Emotional Tie-in Often Determines Home Buying and Selling Choices

Home Buying

Because a home is thought to be a refuge and a place where you frequently raise your family, the value we place in the investment is far greater than what we could ever place on just about any other investment we will ever make. The feeling that is evoked often “blinds” us intellectually when we try to purchase or sell a home. As a result, poor financial decisions can be made.

For example, you might want to buy a certain style of house but ignore the fact that you also want to devote more time to your family. As a result, you may buy the house you want but the location causes you a longer commute. As a result, you spend less, not more, time with the ones you hold near and dear.

Selling can become complicated as well. Homeowners may feel that their home is worth more than the market value because they are emotionally bonded to the place. As a result, they may have a hard time selling their real estate. In some cases, they may not be able to sell the house at all. Therefore, if you are currently planning to buy or sell a house, you need to understand that your emotions may distort your objectivity.

For instance, according to an article in the Wall Street Journal, a homeowner often moves to a bigger house with the belief it will make them happier. However, the house is also farther from where they work, which adds to their daily stress. Therefore, location is an important consideration in how you will feel living in a new house. In fact, a 2008 study, published in the Scandinavian Journal of Economics, indicated that people were happier if they were closer to friends than if they lived farther away and lived in a nicer house.

In another study, conducted at Harvard, researchers found that a sense of community made people happier than specific physical features of their residence. No wonder real estate agents stress that location is an important feature in selling real estate. Where you live or the house you purchase also needs to be located in a place where you feel socially comfortable.

It’s no wonder then that people may place a higher value on their home when they sell it than what the market would indicate. Research supports this kind of emotional drive by defining it as loss aversion, or not wanting to sell real estate for less than its original purchase price.

Research published in the Quarterly Journal of Economics showed that homeowners often hold onto the purchase price as a bargaining chip when selling their house. They want to get more out of the house than what they paid for it. However, economic experts suggest that is not always a sound notion, especially if the house’s worth has depreciated. Current market prices have nothing to do with how much a person spent originally on his or her real estate.

CFPB’s Propsed Rules on Payday Loans Receives Backlash from Arkansas

rules

Last week, the Consumer Financial Protection Bureau (CFPB) made headlines when it announced in Kansas City new proposed rules for the payday loan industry. Although it did garner some mixed reviews, it would give the battered industry a facelift. The rules would apply nationally and duplicate stricter regulations that may already be in place by the states.

Well, the CFPB won’t have Arkansas to kick around as the state is furious with the CFPB.

Soon after the CFPB released its proposal, Arkansas Attorney General Leslie Rutledge sent out a press release, outlining her disappointment with the federal consumer watchdog agency’s lack of respect for state officials. She lambasted the CFPB for failing to meet or consult with state officials across the country.

Rutledge even noted that CFPB director Richard Cordray disregarded her request to meet. Ostensibly, the Arkansas AG sent a letter to Cordray earlier this year asking him to establish a “conference of states” to talk about his proposal and what other ideas the Obama administration may have for payday loans.

She believes that a one-size-fits-all approach by the federal government isn’t feasible. There any many legitimate online and offline payday loan lenders such as Landmark Cash which help people obtain cash who otherwise wouldn’t be able to. There are also many businesses who don’t follow the rules of the current system which is why this approach of one-size-fits-all won’t be effective.

“By disregarding my request and the concerns raised by many others at the state and federal levels about sweeping federal standards that would govern small dollar lending, Director Richard Cordray has made it clear that he is not interested in cooperative federalism,” said Rutledge in a statement.

“This one-size-fits-all federal approach from an unaccountable bureaucrat and agency ignores the interests of the states and will negate reasonable policies that already exist to protect consumers while at the same time allowing the free market to function properly.”

Moving forward, the AG office will review the CFPB’s suggested rules and take it from there.

The Natural State has a long history with the payday loan industry.

In 2008, the Supreme Court of Arkansas concluded that the Check Cashers Act had violated the state’s constitution because it permitted payday loan stores to charge astronomical interest rates – the state deems that consumer loans cannot have interest rates higher than 17 percent per year.

Soon after the Supreme Court ruling, then-AG Dustin McDaniel requested that payday lenders end their operations and void present and past borrowers obligations and stop any collection attempts. They have apparently heeded his request, too, as most payday lenders have gradually exited the state, such as Ace Cash Express and First America Cash Advance.

Will they return to Arkansas? It’s been reported that lawmakers and staffers have been contacted by officials from several bank-affiliated businesses that want to sell products similar to the payday loan industry prior to the end of 2017. It’s unknown what will happen moving forward.

Should You Take Your Savings in a Lump Sum or Payments?

Retired

Retirees often do not think how they will allocate their retirement distribution until they are directly faced with the responsibility. For example, many retirees wonder if it is best to take a company pension in a series of payments each month or in one fat lump sum.

Each option has certain benefits and disadvantages. Some people like the idea of getting a check each month even if the stock market takes a nose dive. However, opting for the payments can also make living rather difficult, especially if you need a sizable amount of cash for an emergency.

Financial planners suggest that taking a lump sum gives a retiree more financial flexibility and enables them to invest their money so they won’t outlive it. However, even choosing this option can be a daunting task, especially if you end up making some investments that yield miserly returns.

In order to make a decision, start by looking at the expenses you’ll need to meet as a retiree. That means creating a retirement budget. As you look at your expenses, separate the essential costs, such as housing expenses, food and health care, and taxes from the discretionary costs, namely entertainment, dining and traveling.

Next, look at the income you’ll receive to cover your basic living costs, such as Social Security. If Social Security is enough to cover most of your basic costs, then you may not need to obtain money from your retirement account or pension. In this case, it may be best to take the lump sum and invest it, covering your basic necessities or discretionary costs by withdrawing specific planned amounts from the lump sum total.

However, if your Social Security income does not meet your essential costs, then taking monthly payments may be a better alternative for you. Think about the amount of flexibility you can handle financially or whether you want to follow a structured plan. Your decision to choose either a lump sum or payments will primarily hinge on what you receive from other income sources especially Social Security.