•    Arbitrage
•    Leverage

Should I Go To Grad School? Get Rich Or Die Trying!

I’ve decided to dedicate much of the rest of this month focusing on graduate schools, specifically the much loved and vilified graduate degree, the MBA.  The deadline for round 1 applications is fast approaching, and I’ve come up with a $1,000 giveaway that any aspiring MBA applicant, PhD applicant, or grad school applicant for that matter may be interested in receiving.  Hence, feel free to spread the word and stay tuned!  For now, let’s start off with a layup as to why getting your graduate degree is a good idea, if you want to make more money.

Many personal finance publishers use Net Worth IQ as a way to track their financial progress.  NW IQ managed to gather a bunch of good data to digest and analyze.  A lot of it is just common sense such as the older you are, the greater your net worth tends to be.

This is the chart that stood out most:

EducationProfile Count% of Pop.Median Net Worth
Less than high school graduate210.67 %$26,440
High school graduate792.53 %$40,570
High school graduate with some college32210.32 %$25,189
Associate degree1173.75 %$46,464
Bachelors degree146046.78 %$73,461
Masters, professional, doctoral degree90128.87 %$193,761
Total Reporting Users: 2900