What you may not know is that the subprime mortgages are mortgages whose interest rate is below federal prime level (although this may be the case in some mortgages) it usually means that mortgages were given to people who couldn’t qualify under normal terms. Maybe their credit score was bad, so they were given a rate to get them through the next 3 to 5 years, called an ARM. Once they got on their feet, got their credit back to normal they could get a fixed rate afford their house.

Problem is, these borrowers weren’t given a financial education to go along with this borrowing that took place. Whose fault is that? Who knows.

Most traditional mortgages require you to put 20% down to cover the bank in case they have to foreclose. The bank then has at least 20% as an asset to cover any sudden downswing in the housing market. These subprimers were able to get loans for both the 20% down and the 80% remaining by paying a small fee called mortgage insurance. These insurance rates, usually enough to deter borrowers from going 80/20 loan routes were lowered and allowed risky credit apps.

The list goes on about what was wrong with this lending. But the bottom line is that subprime doesn’t mean just below prime rate, usually it means people with risky credit scores getting in way over their heads.

What is Dollar Cost Averaging?

When you dollar cost average, you basically regularly invest a fixed amount of money into the market. The investor would use a systematic investment approach without much regard to the market conditions. Dollar cost averaging is great when you are creating your personal finance plans and you do not want to leave your finances at the hands of the market’s whims. Dollar cost averaging is basically used when you are making investments on stocks or unit trusts.

If you would like to create an investment that would produce long term return on investment, dollar cost averaging is the most effective method of maximizing investments especially when you do not want to consider the market. Usually, when you compare the cost of your investment with the average market cost, you would incur lower cost with dollar cost averaging. This method is ideal when the market is quite volatile. You might reconsider, however, using this method when it comes to other funds or forms of investment.

Before you invest however make sure that you have as much information as you can get your hands on. It is always better to make informed decisions when investing. Also you should never invest what you cannot afford to lose.

Unfortunately, the word tax seems to correspond with the word confusion. People are panicky when the month of April rolls in. There goes the Tax Month again. This is why it is such a great thing that taxes can now be settled online. You can now find a lot of companies that offer their services to people who are at a loss on how to pay off their taxes.

With the Internet, the days of sorting out tax papers, personal finance documents and receipts are long way over. Taxes are handled easier these days. The IRS has devised measures on how to get people to pay off their taxes on time and that is by allowing them to pay their taxes online!

If you are running a small business, you might be able to handle your taxes alone. However, some people may still find the need to get the assistance of an accountant to help them sort out the personal finance matters involved.

Where can you file the taxes?

If you would like to file your taxes online, you need to secure the services of one of those tax companies that have tax software. Companies such as H&R Block, Turbo Tax, and TAXACT are among the more popular ones that offer this service. With these companies you can submit both your federal and state taxes. You are advised to stick to the more reputable companies as there are many scams out there. The government has opened the doors to online filing of both federal and states tax returns and this makes it a lot easier especially if you are able to file your taxes yourself.

Defining Commodities

Simply put, commodities are products of the soil like wheat, gold, oil, cattle and crops. The trading on commodities is generally based on speculation. For instance, you have heard that a storm is brewing over the East Coast; so you know that commodities over the area will be or might be affected by the storms making a particular commodity scarce or not available. So, you would buy the commodities you are interested in on the assumption that the prices will go up in the market.

There are some commodities that demand high interest from consumers and traders. These commodities include energy like petroleum, crude oil, propane and even coal; soft products like cocoa, cotton, orange juice and sugar; meat products like live cattle and lean hogs. There is one commodity that is different than the rest. This is the financials. In financial trading, what are being traded are future trades or options. There are no actual goods being traded yet.

How to Buy Commodities?

You should definitely consider diversifying your personal finance portfolio by trading or investing in commodities. With the current recession, stocks are going south and commodities are better alternative when it comes to investments.

When you are making an investment, it is generally advisable to leave 5% to commodity investment. If you are prudent, you would want to ownership of physical commodities as well. You can basically buy commodities through a commodity broker. You can also consider fund companies that offer diversified personal finance and investment schemes that include investments in commodities.

To Rich Dad and to most people who understand how money works, an asset is something that puts money in your pocket. A car certainly doesn’t put money in your pocket it looses money the second it leaves the show room floor. And your house, although it allows you to take more money out on credit, which you may be able to use to buy or create an asset that does put money in your pocket, is definitely not an asset. More often than not the bank owns more of your house than you do and you just keep paying them more.

No, an asset is something that puts money in your pocket. Everything else can be considered a liability. You need to start thinking this way or else you’ll find yourself diligently lining the pockets of those that use your house or car as their assets.

1. Pay off a Credit Card
2. Put it in a CD, rates are rising and why not take advantage of free money
3. Open a Stock trading account and learn about stock investing, even $500 can help you get started.
4. Open an IRA account to save for retirement
5. Use it as your Gas fund, only for powering your vehicle

To get things off to an early start on Friday May 5th, Warren Buffet announced that he was using some of the extra cash of Berkshire to buy $5 Billion worth of an Israeli based metal cutting tools company. That purchase would represent an 80% stake in the company for Berkshire. This is a big jump into the international market for buffet, one that makes him now the biggest foreign investor in Israel with this single purchase.

Next on Saturday Buffet spoke on real estate and the “bubble market” that some feel has begun to explode. What Buffet and Munger basically stated was there is a lot of credit being offered and awarded to people that shouldn’t be going into much debt.

They both expected a cooling effect to occur soon and pull the ever-expanding market back down to earth.

Some other interesting articles regarding Buffet and the Berkshire Empire can be found at:

Buffet’s Extra Cash
Heading to Omaha
Inside the Meeting