Is Sub-Prime lending dead? I would say not really judging by the last deal that I closed. Don't get me wrong the borrowers were good borrowers. They had a score in the 500's and put 5% down and bought a really nice home in a great neigborhood. In the old days that loan would have been called "sub-prime." The funny thing is, that loan was insured by none other than out Government under the FHA guarantee program. I am also seeing a big come back on Jumbo loan product and low down payment mortgage products. Right now you can do 10% down up to $1,500,000 believe it or not. Those borrowers on the fence who are now paying rent take a jump into home ownership while the iron is hot and before it gets hotter.

Re-Evaluating Financial Priorities

“While scrimping to retire our debt and save appropriately, my wife and I have come to realize that each person has their own priorities, and we can’t measure ourselves next to them because each family is putting their resources to use in a different fashion, according to their priorities.”

While I recognize that everyone’s priorities are different, there are similarities that we can all discuss.  Life is not about living up to the standard of the “Jones” family but about living up to the standards of your own family’s comfort zone.

In researching information for this blog, I came across a balanced money formula from the book “All Your Worth” by Elizabeth Warren and Amelia Tyagi.  Their formula is to take your income and divide it into three unequal parts.  50% needs, 30% wants and 20% savings.  Were this so easy in today’s current fiscal crisis!

We all know the basic needs – food, clothing and shelter – but to what extent do we include them in our “needs.”  Does eating out in restaurants (food) qualify as a “need?”  For some people the answer might be a YES!!!  Connecting as a couple over a dinner out might enhance your relationship in ways that are not possible when you are eating at home.  But how often do you need to “connect?”

When figuring out your needs vs wants, please include a discussion of the following: dining out, life insurance, private school tuition, pets, health care, emergency fund, size of your home, college funds, retirement funds, family entertainment (movies, outings, vacations,) etc.  What must you absolutely have and what might be qualified as a want for the time being.  Of course, you will need to revisit your “list” as your family situation changes and as your financial situation changes.

Going back to that formula, what happens when your needs are more than 50% of your income – are you willing to go into debt for your loved ones?  And for what “needs” would you be willing to go into debt and what “needs” are really “wants” when you are considering debt.

We all would be carrying less debt, if we really considered and thought about our real “needs” – honestly, they really may be “wants.”

Please share your thoughts.

Thank you

Carl