A sad story of foreclosure

I just heard a sad story of a friend of mine from her neighbor that their house went into foreclosure and she went back to South America with her little girl. Her husband was making a lot of money in mortgage business when the housing market was hot. First they bought a duplex for about $700,000, then they purchased a new single family house close to 1 million dollars. Soon after they bought the new house, his income dropped sharply. I visited her in her new house a couple of times, they didn’t have many furniture to fill that huge house. It felt kind of empty. They moved back to their duplex after a few months. I was wondering what happened to their new house. She told me they rent it out. Now she is gone. Her neighbor, our mutual friend, told me their duplex got foreclosed. She learned that from someone putting a foreclosure notice on the window. Apparently they lost both houses to foreclosure.

It is so easy for us to feel rich when we are making big bucks. They made that mistake. So did I. Financial freedom is having more than enough of passive income from investments to pay one’s fixed expenses. It doesn’t matter how much money we are making right now, before we achieve financial freedom, we are not truly rich. That’s the first misconception we need to change about wealth–high income doesn’t mean high wealth.

The housing market is in big trouble. And it’s not just on news, happening somewhere else. It’s here and everywhere.

Here comes tax rebate to rescue the economy

I read the news article on yahoo news, Rebates could stave off long recession:

“The tax relief is intended to jump-start the economy. Politicians, worried about a recession in an election year, put aside their normal bickering to speed the proposal through Congress.

Nonetheless, there is debate over how effective it will be. Critics say debt-burdened consumers will use the money to pay bills rather than spending the checks and spurring growth.” By Martin Crutsinger

And another article from the Times, Tax rebate could be President Bush’s best legacy:

” Mr Bush’s plan is remarkably similar to the one he launched in 2001 within days of taking office, when the economy was struggling with the burden of the collapse of the dot-com boom.” by Gerard Bake

This sounds very strange to me, and I couldn’t comprehend this. The government borrow money to send us a check in the hope that we would spend it to boost the economy. What are you going to do with the tax rebate?

1. Save it

2. Spend it

3. Pay down some debts

We can all spend it to help the economy temporarily, but is it good for our personal finances? We have been conditioned to consume, and strangely the more we consume, the better the US economy is. I’m happy to have an unexpected check coming my way, since I’m planning to start my Jars system, once we receive our check, the money could go into different jars. I’ll be totally happy to blow 10% of that money away. Only 10%.

How big is the tax rebate check?

Raymond’s post, breaking down the details of the 2008 economic stimulus plan and your tax rebate check, has a chart illustrating the amount of rebate you could get based upon your AGI.