Improve your financial fitness
By Marcie Geffner – LendingTree.com

Did you know financial fitness can save your life?

Well, maybe not literally. But being well informed about money can reduce stress and help you live a healthier and happier life. Here are three tips to get you started:

1. Did you know? The U.S. has one of the lowest personal savings rates among the world’s economically developed countries. In February 2008, people in the U.S. saved only 0.3 percent of their disposable income, on average, according to the U.S. Department of Economic Analysis.

Saving money is crucial to financial well-being. Savings can help you cope with a financial emergency, make a major purchase and even get ready for retirement.

Saving is easier if you start early and make a habit of it. One good practice is to sign up for an automatic savings plan that deducts money from your paycheck or checking account and sets it aside before you have a chance to spend it. Stash your savings in a savings account, certificate of deposit (CD), investment account or retirement account to meet your future needs.

2. Did you know? Nearly 40 percent of adults have a budget and keep close track of how much they spend on food, housing, entertainment and other categories, according to a survey conducted
for the nonprofit National Foundation for Credit Counseling.

Approximately half of the adults surveyed said they had a good idea of how much they spend or tried to stay within certain limits. Seven percent had no idea and no set limits.

A budget is an important tool to plan and track how much you’re spending and saving each month. To make a budget, start with your monthly income and then allocate specific amounts for each expense. Try to set aside at least 10 percent for savings and no more than 30 percent for housing, 25 percent for living expenses and 15 percent for transportation.

3. Did you know? Nearly 70 percent of young adults have a credit card and 64 percent worry about their debts at least occasionally, according to a survey conducted for the National Endowment for Financial Education.

Paying credit card bills and other debts on time is essential because a history of on-time payments strengthens your credit score, which measures your creditworthiness. It’s much better to build your credit record slowly and patiently than to take on more credit cards than you can handle or spend more than you can repay.

To learn more about saving, budgeting and using credit responsibly explore the LendingTree Smart Borrower Center, which contains hundreds of articles that can help you improve your financial literacy and achieve your goals.

And that, financially speaking, can be a real lifesaver.

© 1998 – 2008 LendingTree, LLC. All rights reserved. No part of this article may be used or reproduced without prior written permission of LendingTree, LLC.

Real estate: A good time to buy?
By Brenda Spiering – LendingTree.com

Today’s headlines can be confusing: Home prices are down, but may fall further; Interest rates are low, but lending standards have become more stringent. What does it all mean? Is now a good time to buy a home?

There’s no question that the current housing market is very different from the one we’ve experienced in recent years. In many parts of the country, there are a lot of homes for sale and interest rates are still near historic lows. These factors combine to create what can be considered a good buyer’s market — at least for some.

If you’ve saved enough for a down payment, have good credit and don’t plan to move in the next five years or so, buying today could be a smart move. Waiting until you believe prices have hit rock bottom may not put you any further ahead if you end up missing out on today’s low financing costs.

If you are shopping for a home today, be sure to:

Pre-qualify for a mortgage
Today’s lending standards are more stringent than they were a year ago. Buyers are generally required to have larger down payments and higher credit scores in order to qualify for the most preferential interest rates. It’s therefore more important than ever to shop around and compare loan options from several different lenders and to arrange financing before you put in an offer on a home.

Beware of deals that sound too good to be true
One of the fallouts from today’s housing market has been a dramatic increase in foreclosure rates. Properties in foreclosure may sell at less-than-market price by lenders attempting to recover money they’re owed. But it’s important to consider the potential hidden costs. Buying a vacant home for a steal may not save you money in the end if you have to pay for a costly renovation to make the place livable. Be sure to arrange a home inspection and to factor in the cost of any necessary repairs if you’re considering buying a home in foreclosure.

Compare apples to apples
Despite all the doom and gloom about today’s housing market, home prices are not down everywhere. While prices in certain regions of the country have fallen dramatically, prices in others have held steady or continued to rise. To get a good sense of a home’s true value, go online to compare the price of similar homes in the same neighborhood or have a local REALTOR prepare a professional competitive market analysis.

And remember, at the end of the day, the decision to buy a home is a personal one that needs to factor in your own financial situation and lifestyle preference. While historically, real estate has usually appreciated in value over the long term, no one can predict the perfect time to buy.

© 1998 – 2008 LendingTree, LLC. All rights reserved. No part of this article may be used or reproduced without prior written permission of LendingTree, LLC.

Fed cuts key interest rate
By Marcie Geffner – LendingTree.com

As expected, the Federal Reserve yesterday trimmed a key bank interest rate by one-quarter of a percentage point from 2.25 percent to just 2 percent. The Fed has now lowered the federal funds rate 3 percentage points in the last seven months.

In its statement, the Fed noted that turmoil in the financial markets, tougher requirements for new loans and weak housing markets have put pressure on the U.S. economy.

“Tight credit conditions and the deepening housing contraction are likely to weigh on economic growth over the next few quarters,” the Fed said.

One of the Fed’s primary objectives is to protect the U.S. economy from inflation. That means the Fed has to find a balance between lower interest rates and higher prices. This week’s statement said the Fed would “continue to monitor inflation developments carefully.”

The Fed doesn’t directly control interest rates on home loans, credit cards or other consumer debts. But this week’s rate cut could still be a positive development for many borrowers since the Fed’s actions can indirectly influence the interest rates on some loans.

Rate cut may aid ARM borrowers
The Fed’s previous rate cuts were especially welcome for borrowers who were facing resets on adjustable-rate mortgages (ARMs) tied to certain indices. Interest rates on ARMs often are tied to the U.S. Treasury or the London Interbank Offer Rate (Libor) rate, both of which have dropped this year.

As an indirect result of the Fed’s rate cuts, some ARM adjustments and resets have been much smaller and less painful for borrowers than they otherwise would have been. The savings due to smaller ARM rate adjustments could amount to hundreds of dollars a month for some homeowners.

The Fed’s rate cuts also influence the prime rate, which is the rate banks offer their best customers. This means short-term interest rates on home equity lines of credit, ARMs tied to the prime rate, auto loans, and some credit cards may move lower as well.

© 1998 – 2008 LendingTree, LLC. All rights reserved. No part of this article may be used or reproduced without prior written permission of LendingTree, LLC.