If you are not prioritizing your debt, you may find it difficult to make any headway in paying it off promptly. One of the keys to money management is knowing how and where to spend your money, and taking the time to prioritize your debt has many benefits. First and foremost, if you are managing your money correctly and handling your debts well, your credit score will be generally be higher. Next, you’ll be able to pay off your debts in less time. If you want to get started with your debt prioritization and reduction plan, here is an easy guide to help you on your way.

1. Determine which is more important – high balances or high interest rates (or both).
If you have a credit card that has a very high balance but a low interest rate, this may not be as urgent as a credit card that has a medium balance and a very high interest rate. Take a hard look at the total amount of interest across all your cards as well as your balances. In many cases, the medium balance may actually end up costing you more, especially over the long term. Paying that off first can free up extra money that could be used to tackle the high balance card next.

Conversely, if you have a credit card that has both a very high balance and interest rate, naturally this would be the one that you would want to tackle first.

2. Determine how much you are paying on each card.
If you are struggling to make your payments on one card, but the others are a breeze, paying off that one card quickly is a smart priority to have. Figure out exactly how much you owe, add in what you spend every month on each card and see which cards are dragging you down. By targeting these first, you’ll be able to free up more capital in a few months that can be used to pay off the remaining cards.

3. Loans or credit cards?
If you have a mix of bank loans, credit cards and other forms of credit, you’ll need to decide which one should be targeted first. Typically, traditional loans will have much lower interest rates that credit cards, but there are exceptions to this rule. Take a hard look at just how much money you are paying out every month, and then look at it over the long term as well. If you have a long term loan that will cost you an additional $2000 in interest over several years, paying that off first can be very beneficial.

Once you have your priorities figured out, make a list of what you plan to pay and how quickly you want those debts taken care of. That will help you stay on track and assist you in getting everything paid off in less time. Prioritizing your debts is one of the best ways to easily get a hold of your finances, before they get out of control.

They’re going out of business! It’s a liquidation sale! The prices will be crazy marked down, right? Not necessarily. Read on to avoid getting ripped off by liquidators. Photo by Cosmic Kitty.

Many an unwitting shopper can be lured into a store with an enormous “50% OFF!” sign strung across the storefront. Even more so when the closure of a chain of stores is highly publicized like the recent closure of Circuit City. Unfortunately, the entire process of liquidating the stock of a store is rather deceptive. Walking past the “Everything must go!” signs and picking up a box marked 50% off could actually mean paying full retail.

First, a brief summary of what liquidation is. When a company is facing dire straits or has already hit the wall of bankruptcy they will— either voluntarily or by legal order—try to convert as much of their assets into cold hard cash as possible to pay off debts and hopefully return some money to their stockholders. The process is usually handled by an external company whose sole goal is to turn the pile of assets into profit—and minimize their risk in the process.

What does this mean to you, the consumer? It means that for the first portion of a liquidation sale you’ll likely be ripped off. Let’s use an HDTV from a fictitious company to illustrate how you’re not actually getting the deep discount you think you are.

Last year SuperPow television company released the SuperPow H9000 HDTV. The manufacturer suggested retail price (MSRP) was $2500. It was sold at HappyBox electronics stores for $2200 when it first came out and as newer models arrived it was eventually sold for $1250. HappyBox has a bad run and ends up filing for bankruptcy. Their inventory is now controlled by a liquidation company. The company responsible for the liquidation advertises that products in the store are deeply discounted, some things are even 50% off already! You walk in to check on the SuperPow H9000 and see that the price is $1250. You remember the TV was really expensive and that seems like a great deal for a nice TV, after all it’s 50% off! The only problem is that you’re getting 50% off the MSRP, which nobody paid even when the TV was the hottest model on the market. It may be a month or two into a large liquidation before that TV is actually marked down 50% from the actual street value to a wallet-friendly $625—and most likely someone not realizing they aren’t getting a very good deal would have bought it well before that.

How can you make sure you’re not the sucker that the liquidators count on to reap their profit? With a little knowledge and some handy tools, you’ll get the most for your money.

Know The Market

Don’t go shopping blind. If you’re heading to a going-out-of-business sale, take a few minutes to do some cursory research on whatever it is you’re looking to buy. Compare prices with price comparison engines like BeatMyPrice and make sure to check out deal-tracking forums like SlickDeals and FatWallet—both were reader favorites for finding the best deals online. You may not even know the exact model you’re going to find at the store, but checking deal sites like FatWallet will give you an idea what the general price ranges are for things and what deals can be had on them. A 40″ HDTV “marked down” to $1500 won’t look so appealing when you know that similar models are going for half that thanks to a little research. 

Use Your Phone as a Price Checker

If you have an internet-enabled phone with you, it’s easy to compare prices right in the store. The quickest, if least specific, method is to plug the product name or model number into the mobile version of Google Product Search. If you’re without internet access but you can text message, you can take advantage of the Amazon/eBay price-comparison mashup provided by MobSaver. Text the ISBN or UPC code of an item to save@mobsaver.com and it sends you back the current prices on Amazon and eBay. When you’re really in a bind you can use—as I’ve often done—the most analog method and call a friend to run a quick price search online for you. A few minutes pecking on your phone or making a call can save you hundreds. 

It’s never a good sign when companies are shuttering their windows—for the economy or for the displaced workers—but that doesn’t mean you should pay extra for their bad luck. Armed with the tips above you’ll never be the sucker paying MSRP for 2007′s castoffs. If you have your own learned lessons about liquidation sales, sound off in the comments below and help save your fellow readers some cash.

via: [LifeHacker]

(CBS) When it comes to bailouts of American business, Barney Frank and the Congress may be just getting started. Nearly two trillion tax dollars have been shoveled into the hole that Wall Street dug and people wonder where the bottom is.

As correspondent Scott Pelley reports, it turns out the abyss is deeper than most people think because there is a second mortgage shock heading for the economy. In the executive suites of Wall Street and Washington, you’re beginning to hear alarm about a new wave of mortgages with strange names that are about to become all too familiar. If you thought sub-primes were insanely reckless wait until you hear what’s coming.

One of the best guides to the danger ahead is Whitney Tilson. He’s an investment fund manager who has made such a name for himself recently that investors, who manage about $10 billion, gathered to hear him last week. Tilson saw, a year ago, that sub-prime mortgages were just the start. 

“We had the greatest asset bubble in history and now that bubble is bursting. The single biggest piece of the bubble is the U.S. mortgage market and we’re probably about halfway through the unwinding and bursting of the bubble,” Tilson explains. “It may seem like all the carnage out there, we must be almost finished. But there’s still a lot of pain to come in terms of write-downs and losses that have yet to be recognized.” 

In 2007, Tilson teamed up with Amherst Securities, an investment firm that specializes in mortgages. Amherst had done some financial detective work, analyzing the millions of mortgages that were bundled into those mortgage-backed securities that Wall Street was peddling. It found that the sub-primes, loans to the least credit-worthy borrowers, were defaulting. But Amherst also ran the numbers on what were supposed to be higher quality mortgages. 

“It was data we’d never seen before and that’s what made us realize, ‘Holy cow, things are gonna be much worse than anyone anticipates,’” Tilson says. 

The trouble now is that the insanity didn’t end with sub-primes. There were two other kinds of exotic mortgages that became popular, called “Alt-A” and “option ARM.” The option ARMs, in particular, lured borrowers in with low initial interest rates – so-called teaser rates – sometimes as low as one percent. But after two, three or five years those rates “reset.” They went up. And so did the monthly payment. A mortgage of $800 dollars a month could easily jump to $1,500. 

Now the Alt-A and option ARM loans made back in the heyday are starting to reset, causing the mortgage payments to go up and homeowners to default. 

“The defaults right now are incredibly high. At unprecedented levels. And thereÂ’s no evidence that the default rate is tapering off. Those defaults almost inevitably are leading to foreclosures, and homes being auctioned, and home prices continuing to fall,” Tilson explains. 

“What you seem to be saying is that there is a very predictable time bomb effect here?” Pelley asks. 

“Exactly. I mean, you can look back at what was written in ’05 and ’07. You can look at the reset dates. You can look at the current default rates, and it’s really very clear and predictable what’s gonna happen here,” Tilson says. 

Just look at a projection from the investment bank of Credit Suisse: there are the billions of dollars in sub-prime mortgages that reset last year and this year. But what hasn’t hit yet are Alt-A and option ARM resets, when homeowners will pay higher interest rates in the next three years. We’re at the beginning of a second wave. 

“How big is the potential damage from the Alt As compared to what we just saw in the sub-primes?” Pelley asks. 

“Well, the sub-prime is, was approaching $1 trillion, the Alt-A is about $1 trillion. And then you have option ARMs on top of that. That’s probably another $500 billion to $600 billion on top of that,” Tilson says. 

Asked how many of these option ARMs he imagines are going to fail, Tilson says, “Well north of 50 percent. My gut would be 70 percent of these option ARMs will default.” 

“How do you know that?” Pelley asks. 

“Well we know it based on current default rates. And this is before the reset. So people are defaulting even on the little three percent teaser interest-only rates they’re being asked to pay today,” Tilson says. 

That second wave is coming ashore at a place you might call the “Repo Riviera” – Miami Dade County. Oscar Munoz used to sell real estate; now his company clears out foreclosed homes. 

“Business is just going through the roof for us. Fortunately for us, unfortunately for the poor families who are going through this,” Munoz explains. 

“I wonder do you ever come to houses where the people are still here?” Pelley asks. 

“Absolutely,” Munoz says. “That’s really a sad situation. I’d rather not meet the people.” 

Asked why not, Munoz says, “ItÂ’s not easy to come in and move a family out. It’s just our job to do it for the bank. It’s just the nature of what’s going in the market right now.” 

Munoz says his company alone gets about 20 to 30 assignments per day. “And we’re one of the few companies right now who are hiring. We have to hire people because the demand is so high,” he tells Pelley. 

People who’ve been evicted tend to leave stuff behind. The next house is usually much smaller. Banks hire Munoz to move the possessions out where, by law, they remain for 24 hours. Often the neighbors pick through the remains. 

Once the homes are empty the hard part starts – trying to find buyers in a free-fall market. 

Miami real estate broker Peter Zalewski talks like a man with a lot of real estate to move. “We have 110,000 properties for sale in South Florida today, 55,000 foreclosures, 19,000 bank owned properties. Sixty-eight percent of the available inventory is in some form of distress. They need someone to clean it up.” 

Asked what the name of his company is, Zalewski says, “It’s called Condo Vultures Realty.” 

What does that mean? 

“That in times of distress, and in times of downturn, there’s opportunity. And you know, vultures clean up the mess. A lot of people seem to think they kill, but they don’t actually kill, they clean,” he says. 

The killing, in Miami, was done by the developers back when it seemed that the party would never end. They sold hyper-inflated condos at what amounted to real estate orgies-sales parties for invited guests who were armed with option ARM and Alt-A loans. “There were red ropes outside. They had hired cameramen, and they had hired photographers to almost set the scene of a paparazzi,” Zalewski remembers. 

“They were hiring fake paparazzi? To make the customers feel like they were special?” Pelley asks. 

“You were selling a lifestyle,” Zalewski says. 

Asked what roles these exotic mortgages played, Zalewski says, “They were essential. They were necessary. Without the Alt A or option ARM mortgage, this boom never would’ve occurred.” 

It never would have occurred because without the Alt As and the option ARMs, many buyers never would have qualified for a loan. The banks and brokers were getting their money up front in fees, so the more they wrote, the more they made. 

“They stopped checking whether the income was even real. They turned to low and no-doc loans, so-called ‘liar’s loans’ and jokingly referred to as ‘ninja loans.’ No income, no job, no assets. And they were still willing to lend,” Tilson says. 

“But help me out here. How does that make sense for the lender? It would seem to be reckless, in the extreme,” Pelley remarks. 

“It was,” Tilson agrees. “But the key assumption underlying, the willingness to do this was that home prices would keep going up forever. And in fact, home prices nationwide had never declined since the Great Depression.” 

On the way up, everyone wanted in. No one expected to feel any pain. People like acupuncturist Rula Giosmas became real estate speculators. 

Giosmas says she bought about six properties in this last five-year period as investments. She says she put 20 percent down on each. Now they’re all financed with option ARM loans. 

Asked what she understood about the loans, Giosmas says, “Well, unfortunately, I didn’t ask too many questions. I mean in the old days, I would shop around. But because of the frenzy, and I was so busy looking to buy other properties, I didn’t really focus on shopping around for mortgage brokers.” 

“But if you’re investing in real estate, you’re buying multiple properties, you should be asking a lot of questions,” Pelley remarks. “Why didn’t you ask?” 

“I was busy. I was really busy looking at property all the time, all day long,” she replies. 

She also acknowledges that she didn’t read the paperwork. Now sheÂ’s losing money on every property. 

“You know that there are people watching this interview who are saying, ‘You know, she was just foolish. She was greedy and foolish. She was buying small apartment buildings and wasn’t paying enough attention to how they were financed,’” Pelley points out. 

“My full-time job is I’m an acupuncturist. So, this was just a side thing,” she says. 

Giosmas says she was misled and she hopes to renegotiate her loans. But many other buyers have simply walked away from their properties. One Miami luxury building was a sellout, but when 60 Minutes visited, a quarter of the condos were in foreclosure. 

Zalewski says one of those condos was originally purchased in October 2006 for $2.4 million. Now he says the asking price from the lender is $939,000. 

And there are tough years to come because, just like the sub-primes, the Alt-A and option ARM mortgages were bundled into Wall Street securities and sold to investors. 

Sean Egan, who runs a credit rating firm that analyzes corporate debt, says he expects 2009 to be miserable and 2010 also miserable and even worse. 

Fortune Magazine cited Egan as one of six Wall Street pros who predicted the fall of the financial giants. 

“This next wave of defaults, which everyone agrees is inevitably going to happen, how central is that to what happens to the rest of the economy?” Pelley asks.

“It’s core. It’s core, because housing is such an important part. We’re not going to get the housing industry back on track until we clear out this garbage that’s in there,” Egan explains. 

“That hasn’t cleared out yet. We haven’t seen the bottom,” Pelley remarks. 

“It’s getting worse,” Egan says. “There are some statistics from the National Association of Realtors, and they track the supply of housing units on the market. And that’s grown from 2.2 million units about three years ago, up to 4.5 million units earlier this year. So you have the massive supply out there of units that need to be sold.” 

“What with the housing supply increasing that much, what does it mean?” Pelley asks. 

“It means that this problem, the economic difficulties, are not going to be resolved in a short period of time. It’s not gonna take six months, it’s not gonna 12 months, we’re looking at probably about three, four, five years, before this overhang, this supply overhang is worked through,” Egan says. 

In the next four years, eight million American families are expected to lose their homes. But even after the residential meltdown, Whitney Tilson says blows to the financial system will keep coming. 

“The same craziness that occurred in the mortgage market occurred in the commercial real estate markets. And that’s taking a little longer to show. But there are gonna be big losses there. Credit cars, auto loans. You name it. So, we’re still, you know, we’re maybe halfway through the mortgage bubble. But we may only be in the third inning of the overall bursting of this asset bubble,” Tilson says. 

“Does that mean that the stock market is gonna continue plunging as we’ve seen the last several months?” Pelley asks. 

“Actually we’re the most bullish we’ve been in 10 years of managing money. And the reason is because the stock market, for the first time I can say this, in years, has finally figured out how bad things are going to be. And the stock market is forward looking. And with U.S. stocks down nearly 50 percent from their highs, we’re actually finding bargains galore. We think corporate America’s on sale,” Tilson says. 

The stock market will still have a lot of figuring to do with more troubling news on the horizon. The mortgage bankers association says one out of 10 Americans is now behind on their mortgage. That’s the most since they started keeping records in 1979.

Produced by David Gelber and Joel Bach

© MMVIII, CBS Worldwide Inc. All Rights Reserved.

http://www.cbsnews.com/stories/2008/12/12/60minutes/main4666112.shtml