Why Buy a Car, Jet, or a Vacation Home When You Can Share It?

May 20, 2012 Marsha Hinde 3) Reuse, Recycle, Repurpose

 

ZipcarThe American dream has always been to own your home. And with the advent of the automobile, to drive a wonderful car.

We dream about buying our first car or our first home. Those are the status symbols that me we’ve “made it”.

And once we have achieved these goals, many of the more ambitious dreamers among us want a second home for holiday getaways – or a fancy car to whisk them away at a moment’s call.

So how can you benefit in today’s economy if you’re among those lucky enough to own that vacation home or fancy car? Welcome to Asset Sharing.

Asset Sharing – Bumming Rides and Crashing on Couches

If the reaction on Wall Street means anything, asset sharing is here to stay. Two new comers, HomeAway (AWAY) and Zipcar (ZIP), recently went public, despite the climate of volatility for recent IPOs. Both stocks went higher on their first days of trading, and they both continue to trade well above their original prices.

HomeAway gives property owners a way to help offset the sting of second home ownership by showcasing them as short-term rentals to folks who need a place to stay for days, weeks, or even months. Travelers benefit because they can stay in one-of-a-kind vacation homes that are far more spacious than cramped hotel rooms, often at prices that are comparable to, if not cheaper than, conventional lodging.

Everybody wins: Owners can make money on their vacation properties when they’re not using them, while travelers can stay in a genuine vacation home without the costs or hassle of actual ownership.

It’s not surprising that HomeAway has been so successful. For $329 annually, property owners can list their getaways and having access to HomeAway’s tools. This cost is typically made back on the very first rental. Through HomeAway.com, VRBO.com, and several other websites it owns, the company offers more than 625,000 paid vacation rental home listings in more than 145 countries.

Baby, You Can Drive My Car

Zipcar is another Asset Sharing success story.

Owning any car can be a real drag. Between the car payments, routine maintenance, insurance premiums, and fuel costs, having a set of wheels can drive your disposable income a lot lower than you think for a machine that sits idle most of the time. Zipcar offers a way out of this income drain.

With its presence in 15 metropolitan cities and on more than 250 college campuses, Zipsters — that’s what members call themselves — typically pay a one-time $25 application fee and an annual fee of around $50 to join. The for roughly $8 an hour, they have sole access to a car. Unlike traditional auto rentals that can nickel and dime you over longer periods, Zipcar reservations cover insurance, gasoline, and up to 180 miles per day.

Environmentalists love Zipcar because it eliminates the carbon footprint of having a boat load of cars on the road. Buy the end of June, 2011, there were 604,571 Zipsters sharing 9,480 cars. Drivers love Zipcar because it’s cool – really cool! All it takes to participate is a smartphone app or a high-tech Zipcard for you to open a reserved Zipcar from its designated parking spot.

But I Don’t Have a Vacation Home

Don’t worry – you don’t need a second home to cash in through airbnb.com. If you have a Spare Room that you’re willing to rent out, airbnb is growing into a popular option. And it provides great value. Listing is free and property owners only pay a 3% commission on any completed bookings. There are now more than 70,000 listings on the site.

So Why Should I Care

Asses Sharing benefits the common man – or woman – in two ways.

#1 -The next time you’re tempted to plunk down your hard-earned — or borrowed — money on a car, home, or other dream asset, see if there are cheaper sharing options available. The Asset Sharing Model means that you may be able to afford more than you think you can.

#2 – If you have under-utilized assets like a spare room in your home or a vacation home, Asset Sharing can help you generate extra income. This income can come in handy to pay the monthly bills or can be put away for the future. Remember, re-purposing what we already own is financially and environmentally sound. It’s good for the world and better for your wallet.

Welcome to a new way of thinking about The American dream. Your American dream is closer than you think with Asset Sharing.

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Article source: http://www.dailyfinance.com/2011/09/06/why-buy-a-car-jet-or-a-vacation-home-when-you-can-share-it/

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What’s More Important: Saving or Paying Down Debts?

May 19, 2012 Marsha Hinde 1) How to Get Out of Debt

 

Get out of debt

Which bill to pay today?

For many households, it’s a personal finance dilemma: Should they try to pay down debt or build up savings? In the aftermath of the Great Recession, opinions have clearly tipped to the ditch-your-debt side.

According to the August poll by the National Foundation for Credit Counseling (NFCC), Americans are choosing to deal with what they owe: 89% of those surveyed said they value paying down debt over saving money; just 11% chose saving first.

America has a new aversion to debt – and with the national revolving debt tab of $798 billion as of June and household debt averaging around $11,000 per household – who can blame us? According to the NFCC, new purchases are more likely to be paid for with debit cards than credit cards.

Paying Down Debt

At face value, paying down debt sounds like it’s always a good thing – but if it comes at the expense of saving it’s a bit more complicated.

“It is a good idea to pay down debt rather than save if you have already started a savings account,” says Harrine Freeman, author of How to Get Out of Debt: Get an “A” Credit Rating for Free.

Rich Arzaga, founder of Cornerstone Wealth Management, says that making your debt demon the top priority makes sense if you are someone who:

- loses sleep over debt
- is trying to reshape your debt ratios and credit scores
- will benefit more from better cash flow later than today.

A Question of the “Opportunity Cost”

But the value of paying down debt is directly proportional to the interest charged, says certified financial planner Michael Kresh.

Credit card debt, which can often exceed 20% interest, should always be a priority to pay down, he says. But all questions regarding how you allocate your money should be looked at through the lens of opportunity cost.

Start by asking yourself: Is the interest you’re paying on money you owe greater or less than the return on an alternative investment you could make with the funds?

If you have an average credit card interest rate of 14%, paying off credit card debt is like earning 14% on those funds – a better profit than you are likely to make leaving the money elsewhere. And if the money you’d use is sitting in a low-interest bank account, you net much more by paying off that plastic.

On the other hand, if you can refinance your mortgage to 3.5% – 4% (the lowest rates in our lifetimes), keeping a low-interest loan active while putting money into other investments can garner you a net profit, says Kresh.

Paying down debt also might not be the best move if:

- you’re likely squander the cash surplus once the debt is paid
- you’re getting the benefit of an interest write-off to help offset your income taxes
- you have the ability to manage debt both short term and long term.

Advocating for Saving

Not everyone agrees on the question of putting debt first.

To pay off debt before you have an emergency fund in place makes no sense, says Kevin Lynch, an assistant professor at The American College. Getting a cash cushion in place should be the first order of business, he feels.

“Generally,  I recommend that people should be saving at least 10% of their income” says Thomas Fox, community outreach director at Cambridge Credit Counseling. “Although American’s have began to save again -to the tune of around 5% of income – in countries like Japan, the savings rate is 25%, and it’s 50% in China.”

In this uncertain economy, you should be looking to have money to cover at least 10 months of expenses where you can readily put your hands on it, says Fox.

When You’re Debt Free

If you do choose to focus on debt, don’t get too relaxed once it’s paid off. Instead, reallocate the amount you had been spending each month to free yourself from debt toward another major financial goal, such as retirement, education, buying a new car, or whatever tops your list.

In the Best Of Worlds

In the best of worlds, we would split the difference: “Pay down debt and contribute to a savings account at the same time,” says Freeman. “That way you will have an emergency fund and pay down debt which increases your credit score, reduces credit card usage and improves your financial life.”

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Article source: http://www.dailyfinance.com/2011/09/03/whats-more-important-saving-or-paying-down-debts/

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Controlling Credit Card Debt

May 19, 2012 Marsha Hinde 1) How to Get Out of Debt
Credit Card v Debt

Avoid Credit Card Debt

Although Credit Cards provide convenience for users, many people do not use them wisely.

Credit Card Mentality

Often, it is the lack of discipline and an unrealistic estimate of income and expenses that causes problems.

Many people are very, very aggressive in estimating their expected income and way too conservative in calculating future expenses. The result is they over spend for the present. They spend more than they can afford and have trouble paying off their credit card bills each month.

The major trap for people – especially young people – in our current economy is using credits cards when they want to make discretionary purchases but lack the cash to do so. Credit cards create an urge to purchase because the means to do so are at hand – right in your wallet. And when the bill arrives in the mail, these same people are at a loss trying to figure out why the bill has gotten so high.

If great care is not exercised, credit cards lure people into a false sense of security. They generate the feeling that you can buy anything you want, just because you have this piece of plastic in your wallet. It’s a struggle between WANT vs NEED. And when want wins out over need it eventually leads straight to a Debt Trap.

The Debt Trap

A debt trap is a situation where one finds it difficult to get out of debt and is perennially in tight financial situation. To avoid the debt trap you need to stick to the basics:

- Spend Cash and Only Cash whenever possible
- Use Debit Cards rather than Credit Cards
- Spend Only What You Can Afford Right Now

Whether you are using cash, swiping a credit card or taking out a loan, the best advice one can heed is to always be conscientious about how much you’re spending – and what you’re spending it on.

If, however, you find you’re already in the Debt Trap, the Motley Fool has a wonderful article called “60 Second Guide to Getting Out of Debt”. It gives you a quick and easy way to begin analyzing your debt and deciding how to eliminate it.

For a more definitive and robust plan to eliminate debt from your life I highly recommend the Debt to Wealth System. This program really lives up to its title. I know because I used it to eliminate $70,000 worth of debt in less than two years. I not only eliminated my debt, I also had a substantial savings account at the end of the process.

Building Good Credit

Building and maintaining a good credit rating comes through demonstrating the ability to manage credit – and credit cards. Satisfactory account handling establishes your good credit history which, in turn, will make it easy for you to get approved later on for business and personal loans. But using credit cards is a privilege not to be taken lightly. The flip side of a good credit history is financial disaster and ruin. Accept offers for credit judiciously and use your cards wisely. Plan for the future by protecting your credit rating and avoiding the debt trap.

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Article source: http://www.malaya.com.ph/sep12/bank3.html

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