Last night I was watching TV and an interesting new ad from Bank of America came on. The add was for a new Bank of America chequing account that automatically rounded every purchase you made via debit up to the next dollar and deposited the difference in your savings account. So if you bought something for $5.52 it would round the purchase up to $6 and deposit 48 cents into your savings account.

The sad thing about the ad was that it didn’t explain why this was a good thing to do or the power of it.

Suze Orman has been saying for a long time that on purchases where you pay cash, put the change into a savings account, exact same idea, but the Bank of America product automates it. If you were to do so you could assume that on average you would put $30 a month into a savings account. If you start with $500 in that account and add $30 in change every month, you would have $500 000 in just over 50 years if you assume a 10% rate of return. Not to bad of return for simply collecting coins, even better if you have a Bank of America account it is automatic.

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Below is one of my favorite videos which simplifies economic principles. Yes, this is where I got my favorite saying from. “Micro economists are wrong about specific things, macro economists are wrong about things in general.”

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The Wall Street Journal published an article this week about an Arizona State University study that tracked the success of publicly traded companies after the CEO bought a new home.

The conclusion, if the CEO cashes out some of their stock to buy a home, the companies share price and productivity will decline. Interesting theory as many executives have been buying expensive homes lately.

You can read the full story here.

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The recent introduction of high amortization mortgages was originally intended to help buyers qualify for mortgages. In effect, it made it easier to get a higher mortgage based on the same amount of income that would have qualified you for much less based on a 25 year amortization. For the most part, the train of thought has been that if you can afford to qualify based on a shorter amortization, you should probably take the shorter option such that your mortgage is paid off quicker. Well, that is a good theory, but there are other more lucrative options should you be willing to look for them.

For example, the title of this post indicates that by amortizing your mortgage over 40 years, there is the potential to make $3,000,000. This is indeed true, if you are willing to look at the situation from a different angle than most. Lets look at the following example. (more…)

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In the last post we talked about how the rate a client receives is generally based on how much of a risk they are to lend money to. Part of that risk analysis has to do with an individuals credit score.

Credit scores typically range from about 350 to 850. 850 represents a client who is extremely likely to pay back any loans they take out in full, a 350 score represents somebody who is highly likely to default on their loans. Most people fall into the high 600′s low 700′s range.

Your credit score is incredibly important in determining whether or not a lender will lend you money. It is based on your past credit history and is usually a pretty good predictor of a clients risk. To keep the score high you should only apply for credit when you need it, and make all of your monthly payments on time. If you don’t, it will take approximately seven year for your credit to recover.

To find out your credit score is simple, and should be done about once a year. Go to equifax.ca and request the Score Power Credit Report. It will cost you about $25, but will give you a pretty good indication of where you stand in the eyes of a lender.

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