Best of Blog posts for the week of December 12th

Jim at Blueprint for Prosperity discusses How To Properly Loan Money to Family, Friends and one aspect he discusses is minimum interest rates you must charge friends and family for the IRS to consider a loan valid.

My Money Blog points out a deal : Blockbuster & PayPal Promo: Pay For 1 Month, Get $25 With their monthly cost starting at $4 for 2 movies/month that could give you 12 free movies over 6 months.

My Money Blog also tells us about the Fidelity Retirement Rewards Card: 2% Cash Back Into IRA + More and theCharles Schwab 2% Cashback Credit Card

fivecentnickel has some good suggestions with Five Ideas for Charitable Giving in a Bad Economy Not only do they serve us doing a down economy the ideas can work well for people with lower incomes who want to help others.

40 or 50 year mortgages

Right now my local credit union is offering a 40 year mortgage option. I've also heard of 50 year mortgages. These mortgages should give you a lower monthly payment but you'll have to pay longer.

If you borrowed $100,000 at 6% then the monthly payment for a 30,40 or 50 year mortgage would be:
30 year = $600, cumulative interest $115,000
40 year = $550, cumulative interest $164,000
50 year = $526, cumulative interest $215,000

So your monthly payment will be a bit less. Your payments will be $50-74 lower a month in this example. But you're paying for 10 or 20 years more and the total interest paid over the life of the loan will be considerably more. Between a 30 and 50 year mortgage you're paying $100,000 more in interest!

Generally you should avoid a 40 or 50 year mortgage.

40 or 50 year mortgages are really only made for people to afford homes they can't afford otherwise. Instead of looking for a long mortgage you should work to buy a home within your means. Save up your money and buy a home that you can actually afford with a traditional 30 year mortgage or better yet a 15 or 20 year mortgage.

The money in Basketball

Forbes published the article The Business of Basketball which has a lot of financial figures about the NBA. I found it interesting to see some of the details of the money in the NBA.

They say that revenue was $3.8B total for the league in the 2007-2008 season. The average profit per team was $10.6M. With 30 teams in the league that means they had $318M in total profits.

To see how each team comes out financially see the list of teams by value with revenue and operating income figures.

The most valuable teams are:
Knicks = $613M
Lakers = $584M
Bulls = $504M
Pistons = $480M
Cavaliers = $477M

It should be no surprise that wages are the biggest expense for the NBA. This site discusses the salary cap and in the discussion it says that the player salaries are about $2.0B total. Average player salaries are $5.5M.

AAA Bonds trading for 6-7%

Corporate bonds with AAA ratings are trading in the 6-7% yield range. You can even find a number of AAA municipal (tax free) bonds trading for over 6%. I did a search in my Scottrade brokerage account and found a lot of GE bonds for 6-7% range and several municipal bonds in various states for over 6%.

These are good rates for bonds. Individual Bonds have fixed returns and AAA rated bonds have very low default rates. But if you're considering in investing in individual bonds make sure you have your investment diversified over several bond issuers so just in case a company or municipality defaults it won't take your entire investment down.

For more on bonds see my previous series:
Bonds 101, part 1 - Overview of Bonds
Bonds 101, part 2 - Glossary of Bond Terms
Bonds 101, part 3 - Treasury, Municipal, Corporate and Junk
Bonds 101, part 4 - Default Rates on Bonds
Bonds 101, part 5 - Bonds Versus Bond Funds
Bonds 101, part 6 - How To Buy Bonds