The Lake Team

MMRecap for Feb. 8

The yield on the benchmark 10-year note, which moves in the opposite direction of price, rode the rollercoaster last week.  U.S. Treasuries sold on strong economic and quarterly reports and concerns about an improving economic outlook.

But a flight to quality on Thursday, spurred by concerns about “fiscal imbalances” in some European countries, boosted prices and sent the yield down 10 basis points.  Debt problems in Spain, Greece and Portugal are the main focus and could hinder global economic recovery.  The rise in first-time claims also drove the yield down.

Wall Street sold on Thursday’s disappointing jobless claims for the week ended Jan. 30.  They jumped by 8,000 to 480,000 — the highest level since Dec. 12 — and spawned worries about Friday’s employment report.

Analysts predicted 20,000 jobs would be added to nonfarm payrolls in January.  Instead, 20,000 jobs were lost.  But the unemployment rate fell to 9.7% from 10%.  These two numbers were offsetting and Treasuries settled near breakeven in the early going.

The week began on an optimistic note, when the ISM index on manufacturing rose to 58.4, its highest since Aug. 2004.  Although 13 of 18 industries surveyed grew, the index fell short of expectations.  But it set off selling in bonds, as did President Obama’s plan to reduce the debt by $1.2 trillion over the next 10 years.

Personal income in December rose 0.4% — a little higher than expected, while personal spending rose 0.2% — somewhat less than expected.  Separately, construction spending in December fell 1.5%, matching November, but coming in higher than predicted.

On Tuesday pending home sales for December rose 1.0% after November’s 16.4% decline; that put some pressure on bonds.

Treasuries on Wednesday had a tough day, as the service sector ISM rose to 50.5 in January versus 49.8 the previous month.  Serious concern over $81 billion in refunding on top of auctions to be held (this week) and signs of an economic upswing also worried traders.

Prices rose and yields fell on the 10-year on Thursday due to the rise in first-time claims and on foreign debt fears.  Other reports, such as a 1.0% increase in December factory orders and 6.2% growth in production combined with a 4.4% decline in costs had little impact.

Even though mortgage rates were on a par with the previous week, mortgage applications soared during the week ended Jan. 29.  According to the Mortgage Bankers Association, refis jumped 26.3% and purchase apps climbed 17.5%.

This week is an odd one.  Although bond traders will be reacting to the auctions and news regarding foreign markets, domestic reports won’t be a factor until Thursday.

Two early reports Thursday will likely shape trading.  Retail sales for January are expected to rise 0.4%, which is far better than the 0.3% loss in December.  And, excluding autos, the 0.4% gain is expected to hold versus December’s 0.2% loss.  If analysts are correct, selling would likely ensue because spending consumers boost the economy.

On the other hand, first-time unemployment claims for the week ended Feb. 6 could turn things around — or not.  Another increase in claims could counteract a strong retail sales report, but a big decline would add fuel to the selling fire.  Both reports are due at 8:30 EST.  Later in the morning business inventories for December will be released and should show a 0.4% increase, the same as in November.  But no one will notice.

Prior to that we’ll get wholesale inventories for December on Tuesday which are expected to rise 0.6% and the U.S trade deficit for December on Wednesday.  It should narrow to $35 billion from $36.4 billion.  Neither generally has much influence on the markets.

The week ends with Friday’s Reuters/University of Michigan preliminary consumer sentiment survey.  It is expected to nudge up to 74.8 from 74.4.  Two weeks ago it rose sharply and analysts appear to believe that it wasn’t a fluke, as they see the upward trend continuing.  Because it’s the only report due Friday it could weigh in a bit more heavily, but traders will also be focusing on economic events outside the U.S. that could move the markets.

18 Most Overlooked Tax Deductions

Every year, the Internal Revenue Service dutifully reports the most common blunders that taxpayers make on their returns.  And every year, at or near the top of the “oops” list, is forgetting to enter a Social Security number at the top of the tax form — or entering those nine digits wrong.

No doubt about it: The opportunity to make mistakes is almost unlimited, and missed deductions can be the most costly.  About 46 million of us itemize on our Form 1040s, claiming nearly $1 trillion worth of deductions.  That’s right, $1,000,000,000,000 — a number rarely spoken out loud until Congress started debating economic-stimulus plans to combat the Great Recession.

Strategies for saving more and spending less

An additional 85 million taxpayers claim more than half a trillion dollars’ worth using standard deductions, and some of you who take the easy way out probably shortchange yourselves.  (If you turned 65 in 2009, for example, remember that you now deserve a bigger standard deduction than younger folks.)

Yes, tax season is a dangerous time.  It’s all too easy to miss a trick and pay too much.  Years ago, the fellow who ran the IRS at the time told Kiplinger that he figured millions of taxpayers overpaid their taxes every year by overlooking just one of the items listed below.

1. State sales taxes: Although all taxpayers have a shot at this write-off, it makes sense primarily for those who live in states that do not impose an income tax.  You must choose between deducting state and local income taxes or state and local sales taxes.  For most citizens of income tax states, the income tax is a bigger burden than the sales tax, so the income tax deduction is a better deal.

The IRS has tables that show how much residents of various states can deduct.  But the tables aren’t the last word.  If you purchased a vehicle, boat or airplane, you get to add the state sales tax you paid to the amount shown in the IRS tables for your state, to the extent that the sales tax rate you paid doesn’t exceed the state’s general sales tax rate.

The same goes for any homebuilding materials you purchased.  These items are easy to overlook, but they could make the sales tax deduction a better deal even if you live in a state with an income tax.  The IRS has a calculator on its Web site to help you figure the deduction, which varies depending on the state where you live and your income level.

2. Reinvested dividends: This isn’t really a deduction, but it is a subtraction that can save you a bundle.  And this is the break that former IRS Commissioner Fred Goldberg told Kiplinger that a lot of taxpayers miss.

If, like most investors, your mutual fund dividends are automatically used to buy extra shares, remember that each reinvestment increases your tax basis in the fund.  That, in turn, reduces the taxable capital gain (or increases the tax saving loss) when you redeem shares.  Forgetting to include the reinvested dividends in your basis results in double taxation of the dividends — once when you receive them and later when they’re included in the proceeds of the sale.  Don’t make that costly mistake.  If you’re not sure what your basis is, ask the fund for help.

3. Out-of-pocket charitable contributions: It’s hard to overlook the big charitable gifts you made during the year, by check or payroll deduction (look at your December pay stub).

But little things add up, too, and you can write off out-of-pocket costs you incur while doing good works.  For example, ingredients for casseroles you prepare for a nonprofit organization’s soup kitchen and stamps you buy for your school’s fundraising mailing count as charitable contributions.  If you drove your car for charity in 2009, remember to deduct 14 cents per mile.

4. Student-loan interest paid by Mom and Dad: Generally, you can deduct mortgage or student loan interest only if you are legally required to repay the debt.  But if parents pay back a child’s student loans, the IRS treats the money as if it were given to the child, who then paid the debt.

So a child who is not claimed as a dependent can qualify to deduct up to $2,500 in student loan interest paid by Mom and Dad.  And he or she doesn’t have to itemize.

5. Moving expenses to take your first job: Job-hunting expenses you incur while you’re looking for your first job are not deductible.  But moving expenses to get to the job are.  And you get this write-off even if you don’t itemize.  If you moved more than 50 miles, you can deduct the cost of getting yourself and your household goods to the new area — including 24 cents per mile for driving your own vehicle for a 2009 move — plus parking fees and tolls.  The same holds true for any new job you take.

6. Military reservists’ travel expenses: Members of the National Guard or military reserve may tap a deduction for travel expenses to drills or meetings.  To qualify, you must travel more than 100 miles from home and be away from home overnight.  If you qualify, you can deduct the cost of lodging and half the cost of your meals, plus 55 cents per mile for 2009 for driving your own car to get to and from drills.  In any event, add parking fees and tolls.  You get this deduction regardless of whether you itemize.

7. Child care credit:  A credit is so much better than a deduction, as it reduces your tax bill dollar for dollar.  So missing one is even more painful than missing a deduction that simply reduces the amount of income that’s subject to tax.

If you pay your child care bills through a reimbursement account at work, it’s easy to overlook the child care credit.  Although only $5,000 in expenses can be paid through a tax-favored reimbursement account, up to $6,000 (for the care of two or more children) can qualify for the credit.  So if you run the maximum through a plan at work but spend even more for work-related child care, you can claim the credit on as much as $1,000 in additional expenses.  That would cut your tax bill by at least $200.

8. Inherited IRA assets: This break can save you a lot of money if you inherited an individual retirement account from someone whose estate was big enough to be subject to the federal estate tax.

Basically, you get an income tax deduction for the amount of estate tax paid on the IRA assets you received.  Let’s say you inherited a $100,000 IRA, and the fact that the money was included in your benefactor’s estate added $45,000 to the estate tax bill.  You get to deduct that $45,000 on your tax return as you withdraw the money from the IRA.  If you withdraw $50,000 in one year, for example, you get to claim a $22,500 itemized deduction on Schedule A.  That would save you $6,300 in the 28% bracket.

9. State tax paid last spring:  Did you owe tax when you filed your 2008 state tax return in 2009?  Then remember to include that amount in your state tax deduction on your 2009 return, along with state income taxes withheld from your paychecks or paid via quarterly estimated payments.

10. Refinancing points: When you buy a house, you get to deduct in one fell swoop the points paid to get your mortgage.  When you refinance a mortgage, though, you have to deduct the points over the life of the loan.  That means you can deduct 1/30th of the points each year if it’s a 30-year mortgage.  That’s $33 a year for each $1,000 in points you paid — not much, maybe, but don’t throw it away.

Even more important, in the year you pay off the loan — because you sell the house or refinance again — you get to deduct all points that have not yet been deducted.  There’s one exception to this sweet rule: If you refinance a refinanced loan with the same lender, you add the points paid on the latest deal to the leftovers from the previous refinancing, then deduct the amount gradually over the life of the new loan.

11. Jury pay turned over to your employer: Many employers continue to pay employees’ full salary while they serve on jury duty, and some require employees to turn over their jury pay to the company.  The only problem is that the IRS demands that you report those payments as taxable income.  To even things out, you get to deduct the amount you pay to your employer.

But how do you do it?  There’s no line on Form 1040 labeled “jury fees.”  Instead, the write-off goes on line 36, which purports to be for simply totaling up the deductions that get their own lines.  Add your jury fees to the total of your other write-offs and write “jury pay” on the dotted line.

12. Property tax deduction for non-itemizers: This break, new in 2008, also works in 2009, but millions of taxpayers who claim the standard deduction might miss it.  Normally, to write off property taxes, you must itemize deductions.  But this new rule lets homeowners who don’t itemize boost their standard deduction amount — by up to $500 if they’re single and up to $1,000 if they’re married and file a joint return — to account for property taxes paid during 2009.

You’ll need to include Schedule L with your 2009 tax return to get this break.

13. Casualty-loss deduction for non-itemizers: For 2009, taxpayers who claim the standard deduction can add casualty losses to their standard deduction amounts — if the loss occurred in a presidentially designated disaster area.  Also, this deduction is not subject to the usual reduction equal to 10% of your adjusted gross income.  If you suffered such a loss, be sure to let Uncle Sam help you by lowering your tax bill.

As with the property tax deduction for non-itemizers, you’ll need to file a Schedule L with your return to pump up your standard deduction to include the loss.

14. Credit for college students: Parents of college kids know the $2,000 Hope credit is just for the first two years of college.  After that, the lower Lifetime Learning credit applies.

But that’s not how it works for 2009.  Instead, the credit has been renamed, increased and expanded.  It’s now called the American Opportunity Credit, and it will rebate up to $2,500 for each qualifying student for the first four years of college.

The full credit is available to individuals whose modified adjusted gross income is $80,000 or less, or $160,000 or less for married couples filing a joint return.  The credit is phased out for taxpayers with incomes above those levels.  The income limits are higher than last year’s.

15. Making Work Pay credit: You’ve probably been enjoying the fruits of this credit via reduced payroll tax withholding since spring 2009.  But to lock in your savings — by reducing your tax bill by $400 if you’re single or $800 if you’re married and file a joint return — you’ll need to claim the credit on your 2009 tax return.  You’ll use the brand-new Schedule M to do so.

The credit is equal to 6.2% of your earned income, capped at $400 or $800.  For single filers, it starts phasing out at $75,000 of adjusted gross income and dries up at $95,000.  The phase-out zone for couples is $150,000 to $190,000.

16. Sales tax deduction for new vehicles: If you bought a new car, truck, motorcycle or motor home after Feb. 16, 2009, and before the end of the year, you can deduct the sales tax paid — up to a maximum purchase price of $49,500 per vehicle — as an itemized deduction or, if you claim the standard deduction, as a supercharged standard deduction.

The benefit begins phasing out for married couples with adjusted gross income above $250,000 and singles with AGI above $125,000.  It is completely gone for single filers with AGI of $135,000 or more and joint filers with AGI of at least $260,000.  Non-itemizers need to file a Schedule L with to get the benefit. Itemizers who elect to deduct state income taxes will claim the car sales tax as a separate itemized deduction.

17. Credit for energy-saving home improvements: The tax credit equal to 10% of the cost of energy-saving home improvements is increased to 30% for 2009 and 2010, up to a maximum of $1,500 in the two-year period.  The credit applies to biomass-fuel stoves; qualifying skylights, windows and outside doors; and high-efficiency furnaces, water heaters and central air conditioners.  The dollar limit on a particular type of improvement, such as the $200 cap on the credit for windows, has been repealed, so don’t limit yourself to the old rules.

Finally, there’s also no dollar limit on the credit for qualified residential alternative-energy equipment, such as solar water heaters, geothermal heat pumps and wind turbines.  Your credit can be 30% of the total cost of such systems.

18. Homebuyer credit: We put this last on the list because it’s hard to imagine any taxpayer missing this big a tax break.  But the rules changed late in the year, so snafus are certain.

For most of the year, only first-time homebuyers qualified for this credit.  A first-time buyer is defined as someone who didn’t own a home in the three years leading up to the purchase of a new home.  But big changes apply to homes purchased after Nov. 6, 2009.  First, in addition to the $8,000 credit for first-time homebuyers, there’s a $6,500 credit for longtime homeowners, those who continuously owned a home for at least five of the eight years leading up to the purchase of a new home.

The new law also increases how much buyers may earn and still claim the credit.  For deals closed before Nov. 7, the right to the first-time-buyer credit gradually disappears as adjusted gross income rises between $75,000 and $95,000 on single returns and between $150,000 and $170,000 on joint returns.  For purchases after Nov. 6, the phase-out zones — for both the $8,000 credit and the $6,500 credit — are $125,000 to $145,000 for singles and $225,000 to $245,000 for married couples.

By: Kevin McCormally, www.kiplinger.com

10 Tips on Mortgages for 2010

More than three years into a painful housing crash, the real-estate market has sent recent — albeit tentative — signs of stabilization.  Home sales have increased, inventory levels are down, and price declines have become less precipitous.

Along with more-affordable home prices and a tax perk from Uncle Sam, attractive mortgage rates — which remained near 5% as of late December — have been a driving force behind this development.  The availability of low mortgage rates will play a decisive role in the performance of the 2010 housing market as well.

To help consumers better understand the requirements and costs they will face as they shop for a home loan next year, U.S. News spoke with a handful of housing market experts and compiled a list of 10 things to know about getting a mortgage in 2010.

1. Lending standards

The steep run-up in home prices during the first half of the decade was fueled in large part by breezy lending standards.  Some bankers handed out loans without down payments or documentation requirements.

But when the housing bubble popped and those loans became massive losses, banks began raising lending standards for borrowers of all stripes.  And with the labor market continuing to erode — the unemployment rate topped 10% in October — and mortgage delinquency rates setting records, there is no reason to expect credit requirements to loosen in 2010.

“Lending standards have tightened dramatically between 2007 and 2009,” says Scott Stern, the CEO of Lenders One, a cooperative of independent mortgage bankers.  “I think there will be a little more belt-tightening in 2010.”

2. Down payments

This tight credit environment affects consumers in several ways.  First, down payment requirements will be higher than they were just a few years ago.  Loans backed by the Federal Housing Administration are at the low end of the spectrum and come with minimum down payments of 3.5%.  Down payments on loans outside the FHA will vary depending on the market, the borrower and the property type.

“Generally, to get the best rate around, you need at least 20% for a down payment,” says Guy Cecala, the publisher of Inside Mortgage Finance, an industry newsletter.  “That doesn’t mean you can’t get a mortgage if you have less of a down payment.  It just means that you are not going to get the best interest rates.”

Could lenders ease up on down payment requirements in 2010?  Possibly.  If lenders become convinced that home prices are improving, they may allow borrowers to put slightly less down.  But don’t expect that to occur until the end of the year — if at all.

3. Credit scores

Cecala says borrowers will need FICO credit scores of at least 730 to get the best mortgage rates.  They also will need to fully document their income and assets.  To ensure that their credit scores are as strong as possible, borrowers should check their credit reports and watch for errors.  The Fair and Accurate Credit Transactions Act entitles consumers to one free credit report from each of the three major credit reporting bureaus — TransUnion, Equifax and Experian — each year.  The free reports can be obtained at AnnualCreditReport.com.

“Consumers ought to know what their credit score is; they ought to know what’s on their credit report; they ought to make sure that what’s on their credit report is in fact theirs,” says Rick Allen, the director of strategic initiatives for Mortgage Marvel, an online mortgage shopping Web site.  “That’s a must-do for everybody.”

4. FHA-backed mortgages

Borrowers who can’t meet these tighter lending requirements can turn to the FHA, which insures mortgage loans against default.  Standards for FHA loans are typically less onerous than those for private lenders.  The average credit score for FHA borrowers is about 690, Cecala says.  “If you can’t make the 730 credit score or you can’t make the 20% down, the next best thing is FHA,” he says.

The downside is that FHA loans come with additional costs.  Borrowers must pay an insurance premium as well as a slightly higher interest rate, Cecala says.

5. FHA requirements

With so many borrowers unable to meet today’s stricter lending requirements, FHA-backed loans have become increasingly popular.  Today, the FHA guarantees nearly 30% of new home mortgages.  That’s a stunning increase from 2006, when the agency backed roughly 3% of new home loans.

Meanwhile, the agency’s finances have deteriorated considerably.  The seasonally adjusted delinquency rate for FHA loans increased from about 13% in the third quarter of last year to 14.36% in this year’s third quarter.  At the same time, the agency’s capital reserve ratio dipped below the level that Congress mandates.

In the face of mounting political pressure, the Obama administration has announced steps that may make it more difficult for some borrowers to obtain mortgages backed by the agency.  These include raising the minimum FICO score, increasing upfront cash requirements and possibly charging higher insurance premiums.

“We want to ensure that we are able to continue to support the housing market in the short term and provide access to homeownership over the long-term, while minimizing the risk to the American taxpayer,” Housing and Urban Development Secretary Shaun Donovan said in written testimony to a congressional committee.

6. Mortgage rates

Mortgage rates in 2010 are expected to climb from 2009’s extremely low levels.  After the Federal Reserve announced plans to purchase debt and mortgage-backed securities from Fannie Mae and Freddie Mac last year, rates on 30-year fixed conforming mortgages fell to historic lows, plunging to 4.97% in late November from 6.19% a year earlier.  But the Fed’s asset purchase program is scheduled to expire at the end of the first quarter of 2010, and a lack of private demand for mortgage-backed securities could lead to higher rates.

Keep in mind that the Fed has already extended this program once.  And if it appears that the market needs additional government support to keep rates low, the Fed could always decide to remain in the market.  Keith Gumbinger of HSH.com expects rates to increase from current levels to between 5% and 5.25% by the end of March.

7. Jumbo mortgages

Rates on bigger home loans, called jumbo mortgages, have dropped to extremely attractive levels, dipping under 6% in November and near that mark now.  “That ranks with all-time bests,” Gumbinger says.

But while he expects rates on jumbo mortgages to remain historically attractive throughout 2010, many borrowers won’t be able to obtain them.  That’s because most banks have to keep jumbo mortgages on their books and therefore apply much stricter lending standards to them.  Smaller conforming loans can be sold off to Fannie and Freddie.

“Your down payment requirements for jumbo mortgages are anywhere between 40% down to 20% down, depending upon what is happening in your marketplace,” Gumbinger says.  “You may have to show superhuman strength in terms of credit; you may have to show extraordinary income size.”

8. Fed rate hike

In attempting to jump-start the economy, the Fed has slashed its benchmark federal funds rate to nearly zero.  And even as some express concerns about future inflation, the central bank in early November said that economic conditions were “likely to warrant exceptionally low levels of the federal funds rate for an extended period.”

Economists don’t expect the Fed to raise rates anytime soon.  “The statement does not lead us to change our view that the Fed will keep rates unchanged until the September 2010 meeting, when we expect the first rate hike,” Dean Maki, the head of Barclays Capital research, said in a report.  But while an increased federal funds rate could push rates on certain products — such as adjustable rate mortgages or home equity lines of credit — higher, it has little direct influence on fixed mortgage rates

9. Economic recovery

A recovery in the U.S. economy may also lead to increased mortgage costs.  That’s because economic improvement could create more demand for credit, which pushes rates higher.

At the same time, a recovery could embolden investors to move money out of ultra-safe assets such as 10-year Treasurys and into riskier investments.  And because 30-year fixed mortgage rates tend to track the yield on the 10-year Treasury note, such a development would put upward pressure on mortgage rates.

Gumbinger says that economic improvement and other factors could push rates on 30-year fixed mortgages as high as 5.75% by midsummer.  “After that, you are going to be at the whims of the economy,” he says.

10. Future of Fannie and Freddie

A wild card in the outlook for mortgage rates is the administration’s plans for Fannie Mae and Freddie Mac.  The two mortgage finance giants — which buy home loans from banks — are a key source of liquidity for the market.  The government-chartered companies have long been controversial, and speculation about their future has been mounting since their shaky finances forced Uncle Sam to take them over last year.

The administration’s plans for their future, which could include liquidation or converting them to public utilities, could become clearer in early 2010.  This decision could have profound implications for mortgage rates, Gumbinger says.

“We could have some dislocations in the supply chains with mortgages depending upon how immediate or how gradual the changes to the structures of those companies are,” he says.

By: Luke Mullins, www.usnews.com

In case you are scheduling any travel time in the near future, here are some safety tips on how to make your house look “lived in” while you are away. 

If you can afford it, hire a house sitter to live in your house while you are away. As an alternative, ask a relative or friend to live in your house, even if it is just for a few days, or a couple of overnight stays. If you can’t arrange to have someone live in your house, arrange for someone to check on your house at least every second day. They should take in ad mail and postal mail, pick up any litter in the yard, and put out some garbage and/or recycling bins, even if they have to bring some of their garbage over to your place to put in the bins!

Install timers for house lights. Set the timers to mimic normal living patterns.

Close blinds/drapes before leaving. Ask whoever is checking your house to change the blinds’ positions every few days.

If your car is visible from the street, arrange to have it moved and/or driven every few days.

Arrange to have your lawn cut or driveway shoveled, depending on the season.

The Other Side of the Frugality Fence

In a recent post at Get Rich Slowly, J.D. defined the “basic law of frugality” as this: “Decide what’s important to you.  Give yourself permission to spend on these things.  Pinch pennies on everything else.”  That’s a pretty spot-on definition, in my opinion.

The more I thought about it, though, the more I realized that it speaks to the problems that both over-spenders and cheapskates have.

Over-spenders

In most situations, it is easily possible for a person to spend substantially less than they earn.  So what causes a person to spend more than they earn?

The answer is hidden in that phrase.  Over-spenders stretch their definition of what’s important to them to cover a lot of things.

I’ll use myself as an example.  Back in my overspending days, there were a lot of optional things in my life that I defined as being important enough to throw my money at.  I went golfing a lot.  I bought gadgets by the truckload.  I bought more video games than I could ever possibly play.  I bought carts full of books.

The end result was twofold.  First, I often didn’t have time to actually enjoy all of the stuff I had bought.  Second, because of all of the spending, my life was in a rough place.

My definition of what was important in my life was skewed.  I had elevated too many things to the threshold of “permission to spend freely.”  Because of that, I spent much more than I needed to spend, but I had too many things in my life to actually thoroughly enjoy the things I was spending money on.

The solution?  Cut back.  Ask yourself what things you most enjoy doing and toss the rest of it.  And look for ways of minimizing the costs of the things you do enjoy.

Frugality is often said to be miserable because you have to give up so much.  In reality, frugality means not giving up the things that are actually important to you.  The trick is stepping back, looking at your life, and figuring out what things are important and what things are not.

Cheapskates

On the other side of the coin are cheapskates, a role that I’ve almost fallen into a time or two over the past few years.

Cheapskates apply principles of penny-pinching to every aspect of their life, even the important ones.  Although they have financial stability in their lives, they do it at the expense of other elements of their life that could add a great deal of value.

Here’s an example from my own life.  I love to read books.  I read several books a month beyond what I review on The Simple Dollar.

For the better part of a year, I refused to buy a single book.  Instead, I just reserved books that interested me at my local library and patiently waited for them.

Several titles came out that I was eagerly anticipating.  I was able to read some of them fairly quickly (within three months) of their release.  Others?  I’m still waiting.

Even more noteworthy is that at least two of the books I checked out and read during that period were books that I strongly fell in love with and wanted to read again (and I was quite sure I would read them many times in the future, as I love returning to books that really make me think).

But I was cheap.  I didn’t buy these books.  I resolved to just check them out at the library when they became available again.

One Saturday afternoon, I was sitting at home, having just finished a book.  I looked at my unread books and realized that the book I most wanted to read wasn’t there — a book I had read before and returned to the library after thoroughly enjoying it.  The library didn’t have it, either.  I checked on Amazon and realized I could have the book for just $7.  And yet I talked myself out of buying it.

That’s when I realized I was being a cheapskate.  I was avoiding spending $7 on something that I knew would give me many hours of enjoyment now and quite a few hours of enjoyment later on, plus it would be a book that I could recommend to friends and loan to them while they loaned me books, as well.  To not spend $7 on something I cared so deeply about — and it was a $7 I could easily afford — was pure cheapness.

It’s okay to spend money on things that are truly important to you.  In fact, it’s good, because spending money specifically on things truly important in your life directly raises your quality of life much more than any other way you could spend your money.

Reading is important to me, so I’m no longer afraid to spend money on it.  Yes, if I see a book I want to read, I’ll check to see if the library has it and read it from them first.  Yes, I use PaperBackSwap religiously.  But if those outlets don’t connect me with a book I’m passionate about, I’m no longer scared to go to the bookstore and pick up that book that I want.  Doing so raises my quality of life quite a lot.

The Winners Are in the Middle

The best place to be is at that place between the over-spenders and the cheapskates.  People who know what’s truly important to them and aren’t afraid to spend money on it enjoy a higher quality of life than people who spend themselves into debt (adding a lot of stress and challenge to their lives) and people who never spend a dime (missing out on things that they truly value in life).

What are your central values?  What’s really, truly important to you?  Give yourself some permission to spend in those areas without worry — but then lock down the ship in the other areas of your life.

By: Trent, www.thesimpledollar.com

Here is a link to the article on the Tribune’s website.

http://www.chicagotribune.com/classified/realestate/chi-local-scene_chomes_0108jan08,0,1361616.column

Summary:  Legislation is calling for realtors to be “professional”, to not “dabble” and to not be construed as “salespeople”.  It also talks about the increasing education requirements.

If you would like us to refer you to one of our realtor referral partners please contact us @ 847-470-3357 or laketeam@jeffreylake.com.  We have many qualified agents in the Chicagoland area that would be more than happy to assist you with your real estate needs.

Identity theft is unfortunately becoming more prevalent every day, and we thought these important tips from the FTC on how to protect yourself might be interesting for you to review.

Actually look at your credit card and bank account statements, instead of just glancing over them quickly or passing them along to your spouse to pay off. This is usually the first place unauthorized activity will show up.

Call your credit card company or bank if an account statement is late. A missing bill may mean some one called the company using your name, and changed the billing address to prevent you from catching their shopping spree.

Don’t give out personal information on the phone, through the mail, or online unless you initiate the contact or know the caller. Thieves will pose as bank representatives, Internet service providers, or government agents to get you to reveal personal information.

Tear or shred any documents that contain personal information. These include credit card receipts, insurance forms, physician and bank statements, and even credit card offers.

MMRecap for Jan. 25

Disappointing economic indicators and some big losses on Wall Street resulted in a good week for U.S. Treasuries.  Although reports were limited to two days during a short week, the benchmark 10-year note yield, which moves in the opposite direction of price, remained at near recent lows.

Wednesday’s December housing starts and building permits was the first to shake things up.  Starts fell by a worse-than-expected 4% to an annual rate of 557,000 units.  Building permits, however, rose 10.95% to an annual rate of 653,000, the most in 14 months.  Single-family permits climbed 8.3% to an annual rate of 508,000, the highest level in 15 months.

Also released was the producer price index, which checks for wholesale level inflation.  The index rose by a tame 0.2% in December, while the more closely watched core rate, which eliminates food and energy prices, came in flat.  Buying ensued, as traders don’t have to worry (right now) about inflation eroding the value of long-term bonds.

These reports and disappointing quarterly earnings from three major banks had equities traders concerned about economic growth, so money flew to the safe haven of Treasuries.

The flight continued Thursday when first-time unemployment claims for the week ended Jan. 16 soared by 36,000 to 482,000, the biggest increase in eight months.  In addition, the four-week average rose to 448,250 after 19 weeks of declines.  It was noted, however, that delays in reporting may have occurred over the Christmas and New Year’s weekends.

The Philly Fed index of January manufacturing conditions also spurred buying in government debt, as it unexpectedly fell to 15.2 from a revised 22.5.

The only positive report showed the index of leading economic indicators (LEI) rising 1.1%.  The LEI is supposed to predict economic conditions over the next six to nine months, but the markets didn’t buy it.

In addition to economic reports, President Obama’s plan to increase regulation of the nation’s biggest financial firms was not well received by Wall Street, and concerns remain about China’s halting lending to control growth.

Lower rates propped up mortgage applications for the week ended Jan. 15.  Purchase apps rose 4.4% while refis jumped 10.7%, according to the Mortgage Bankers Association.

This week features the usual round of month-end releases — some important, some not.  The Fed will conclude its meeting on Wednesday and most likely announce that short-term rates will remain unchanged.

Existing home sales for December come out Monday and are expected to have declined.  Analysts predict an annual rate of 5.9 million units, which would be down substantially from the previous 6.54 million units.  This report would be welcomed by bond traders, as would Tuesday’s consumer confidence report, if estimates are on target.  Confidence could dip to 52.9 from the previous 53.3.

Wednesday’s new home sales release for December should indicate an increase.  Analysts predict sales to come in at an annual rate of 362,500 units, up from 355,000 in November.

Thursday’s first-time claims for the week ended Jan. 23 could show a decline, if previous results actually were holiday-skewed.  But that’s an unknown.  Orders for durable goods in December are expected to increase 1.25%, which would dwarf November’s 0.2% increase.  A drop in claims and strong durable goods numbers could rattle Treasuries.

Friday’s big report will be the advance 4^thquarter GDP, and it’s expected to come in at 4.5%.  That would be a huge increase from the 3^rdquarter final of 2.2%.  Although such an increase would likely worry traders who fear strong economic growth, they should remember that the advance 3^rdquarter GDP came in at 3.5% and was adjusted downward twice after that.

The Chicago PMI on January manufacturing conditions could edge up to 73 from 72.8, which would be acceptable.  A larger number could concern traders.  The final January consumer sentiment report from the University of Michigan is similar to the PMI.  It’s expected to edge up to 72.9 from 72.8, which would be a non-factor.  If it were much higher or lower, it could affect Treasuries.

Speaking of non-factors, the 4^thquarter employment cost index (ECI) should rise 0.4% — the same as in the 3^rdquarter.

Lane Rasberry may not be the next Steve Carell, but the same skills that improv comedians typically learn on their rise to stardom helped this research interviewer get better at what he does at work every day.

A class at Seattle’s Jet City Improv made Rasberry more aware of how he communicates and helped improve his interviewing skills.  In presentations, he’s more responsive to an audience, and he isn’t as fazed when something doesn’t go according to plan.

Chicago’s Second City is known as a training ground for comedic actors, but it also offers improv classes to Corporate America.  Lesson No. 1: Learning how to listen, a necessary skill in improvisation — and business.

“I never thought about acting or getting involved in something like that,” Rasberry said.  ”I wanted more communication skills.”

Mastering the ability to listen closely and communicate well with co-workers can be a rarity in the corporate world of countless email messages and PowerPoint presentations.  Improv companies are taking note and offering assistance through corporate training workshops.

Meanwhile, some individuals looking to perfect those skills invest in improv classes — whether it’s to do their job better or find a new one — giving new meaning to the phrase “all the world’s a stage.”

“How to listen, how to read a room, how to build trust on teams, how to create and innovate, how to resolve conflict — all that kind of stuff is stuff that our actors know how to do really well,” said Tom Yorton, chief executive officer of The Second City Communications, the business-focused arm of the legendary Chicago comedy theater.

Real-world skills

These are skills that business schools don’t always teach.

“We’re being called in to work with young people who aren’t showing up with the emotional intelligence and the listening skills and people skills — brilliant people with numbers and flow charts,” said Richard Richards, vice president of program design for The Ariel Group, a Lexington, Mass.-based firm that takes a slightly different approach — using acting-based techniques to coach employees.

For individuals, Jet City Improv occasionally offers a course specifically on using improv skills in job interviews.  The workshop ends with participants doing mock interviews to put the concepts into practice.

This type of training also is useful for holding down a job.  While people need to be competent at what they do, “the other key facet of being someone who keeps their job is being someone whom other people want to work with,” said Seth Weitberg, curriculum director for Improv Olympic in Chicago.  ”If you’re a good, active listener, someone who supports other people and makes their ideas look better, you will find a lot of people want to be around you quite a bit,” he said.

Crash course

No time for an improv or acting class?  Whether your 2010 involves finding a job or keeping the one that you have, below are five tips for a better performance:

1. Listen up

Practice better listening skills by concentrating on the person speaking and not what you’re going to say next, Weitberg said.  ”Most people will self-identify as poor listeners,” Weitberg said.  ”They’re afraid they won’t have something good to say when it’s their turn to speak.  Out of fear, they start thinking about what they want to say.”

You’ll have a better conversation if you stay in the moment and pay attention.

2. Be flexible

The ability to go with the flow is important whether you’re supporting members of a team or making a good impression in an interview.

Improvisers know this well: A scene might not take the direction they had hoped, but they can stick with it to make it work.  To succeed in that, they follow a “yes, and” rule; instead of saying no or denying something said or done onstage, actors support their cast mates, accept the suggestion and add to it.

That rule “is important for creating professional relationships and getting people’s trust and letting them know we are all on the same side here,” said Shubbu Amin, a program manager at Microsoft who took a course at Jet City Improv.

3. Know yourself

For job interviews, people will often memorize their resume in preparation.  Instead, rehearse by reflecting on experiences you’ve had that could express your personality and what you bring to a company, Richards said.

Go into an interview knowing stories from your past that illustrate certain qualities or lessons learned.  Create a value statement about yourself — what you’re bringing to the table regardless of the company — and weave the ideas into an interview conversation.

Actors develop a keen sense of self-awareness to present characters on stage; in the business world, develop that awareness to recognize your personal strengths and weaknesses — and use the knowledge to your advantage.

“Most people think they have to play a role instead of just being themselves in an interview — and when they’re themselves, they get to be a little more credible and authentic, and that really rings true,” Yorton said.

Remember that, even if you have a job, self-awareness is important — especially in a tough economy.  ”Every interaction is a continuing job interview — whether you’re going to keep it,” said Sean Kavanagh, chief executive officer of The Ariel Group.

4. Pay attention to body language

Have friends or family critique your body language for cues on how interviewers and business associates view you.

“One of the reasons salespeople try to put something in your hands is because it doesn’t allow you to cross your arms,” Weitberg said.  ”Staring out the window can be a sign of indifference — or fear.  Staring someone down can be aggressive.”

Also pay attention to filler words like “um,” or any other verbal cues that could work against you.  For example, Lauren Domino, education director at Jet City Improv, worked with a student who seemed to apologize for everything — a trait that gives off a less-than-confident vibe in a business setting.

5. Find common ground

It’s important to make connections, even if it’s something as simple as where you went to school or your favorite sports team.  Identifying common ground goes a long way to establishing trust and building rapport, whether in creating a scene with another actor or talking with a potential boss during an interview.

“The sooner you can find that common ground, the more likely you can get what you want,” Richards said.

Added Weitberg: “Having a genuine interest in the lives of people around you and embracing opportunities to be vulnerable around others goes a long way in people feeling you’re someone they want to spend time with.”

Even if the only time you spend together is in the break room.

   By: Amy Hoak, www.marketwatch.com

I wanted to pass on an idea to consider for an inexpensive way to upgrade the appeal of your home. 

Landscaping is one of the best home investments you can make. A well-placed tree or shrub will add to your enjoyment and increase resale value. For under $100, you can choose from a wide selection of quality nursery stock and plant them yourself. If you like, you can play with some of the gardening software that’s out there and get an idea of what your work will look like. Try to plan it out in advance; you can add a shrub at a time.

A perennial garden will bloom year after year. This permanence makes it a landscaping fixture and thus adds value to your home. If you prepare and plant the garden yourself, $100 will buy a good stock of perennials. For the best enjoyment and value, take the time to measure your property and use graph paper to design the best placement of your perennial garden. Many local nurseries also offer free help with garden design.