Money Talks, LLC
Susan Hammitt
 AFC, CDFA, Mediator, Financial Life Planner
May 2012
In This Issue
New Economy - New Realities - Mortgage Lending
Savvy Money Decisions
Savvy Money Decisions

 Money Talks - We listen

Money Talks, LLC


Susan Hammitt


511 SW 10th Ave.

Suite 805

Portland, OR  97205


Phone: 503-233-8142


Email: Money Talks



Financial Life Planning 



Divorce Mediation



Talking about money is a powerful way to teach and learn financial skills.
The cocoon of privacy and silence skews financial decisions in favor of images provided through media. 
I recall Bill and Melinda Gates said it was conversations with Warren Buffet that influenced their perspectives about inheritance and philanthropy.
We learn from each other through conversations about money and choices.  The information can not be gleaned through observation.  Appearances are deceiving. Instead, small conversations about money provide a collage of perspectives and ideas that prepare us to make well informed decisions. 
This newsletter Talks about Money and I hope you will continue the conversations with your peers and family members. 

Susan Hammitt
Money Talks, LLC

Elder Friendly Logo

Personal Financial Sustainability 


What changes have occurred in your personal financial life as a result of the recession? This is a good time to consider and ask: "How well have I weathered the changes?"  And, "What future changes may impact my financial life going forward?" 


Personal Financial Sustainability requires Financial Agility: the ability to adapt to change with the least amount of negative impact to Valuable Daily Life


We are all familiar with mental inventories identifying what we would save if our home was threatened by fire or other disaster.  The other important inventory identifies what we would save if our financial situation changed. That is critical information - the foundation for every financial plan.


Millions of American households, hit hard by the economic downturn, have been forced to inventory the most valuable pieces of daily life essential to happiness and well being.


This inventory can not be supplied by a counselor or financial planner - it is an inventory unique to each individual or life partnership.  It represents the delicate balance woven in threads of work, activities of daily life, thoughtful time, social capital, and stewardship.


I have personally witnessed more than 300 cases of people loosing their jobs, their homes, their retirement savings, or going into bankruptcy after a lifetime of working hard and believing in the American Dream.  They have been heroic, letting go of so much and carefully nurturing access to the most essential and valuable pieces of their lives.


There is no way to predict with certainty what economic changes we will experience in the future. However, change is always on the horizon and depending on life events and the economic and political climate - everyone must be prepared with Financial Agility



New Economy - New Realities 
Mortgage Lending
It is very important to talk to mortgage lenders before making financial plans that rely on real estate financing.  
Underwriting guidelines for home mortgages (and other types of financing) shift and change almost daily. It's more than rolling back to earlier, more conservative times. Lenders are also finding ways to factor their concerns regarding overall economic outlook.  
Several of my clients have assumed they were well qualified  for purchases and were denied loans based on appraised values, condition of the properties, or one minor weakness in their income/credit profile.
I have heard about lenders denying loans with 50 to 80% down-payments: In one case a retiree was making an 80% down-payment and wanted a 20% loan on a new purchase. Because she had not begun systematic withdrawals from her substantial retirement savings account, the lender refused to include it as source of income.

Lenders are adding new guidelines, layers of scrutiny.  For instance borrowers who planned to purchase a new family home and convert their current residence to a rental have been denied the new loan because they did not have 30% equity in their old home and/or they did not have experience as landlords. 

Tragically, many people who have needed some relief as a result of reduced income, have been stuck in high interest loans because they can not qualify for refinances.  Congress has provided some relief through guarantees to the lenders but that has been a long and difficult road which continues to be debated.
Loan officers continue to bridge the gap between what borrowers believe is fair and banks are willing to do. Those of us who serve as advisors, to our clients, our children, or our peers must respect the fact that things are not the same as they used to be.
Make a Money Plan

Cash Flow Planning is essential to financial success in business and personal life. No matter how much income is available, without a plan, cash flow can become a real problem. What is the difference between a budget and cash flow plan?  Most budgets are fixed plans for allocating monthly income to specific expenses.  A cash flow plan factors inconsistencies.


Most budgets include annual expenses broken into monthly amounts.  if you spend $1,200 a year on travel it shows up on a budget as $100 a month.  There can be ten or more expenses like that in a budget.


But, where is the money when you need to pay the bill?


A cash flow plan provides the amount of money required to meet expenses as they occur. There are four ways to fund non-monthly expenses: (1) Use available cash assets. (2) Create an reserve account that is funded monthly. (3) Count on windfalls. (4) Use credit and go into debt.


No matter how much money we have if we don't factor all expenses in our plan it distorts financial reality. Budgets are based on the amount of income, or distributions from assets, planned and available to fund a valuable life. Whether a budget is $20,000 or $200,000 a year, unfunded expenses are risky financial business.



 Make a Plan - Make it Work!



Savvy Money People Make Informed Decisions 

Here are some tips for savvy money strategies: 


Before purchasing anything using credit, add up the total annual payments and consider the costs. Something that is only $.25 an hour is $6 a day and $2,190 a year, is it worth it? One of the oldest and most successful sales tools is reduce cost to the lowest possible amount. Savvy purchasing decisions consider the impact to an annual budget. 


Never make financial decisions based exclusively on tax savings. Generally, in order to save on taxes you will need to spend much more. As an example: Mortgage interest is a write off, however, the actual interest payment exceeds the tax savings. So, in effect we pay the lender $6 in order to avoid paying taxes of $1 to $3. Do the math. 


Financial Skills Are Not Genetic.

They Are Learned Behaviors.