Folks, I just saw this you tube video. In it, Mike Gravel – a democratic presidential candidate – is explaining the reasons why he decided to declare bankruptcy. Evidently he had some health problems, so he decided sign up for like 6 credit cards. Apparently, the payments caught up with him and he had to file.
While I recognize that politics aren’t saints, but I’m especially shocked that Gravel would file, mostly because he’s always seemed really dynamic and resourceful to me. I guess it just goes to show that if bankruptcy can happen to a public figure like Gravel, it can happen to anyone!
So, if you’re a frequent reader of the DINKs you know that I’m a bad news monger. For the past year and a half, I’ve been gleefully commenting on the decline of the dollar, slamming greedy mutual fund managers and denouncing the excesses of the credit card industry.
Well for a switch, I wanted to point out some good news for all of you. Reuters is reporting that the internet has had a substantial impact on the way in which financial services price products and relate to customers. Evidently, the use of social marketing tools such as Facebook and Bebo in the UK has allowed consumers to create a “flock mentality” which has forced big banks to scale back on overpriced products like debt insurance and credit card charges. This “flock mentality” has also forced banks to be less paternalistic towards their customers.
In short, the ability of the net to facilitate mass communication is making information more readily available, thus forcing English banks to drive down prices and improve service. While I don’t have the evidence in front of me, I bet you a similar processes is happening in the US.
For my part, this is wonderful news. The greatest benefit of economic well being is empowerment. Anything that facilitates this process is just fine with me.
This is an important thing to keep in mind when working to achieve your goals. Whether financial or otherwise, it’s a matter of perseverance and stick-to-it-iveness. Without those elements I’d say it’s hard to achieve any goal.
Here are a couple of things I think are important in achieving your dreams:
Take your goal seriously but don’t take yourself too seriously. If your dream or goal is causing you undue stress you might want to consider if it is really what you want.
Dream big. If it doesn’t scare you, think bigger. If you know every step between a to z you probably aren’t challenging yourself up to your potential.
Put it out there. Don’t keep your dreams and goals to yourself. Telling your friends and family not only brings them on board with how you envision your life, but it also makes it more real for you.
Focus but don’t be blinded by that focus. It takes balance to remind yourself of your path but also keep your eyes open and remain aware of external realities.
Give yourself credit for your hard work. Whether that means updating you progress on a spread sheet at payday or giving yourself gold stars on the fridge, make sure you acknowledge your contributions towards your goals.
Dream together. While I cherish so many parts of our relationship, one of the best parts of marriage has been learning to dream together. For us this has made our marriage strong and our lives more fulfilling.
You can do it! Whether it is chipping away or going at it with a sledge hammer, stick with it and you can accomplish anything!
Readers: I’d love to hear about your goals and how you reward yourself for sticking with it.
Keep with it,
Miel
P.S. Today I chipped away at our second mortgage with a $500 extra payment! :-)
Since a lot of people seem to have credit card debt these days, I wanted to post this video from Kiplinger. Its a brief discussion of some tips for dumping your plastic debt. I agree with most of them and can endorse them as being effective.
I’m also posting this because for some reason, the Kiplinger video presenters seems to have that low budget Jane or Joe average appeal which lends them credibility. Its just the right combination of pasty and perky so that listening to their videos makes you feel like you’re having a conversation with one of your friends in the office. This is a refreshing change from a lot of the more mainstream investment media types – most of whom are a bit too slick for my taste.
Here is a quick posting from one of the journalist at Kiplinger.com. While I don’t agree that you necessarily need an emergency fund, the presenter, Erin Burt is perky and the video is quick – so check it out if you’ve got a spare moment!
Even though we DINKs are a half a world apart from each other we’ve still managed to keep track our net worth together. After a couple of hours talking via the internet, we reconciled our accounts and totaled up our net worth. When it was all said and done, our wealth grew by 4% since this September.
Most of this is due to the strong performance of the stock market. The values of our TIAA and CREF, IRAs and brokerage accounts all increased. Also, our spending held steady in the past few weeks after spending to purchasing supplies and equipment for Miel’s trip to Afghanistan. Miel is still getting settled in Kabul and due to the security situation and lack of consumer economy in Afghanistan, she’s not spending as much there. Also, James is a graduate student and doesn’t spend a great deal.
The values of our savings bonds and precious metals were up as well, but most of the growth was due to the stock market combined with modest spending.
If you’re like most people you probably have an active social life. Since you are reading this blog, you also know being social can be expensive. The cost of meeting friends for an evening of visiting can be a pretty penny. For example, meeting friends, having dinner and getting back home can run you well over 50 dollars. Ouch!
So, today’s posting looks at ways you can cut back while still being social.
1) Don’t Buy Alcohol: At least in the DC area, it costs you 4 or 5 dollars to get a beer. Mixed drinks can be a bit more. A good way to shave a couple of bucks off your dinner tab is to get water or a soda instead of alcohol. Water or diet soda can also be less fattening and you don’t run the risk of getting tipsy and saying something silly.
2) Use Coupons: This is a little tougher when you’re spontaneously meeting friends, but using coupons can work. For example, my wife Miel is great at clipping coupons. We’ve gone to several restaurants in Washington and eaten for half price! If you’re meeting friends and have some time to plan ahead, you might search on line to see if the place you’re going offers any discounts.
3) Get Cheaper Alcohol: If you’re in a situation where you do want to enjoy a beer, you might consider getting the cheapest available on the menu. This is typically something like Bud or Miller or some of the more “pedestrian” domestic beers. While you might sacrifice a bit on taste, your wallet will thank you.
4) Order the Cheapest Thing on the Menu: Sharing a good meal with friends can be an important way to renew old friendships or meet new people. If you can’t get out of the social obligation of meeting for dinner, try ordering the most inexpensive thing you can stand on the menu. Chicken dishes are usually less expensive than other types of meat, and salads or vegetarian dishes are typically easier on the pocketbook than cheesy or meaty entrees. This is often good for shaving another two dollars or so from your final tab.
Sometimes you’ll want to balance the need to save money with the need to have an active social life. Hopefully these tips will help you cut your bill at the end of the night.
Today’s posting is on investing in rental real estate. Since the market has turned around in many parts of the United States, many people are considering getting back into the real estate market. Since rental properties are a proven way to build wealth, this post addresses two important aspects of rentals: making money* and management.
First off, a rental property is “profitable” if you are covering your expenses – that is you are able to build up a cash reserve and can achieve at least a modest profit (5 to 10% pretax). Since the money is the whole point, here are some ways to profit from rental real estate.
1) Buying in a Low Priced State: If you buy into a low priced state, the rents may be more likely to cover your expenses. For example, in Oregon, where we’re from, the housing market wasn’t as frothy as it was in other parts of the country. Because of this, housing prices are lower in Oregon, so its easier to buy profitable rental properties.
2) Buy in Working Class Neighborhood: In some neighborhoods in some cities, you can still purchase a profitable rental. An important consideration here is that sometimes working class and minority communities attract renters who have less than perfect credit. You’ll need to plan accordingly.
3) Buy a House with a Problem that Traumatizes the Seller: The main idea here is that if you buy a house that’s got problems (e.g. a bad foundation, leaky roof, homicide occurred on premises), you’ll have better bargaining leverage and might be able to purchase the property at a discount. The thinking here is that sellers may be more motivated if they think their place will be hard to unload – thus increasing your ability to bargain hard.
4) Buy a one bedroom Home: These are hard to find, but they sell cheap because most homeowners are looking for more space. On the other hand, they can command good rents because many renters are singles or childless couples. If the house has enclosed space you convert it to a second bedroom.
5) Buy a House with Extra Land: If you can pick up a place with more land than the zoning laws allow, you can subdivide the land and sell it to a neighbor. Even if you have to go through a formal subdivision, the cash windfall might turn your rental property into a winner.
6) Rent With A Option To Buy: The main idea here is to put an option to buy in the contract owners sign with their tenants. The terms of this “option to buy” contract usually involve the tenant paying a higher amount of rent than the market currently bears, with the understanding that the higher amounts will be credited towards buying the property at the end of a specific term. For example, if the normal rent is $900, the lease option payment would be $1,300. The tenant would pay the $1,300 for a specified period of time, at which point they would have the right to buy at price specified in the contract. Option to buy leases can be complicated, so get a competent attorney’s advice before going forward.
Now, once you’ve got a rental property, you need to develop a logistical and support network to manage the property. Things to consider include:
1. Forms and Paperwork: Typically this means a rental application, credit check authorizations, legally mandated disclosures, payment receipts, or other forms. Look on-line for boilerplates or talk with your realtor or attorney to get help.
2. A Lawyer: Yes, its true. Lawyers are sometimes necessary. In many parts of the country rental markets are highly regulated. You’ll often need a good attorney to advise you on sound strategies for motivating slow paying tenants or for buying and selling larger multifamily buildings where there are leases or other legal complexities.
3. An Account System: If you have rental real estate, you should probably get a separate bank account for your property. This would include a checking account to handle transactions and a savings account to stash your house emergency fund. Its best to get these configured so that making payments and transferring money is simple. Also, you’ll need a means of keeping track of your expenses and profits – try MS excel.
4. Making Friends with a Contractor: Properties require a lot of upkeep. You may also want to improve your properties to increase the rent. Both of these mean you’ll need someone to help with jobs like roof repair, renovations, remodeling, etc. My advice would be work your personal networks to locate a good small contractor. If you get into real estate, you’ll need one.
Best,
James
*As always, acknowledgments should to go Jane Bryant Quinn for the inspiration for this post.
Having less available money can result in spending less.
Obviously this isn’t a definite, but it does contribute to less expenditures. I learned this lesson back when I was paying off my credit cards in 2004, but have been reminded of this lately.
As our readers know, James & I are both working to reduce our monthly expenditures by at least $50 each. I’ve found that if I just put that extra $50 away, then I’m more likely to save even beyond the initial goal. Part of it is psychological, but when you have limited available cash in your checking account or pocket, you are less likely to spend like you would if it felt like there was more. Here are a couple of specific examples:
1) When planning to go out with friends, bring a specific amount of cash to cover your bill. Everyone knows that it is easier to spilt the bill if you’ve got change, so plan ahead to save hassle & money. Often times you have a pretty good idea of what range the restaurant is, so price it out beforehand. Plus, if you know how much you have in your pocket, minus how much it will take to get home (walking is best), then you can limit your menu selection and/or how much you drink/eat, by what’s in your pocket.
2) Most of us get paid in two week cycles. We all know how great pay day is. At the same time, my tip is to squeeze yourself before the next pay day. On Sunday night before pay day, sit down and look at your account balance. Determine what your schedule is in the next week, and what bills or expenses you might have. If you have excess of what you are expecting to spend, stash any savings away before you are tempted. Plus, it makes the next payday that much better!
In the end it is mostly a mind game, but it seems to work from my experience. Try it, you might like it!
For those of you out there who are interested in investing your money in social and environmentally conscious organizations, here are a few to check out.
Clean Edge works to help investors, industry, and society understand and profit from clean energy. They offer a NASDAQ Clean Edge U.S. Index with a list of a couple dozen green options for your investment dollars.
New Alternatives Fund invests in renewable energy, check a list of the investments to know what you are buying in to. I checked out their ticker, NALFX, and it has been on a steady rise so they must be doing something right aside from just a nice fuzzy feeling.
Green Century Balanced Fund actively seeks out competitive returns while still being eco-friendly. Unfortunately both of their equity funds GCEQX and GCBLX seems to be a bit to balanced for my liking.
