Foundations of Finance

Due to the apparent beginning to economic recovery, consumers have been spending more in the last few months than they have been during the last couple of years. Now that the economy has stabilized somewhat, the confidence that people have in the market and in businesses has increased substantially, and they are putting down the money to prove it.

This is a positive step forward toward improving the overall state of the economy, as it is still fragile in nature. If the upswing in consumer confidence continues, then it will be much more likely that the market will grow stronger.

There is one obstacle that potentially could damage the gains made by consumers, however. The housing market remains shaky, and predictions for the 2011 year are not as positive as people would like. Nonetheless, economic growth could potentially help the housing market gain stability, so here’s to hoping that the connected nature of the two entities will result in a good outcome.

If you’re trying to sell your home, this is a bad time to do it. But, if you’re thinking about buying your first home, now is the time to take advantage of the low mortgage rates and pay for a home with the same amount you’re paying for rent each month. Here are a few first time home buyer tips that will help you get a home and pay as little as possible for it.

1. Know The Market

Today’s economy is not like it used to be. As little as 4 years ago, home sales were on the rise across most of the United States. General contractors were having trouble keeping up with the demand for homes, and the price of homes continued to rise. Investors were buying them two or three at a time, with the hopes that the economy would continue to thrive and they could sell their property for a lot more than they bought it for.

Then, in early 2006, with almost no warning, the housing market climaxed, leveled off, and started to drop. Housing prices slowly began to drop. . .and drop. . .and drop. Now it is 2010 and there are no signs of improvement. Since 1990, the Case-shiller index shows that the market has not declined until the market crash of 2006. That’s 16 years of steady increase. But now that’s in the past. We’re in the now. So what can we do about it?

2. Don’t buy a home for more than you can afford

Another first time home buyer tip is keeping your budget. Buying homes that are too big and too expensive is what got us into the housing market mess we’re in now. There are plenty of websites that will give you a free estimate on what you will pay monthly for your mortgage. If you are buying a home with your spouse, a good idea is to plan on spending the income of one spouse each month on the mortgage, which leaves room in case one of you loses a job or there are other unforeseen financial strains. Don’t forget about including taxes and homeowners insurance into your budget. Figure out how much you want to spend on a home, and don’t go over budget. Again, there are plenty of options in today’s market, so be patient.

3. Do Your Research

Buying a home is a major life decision, and it’s consequences will be lived with for a long time. Research the neighborhood surrounding your home. Talking to your future neighbors is a great way to find out about the neighborhood, crime rates, education, local government, etc. and most people are willing to talk. Think about how far away the mall is, if there’s a park nearby. If you see gang signs and graffiti on every corner, you may want to consider someplace else. Be patient. The right home will find you.

4. Buy A Foreclosed Home

One of the biggest causes of the housing crash was banks and financial institutions lending mortgages at 5 to 10 times the annual income of people. That means that if someone made $100,000 in a year, the bank would lend them $500,000 or even up to $1,000,000. Most people were okay with that, because if the market continued to rise, then their home would be worth a lot more than they bought it, and they would make money when they sold it. But when the crash hit, many people owed the banks a lot more than their homes were worth. People were simply walking away from their homes, and foreclosures rose rapidly.

When a home is foreclosed, it means that the owner rights are taken away from the owner and given to the lender (usually a bank), so that the lender can try and sell it and make back some of the debt that the owner has incurred. Lots of times these home go up for auction, and that is where first time home buyers can find a great home for thousands of dollars less than it is worth.

5. Don’t own the nicest house on the block

When buying a home, even in a down market, it’s important to remember that you will most likely not live in one place your entire life. Try and find a home in a nice neighborhood that is a little bit smaller or older than the majority of the houses around you. This will increase the value of the home, and give you some leeway in making improvements. Don’t get carried away, either. Keeping up with the Jones’ is not a happy way to live.

By following these first time home buyer tips, buying your first home will be a solid investment, and not a financial burden.

Money is anything that is used by an economy to purchase goods and services. The fact that currency is issued by the government does not necessarily make it money.

For example, the 100 dollar bill is issued by the US government, but how many people in the united states actually pay for things with $100 cash? Answer: not that many. So the bill is currency, but it is hinging on the edge of not being a form of money.

Here are some interesting forms of money from all around the world:

Forms of money

1. miniaturized tools
2. miniaturized swords
3. cowry shells
4. slabs of salt
5. beaded belts (wampum)
6. giant stone wheels
7. tobacco
8. electronic transactions

As illustrated in the list above, things such as tobacco and cowry shells (which are not issued specifically as a form of government currency) are used as money in some places. They are simply used to purchase goods and services.