I have recorded and released the latest episode of the No Credit Needed Podcast.

Click here to visit the NCN Podcast homepage where you can listen to the No Credit Needed Podcast Episode 53.

Topics discussed include - preparing for 2008, resources for personal finance bloggers, and the new listener line.

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I recently asked my fellow personal finance bloggers (and my readers) to contact me and let me know about their favorite charities. Several bloggers and readers have responded - but I’d still love to hear from you! So, read the original post about the Charity Spotlight 2007 and let me know about your favorite charity.

Today, the spotlight shines on Kristen’s favorite charity -

Good Gifts - An Organization Located In Hampstead, England

Website: Good Gifts

Kristen’s article about her participation and why she loves this charity: Simple Pound - Good Gifts

A quote from the Good Gifts website -

1. You’re giving directly.

2. The thought really counts.

3. You’re providing a practical solution.

4. You’re effecting positive change.

5. Your gift is wanted.

6. Smiles all round.

A quote from Beth’s Random Life website -

They offer a range of presents to replace the ordinary Christmas gift by contributing to a selected number of charities instead and hence helping people who are in real need. (Y)ou could be giving your parents, partner or friends the warm and content feeling of having helped…

I had never hear of Good Gifts before today, but it looks like an interesting organization. I would be interested to know if they have an American counterpart.

Kristen, thanks for sharing this great charity with us!

If you have a charity that you’d like me to ’spotlight’, please read this post. I’d love to hear from you.

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It’s strange.  Every day, I turn on the television and I see programs about the ’sub-prime situation’.  Banks and mortgage companies, desperate to attract customers during the housing-boom, loaned money to folks who didn’t have the ‘best’ credit scores.  Many of the loans that were written were ‘adjustable’ - meaning that, over time, the interest rate associated with a particular loan could fluctuate.  When most of the loans were written, interest rates were at or near historic lows.  Now, as those loans begin to adjust, and rates are higher, many people are finding it difficult to pay their monthly mortgage payments.  Slowly, but surely, more an more people are defaulting on their mortgages.  Major financial institutions are losing millions of dollars, and investors are worried about the long-term effects of the sub-prime mortgage mess.  (Please note, I am not a financial professional.  I’m simply presenting a summary of the current situation, as I see it.  I am sure that there are things about sub-prime mortgages and adjustable rates that I don’t know or understand.)  Apparently, in an effort to keep people in their homes and to avoid a number of foreclosures, President Bush has announced a foreclosure relief plan - the details of which I’ll not go into at this time.

Whew, I’m exhausted just thinking about the situation, and I don’t even have a mortgage, adjustable or otherwise.  As I’ve mentioned before, I live in a home provided to me by my employer (as part of my compensation).  So, it would be foolish for me to criticize anyone who borrows money, responsibly, for the purpose of buying a home.  In fact, if I were to change jobs, I would, more than likely, take out a mortgage and buy a home.  Of course, I would only do so AFTER I had the money for a 20% down payment and I would choose a fixed-rate mortgage, as opposed to an adjustable-rate mortgage.  (As you can no doubt surmise from the title of my site, No Credit Needed, my goal is to live without borrowing money - even for a home purchase.  So, until I am faced with the necessity of a home purchase, I’m saving as much money as I can, and I hope to eventually be able to buy a home - with cash.)

I’ve thought about the current situation a lot - and the situation appears, on some fronts, to be getting worse and not better.  It’s pretty clear that the financial institutions loaned money to people who, historically, would not have qualified for mortgage loans.  It’s also clear that many of these loans were written with the assumptions that housing prices would continue to rise - and that people who borrowed money would be able to sell their homes or refinance, before the adjustable rates began to ‘reset’ (go up).  But, as with most assumptions, there were flaws.  Housing prices have gone down - the market has ’softened’ - and people cannot sell their homes or refinance.  And now that those mortgages are ‘resetting’ - people cannot make their monthly mortgage payments.  People are losing their homes and major financial institutions are losing millions (billions) of dollars.

What amazes me - and what continues to frustrate me - is that when I watch television reports about the mortgage mess, or when I read an article about the sub-prime situation, no one ever suggests that the underlying problem is that people are addicted to borrowing money.  Is it really surprising that we find ourselves in this situation?  We borrow money so that we can go to school, we use credit cards so that we can go out to eat, and we take out cash advances so that we can go on vacation.  Instead of saving our money, we spend it.  Instead of managing our finances, we ‘live-for-today’.

I  cannot tell you how sorry I feel for folks who might lose their homes.  I cannot imagine the fear associated with a foreclosure or a bankruptcy.  But, I must admit, I find it troublesome that many of the people who are struggling to make their mortgage payments also have credit card debt and automobile debt.  The truth is, many of the loans that were written should never have been written.  Many of the folks who borrowed money would have been better off to rent a nice home, build up an emergency fund, get out of debt, and save up a good down payment.

It looks like all of us, not just borrowers and banks, will pay for the sub-prime situation.  The stock market is all over the place - radically up one day and radically down the other.  The Federal Reserve is cutting rates.  This might be good for some, those who are trying to refinance or restructure their mortgages.  But, it might be bad for others, perhaps leading to inflation and lower returns on basic savings accounts.

This is just another example of how debt, which is supposed to be a wonderful servant, can quickly become the master.  Personally, I just don’t want to deal with debt, borrowing money, or worrying about interest rates.  I am laying the foundation for a “debt-free, credit-free” life - and I’m shocked that so few financial writers or commentators are suggesting that folks should focus on debt reduction.  Sure, a bail-out or an interest-rate freeze might help in the short-term, but neither will help us deal with our fundamental problem - an addiction to debt.

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As many of you know, my wife and I are expecting our third child.  My wife is an educator.  If all goes well, my wife will have the baby in April.  She will not work the last two months of school.  So, as we plan for 2008, we have to account for this loss of income - and the additional expense associated with a newborn baby.  Still, we plan to be very, very aggressive with our retirement and education savings, plus we plan to save as much as we can in our regular savings account.

Here are our definite goals for 2008:

Account	Amount	Progress
My 403b	$15,500
My Wife’s Pension	$2,000
Daughter’s ESA	$2,000
Son’s ESA (’07,’08)	$4,000
My Roth	$5,000
My Wifes’ Roth	$5,000
Total	$33,500

Here are our stretch goals for 2008:

Account	Amount	Progress
My 403b	$15,500
My Wife’s Pension	$2,000
Daughter’s ESA	$2,000
Son’s ESA (’07,’08)	$4,000
My Roth	$5,000
My Wifes’ Roth	$5,000
Brokerage Account	$8,000
Additional Savings	$8,000
Total	$49,500

Are there some things that I can do in 2007 that might help us reach our 2008 goals?  Sure!

1. I can adjust tax withholdings.  As we move from a family of 4 to a family of 5, we’ll have an extra dependent (and lower taxes) in 2008.
2. I can use any bonus money / gift money that I might receive in 2007 and apply it to my Son’s ESA.  (I’ll have until April 15 to fully-fund the 2007 contributions to his ESA.)
3. I can begin to look for deals on diapers / baby clothes / baby-related items.  For instance, when winter clothing goes on sale after Christmas, I can stock up for next year.
4. When friends and family ask, “What do you want for Christmas or your birthday?”, I can reply, “Diapers and formula, diapers and formula.”
5. I can make a slight change in our health insurance coverage.  We shifted to a slightly cheaper plan, which should save us about $30 a month.
6. I can continue to lose weight.  When I eat less, I spend less on groceries.  When I weigh less, I sleep better.  When I sleep better, I spend less money on sleep medication.  (I no longer need Lunesta - a $50 per month savings!)

My wife and I cannot wait for the baby to be born.  But, we also realize that our household expenses will go up, while our household income will (temporarily) go down.  I love being debt-free, because it gives us the opportunity to spend money when we want and SAVE money when we want.  So, if things get a little tight, we can do without a few niceties - and we don’t have to worry about debt collectors or credit card companies.

2008 is shaping up to be an awesome, interesting, busy year.  Having a plan helps keep me grounded, focused, and motivated.

If you have goals for 2008, I’d love to hear about them.

By the way, ESA stands for Education Savings Account - also known as a Coverdell Education Savings Account.

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My goal for 2007 is to “save” $48,000 in various retirement, education, and investment accounts.

Click here to read all posts associated with my $48000 goal.

Click here to read about my savings and investing goals for 2007.

Here’s my updated chart with detailed information:

As you can see, I’m going to miss my goal… by more than $20,000! Yikes, right? Well, it’s not nearly as ‘bad’ as it seems.

My primary mini-goals were to fully-fund our retirement accounts. I managed to fully-fund my 403b, my wife’s pension plan, my Roth IRA (for 2006 and 2007) and my wife’s Roth IRA (for 2006 and 2007). I also fully-funded my daughter’s ESA (for 2006 and 2007). Mid-year, I decided not to fund my son’s ESA in 2007. I am going to fund his ESA in 2008. I also put $1000 into my standard brokerage account. All-in-all, I was able to put $38,000 into various retirement / education/ brokerage accounts.

But, all did not go as planned. First, when I opened my wife’s Roth IRA, I “borrowed” $5000 from my ING Direct Savings account. (I wanted to fund the Roth for 2006 and April 15th was right around the corner.) Then, in October, our old van began to “die” - so we decided to use some of our savings and purchase a newer van. So, instead of ADDING $10,000 to my savings, I actually DEPLETED my savings by $12,000. (I’ve managed to ‘payback’ $3,000.)

There are two ways to look at 2007. On the one hand, I managed to fully-fund 4 retirement accounts AND buy a newer car with cash. On the other hand, I missed my original goal and I actually lowered my “savings”.

Personally, I’ll always view 2007 as a success. While I did not reach my goal, I reached several “mini-goals”. In 2008, I’ll work to rebuild my “savings” - and I’ll continue to fully-fund the retirement/education accounts.

I still have a month to go and I’ll be working VERY hard to rebuild my savings account. I’m a little bummed to see the hit that our savings took, but I’m very, very happy with the newer van.

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