In this home buying guide I want to focus on emotions of the buyers. Let us forget for a few minutes about your down payment and credit history, even though, we will of course talk about those. I suspect, it is going to be one very long post. So bear with me. Emotions, you see are quite dangerous thing when it comes to buying a house, especially your first one. How to buy a house in 2010 without getting yourself into trouble? Put your emotions aside and keep them there. Things like I must have this house or honey, I fell in love with it from the moment we stepped in have promptly led many to the most severe cases of buyer’s remorse. And selling home you no longer want in current market circumstances will cost much grief and money. So keeping a cool head is very important.

How to buy house in 2010 – common sense do-not-do things
For starters, we want to notice in our home buying guide a few rather simple things that somehow people insist on doing.

1.

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Sales of new homes fell by 7.6 percent in December – a somewhat unexpected result in a year that proved to be the worst on record. December’s sales fell to a seasonally adjusted annual rate of 342,000 from an upwardly revised November pace of 370,000.

While some are predicting a recovery this year in the housing sector, others feel that the “shadow inventory” – that is, the large number of repossessed properties held by the banks and expected to find their way to the market this year – will quickly overwhelm demand, leading to a pullback in house prices.

Source: NY Times

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If you’re in the market for new eyeglasses, the affiliate manager from EyeBuyDirect just sent me an email that they are having a special ‘buy one, get one free’ sale today only. Not a bad deal when you consider that they have 160 pairs of glasses (with prescription lens) for under $30! Sale ends at midnight PST. More details at the link above.

If you haven’t purchased online before, I wrote a pretty extensive guide on how to buy glasses online that you might want to check out. It’s a lot simpler than you might think. After doing so myself, I would NEVER buy glasses at an optometrist – the prices are significantly different.

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In a long-overdo move, Vanguard has officially lowered the subsequent electronic minimum fund purchase to $1.  I’m not sure when exactly the change went into affect, but several Bogleheads have reported verifying the change.  Vanguard is actually late to the party on this issue, since Schwab and Fidelity (and probably other fund companies) have long allowed subsequent electronic fund purchases for even less than $1.

What Is A Subsequent Minimum Fund Purchase?

Not to be confused with the minimum initial investment (see The Best Mutual Funds With Low Minimums), the subsequent minimum fund purchase is the minimum allowable purchase for a fund you already own.  The initial minimum investments for all Vanguard funds remains $3,000 (excepting the Star Fund, which has a $1,000 minimum).  Once you’re in, however, you can invest as much or as little as you want down to the $1 minimum.  Previously, the official subsequent minimum fund purchase was $100;  however, the actual minimum was lower since I regularly made $66 monthly contributions to many funds.  Additionally, this new minimum only applies to electronic purchases.  The previous minimums for phone or mail purchases remain.

If you are having trouble coming up with the initial $3,000 minimum (or whatever the minimum of the fund you want to purchase is), you might look into opening an account with T Rowe Price.  They will let you start an IRA with as little as $50 if you agree to contribute at least $50 per month going forward.  Check out my article How To Invest When You Don’t Have Much Money for more tips.

Will Lower Minimums Raise Costs?

Some Bogleheads, the relentless pursuers of low cost that they are, have questioned whether Vanguard’s decision to lower the subsequent minimum fund purchase limit will lead to higher costs for every investors.  I am quite confident that it won’t.  Their argument is two-fold:

1. Higher administrative overhead - Naysayers claim a higher volume of transactions to track and implement will lead to higher transaction and administrative costs.  This would have been true 15 years ago when most transactions would have been handled over the phone or via checks in the mail, but that is no longer the case.  The $1 minimum applies only to electronic purchases, not phone or mail purchase.  Since mutual fund purchases are made after the market closes and not in real-time, it’s a trivial task to aggregate the total value of all the contributions made during the day an execute them at once.  The infrastructure is already in place to do this since that’s what they already do, anyway.  Handling even ten times the purchase volume (assuming the lower minimums has even that effect, which it won’t) is nothing more than a few extra seconds of CPU power.  Okay, so maybe it will increase costs by $0.83 per day for a $10 billion mutual fund.  Electricity ain’t free, after all.
2. Higher printing costs – Another argument was that printing all those extra transactions on annual account statements would raises Vanguard’s printing costs.  First of all, I call BS on this.  Ink simply isn’t that expensive.  Furthermore, Vanguard already charges a $20-per-fund administrative fee for investors who won’t switch to electronic statements.  If it increases costs to service those old-school investors, raise their service charge to $21 per year.  I just don’t see this as a valid argument.

When it comes down to it, attracting more assets is a win-win for Vanguard, current shareholders, and new shareholders since it increases economies of scale and drives future costs down.  Lowering fund minimums makes sense in the long run, even if it costs slightly more in the short run (we’re talking a few cents per account, nothing significant), is worth it so long as it attracts more assets to the fund family over time.  I believe lowering the subsequent minimum fund purchase limit was the right thing to do.  To not have done so would have been short-sighted.

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With the economy suffering and unemployment percentages reaching historically high double digits, it is naturally getting much harder for people to keep up with their bill paying, and that means a spike in credit card defaults and late payments.

According to recent industry research and statistics gathered from card companies, the rate of credit card defaults in the USA rose to record highs in 2009, in lock step with similarly high unemployment rates.
Bank of America, which is the nation’s biggest bank – and one of the top credit card issuers in the USA – reported that its own default rate jumped to more than 12 percent. That represented a climb of more than 10 percent when compared to the previous year, but in the prior year the employment picture across America was also more robust and rosy. Meanw Read more…

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