I’ve Paid For This Twice Already…

Frugal living and debt reduction tips for a better financial future. This is one family’s story.

September 25th, 2013

Need to Get Out of Debt? Start a Business

If you think that you’ll be able to get out of debt by simply paying your minimums each month, you are sadly mistaken.

Debt is by far the easiest thing to acquire, but when you’re ready to pay down your balances, it always seems to be an uphill battle. Of course, you could have avoided this situation all together my managing your credit cards better. But there’s no good in crying over spilled milk. You can’t turn back the hands of time, but you can take steps to right the matter. 

I know, much easier to say than do, especially if you don’t have a lot of disposable cash. Not that you have to accept debt. Sometimes, it’s all about a creative approach and stepping outside your comfort zone. Do you have a talent or interest? Why not turn this into a business and generate extra cash to pay down your cards. 

1. Choose something that you’re interested in

Don’t select a business simply because of how much you can make. A lucrative opportunity can certainly help you reach goals faster. But if you don’t have a strong interest in the business, you’re not likely to keep with it. 

For example, do you enjoy spending time with children? Perhaps you have education or teaching experience. A part-time home day care or maybe a tutoring business might be right up your alley. 

2. Get a marketing plan

Whatever business you decide, a good marketing plan is the best way to get your name in the public. There are several ways to promote your business – some free, some costly. Determine how much you can spend on marketing and choose approaches that fit your budget. Options might include placing flyers throughout your neighborhood, running a classified ad, cold calling businesses or maybe investing in direct mail. 

3. Use social media

The Internet can not only draw attention to your business, it offers an excellent way to interact with customers. The ability to satisfy your customers is one key to success. According to Matthew Roblez, an engineer and business leader, “Your most unhappy customers are a great source of learning.” 

Social media platforms, such as company blogs, Facebook, Twitter and other websites allow interaction with customers. You can promote and announce sales, plus receive feedback, which is an invaluable tool as you work to create a reputable brand. 

4. Don’t quit your day job

It takes time and patience for new businesses to get off the ground, and when your business finally generates consistent profit, don’t quit your job just yet. Remember your purpose – debt repayment. 

If you continue to work your day job, all income from your side business can go toward your debt. This can speed your debt eliminate efforts, letting you move on with your life sooner.

There are certainly ways out of debt, and you shouldn’t let lack of disposable income keep you from reaching your end goal. Get creative, look for ways to generate cash and be disciplined. The quicker you eliminate debt, the sooner you can enjoy peace of mind, plus a better credit score 

September 4th, 2013

Have you Considered Investing in an Apartment Building?

Part of being a responsible adult is planning for the future. Most of my family’s plans for the future have been based on getting out of debt now and setting up our retirement savings. If you’ve been following my blog, you know that we have been making changes to our 401K and investments since 2008. Just click on the category links for “Retirement” and “Wise Investing Made Simple” to read my older posts, such as “Choosing the Best Investment Strategies” that I wrote about a year ago.

Once we’ve started on the basics of planning for retirement, we are ready for the next step, checking out the different investment opportunities. Today’s financial marketplace has many different ways to earn a good return on investments, including:

life insurance,
mutual funds,
trusts, and
real estate.

We have been particularly interested in commercial real estate, which can be anything from buying or building a small strip shopping center, an office building or multi-family properties.

The U.S. economy is slowly recovering and this has signaled changes in the banking and mortgage industries. Record low interest rates on loans for real estate are starting to rise, and demand for rental housing continues to grow. Even the Federal Government’s web site for FreddieMac mortgages endorses buying apartment buildings in most metropolitan areas as a good investment. Established in 1970, Freddie Mac makes mortgages possible for one in four home buyers and is one of the largest sources of financing for multifamily housing. Their website shares a wealth of information on investing in apartments, including information about qualifying for their loans, market insights and checklists.

Digging into more information on investing in apartment buildings, I’ve found advice from many sources and have learned a lot already. Successful investing in commercial real estate, and especially multi-family properties, depends upon three things:

Finding The Right Property
The Right Location
The Right Financials

Finding the right property is the most time consuming and challenging part, but some people consider it the most fun. You get to meet many different professionals, from commercial real estate brokers to property management companies, appraisers, insurance agents, attorneys and mortgage brokers.

We will start our search for the right property by conducting an overview of the existing market and property owners. Companies that are proven successful in owning and managing apartment buildings, such as Post Brothers in the Philadelphia area, can be good role models but might also be good candidates for considering a purchase offer. I found their story intriguing, starting with the fact that their company really was founded by and is run by two brothers.

Post Brothers Apartments is a good example of a company which manages properties and their web site describes how each one was selected and is maintained on certain criteria, such as:

strength of community
tenant focus
local resources/neighborhood
green initiatives and eco-friendly
accessibility to transportation options

As an investor, I would mirror the Post Brothers business model and task my commercial real estate broker with finding properties like theirs to tour as a good investment prospect. I especially like the many steps they have taken to be green, such as all Energy Star appliances in each unit, and meters so tenants can see for themselves have much energy they use.

Then it all comes down to the financials. If you like the property and believe it can make money for you without requiring a lot of additional capital investment, the next step is to prepare and submit a Letter of Intent (LOI) to gain access to the property’s financial and records. If everything checks out, making an offer to purchase puts you on the path to a multi-family property owner!

August 21st, 2013

California Debt Consolidation Programs can Reverse the Financial Domino Effect

While much of the country’s population is starting to recover from the recession of 2008, a number of people in California and nationwide are still experiencing lingering financial troubles. For various reasons, many Americans just can’t seem to get their financial lives back on track.

Are you are still dealing with a financial crisis, whether it be underemployment, unemployment, extremely high interest rates, maxed out credit cards, or other difficulties? Do you live in California?

If you answered yes to both questions, then there are solutions available that may be able to help get your financial life back on track – without making you suffer any longer.

The Financial Domino Effect

The problem some people fall into when they find themselves in financial trouble is that everything starts falling behind. For instance, if your bills start falling behind, you might eventually get a shut off notice one day. To make the payment, you might have to spend your savings on the bill, or the money you had set aside for the mortgage.

Either way, using money from one bill to pay off another is not the answer to your financial troubles because doing so only makes the financial domino effect worse.

Eventually, most people who have financial problems start having trouble paying not just their bills, but taxes too. Not paying taxes is even more serious than not paying the bills because of the actions the Internal Revenue Service can take to recover the money owed in addition to the actions your specific state can take to recover the money owed.

According to the State of California Franchise Tax Board, the California Tax Board can issue a wage garnishment order to recover unpaid local taxes, unpaid utility bills, unpaid interest, fees, and monies that may be owed to the courts. California and other states can also issue a wage garnishment for unpaid child and spousal support as well.

According to the United States Department of Labor, the U.S. Internal Revenue Service can issue a federal wage garnishment order to recover unpaid federal taxes, interest, fees, and monies owed the courts.

A wage garnishment is an order that requires your employer withhold money from your paychecks each week, or each pay period if not weekly. Sometimes, the IS and State of California can freeze bank accounts, and take and sell your physical items if the courts issue judgment against you for unpaid debts. However, this usually only happens in cases in which the debtor is unemployed, or owes a large amount.

Consolidating to Get Out of Debt

If you live in California and have a number of credit cards that are maxed out, a mortgage, a car or two on which you must make payments, overdue utility bills, and other miscellaneous bills, you may be able to get some relief. The various available California debt consolidation programs may help you to dramatically reduce your monthly bill payments. Simply stated, programs that consolidate your debt are all about keeping you and your family finances afloat in times if financial crisis.

While the term ‘debt consolidation’ is not easy on the ears, the act of consolidating your debt is a legitimate and simple step you can take to help dig your way out of debt. If you apply for a debt consolidation program, and are approved, the process for paying your debts is simplified instantly. The program will lump all of your debts into one monthly payment that is usually lower, and usually has a lower interest rate than the rate you paid previously.

After consolidating debt, you make a single payment each month that covers all of the debts you consolidated. This not only helps maximize the amount of money you can afford to pay each month, but overall, consolidation can help you save money after paying off the interest, which leaves more money that goes towards the principle.

July 12th, 2013

How to Avoid Hazard Debt

The last few years have seen an increase in natural disasters, such as hurricanes, tornadoes, thunderstorms, wild fires, and earthquakes. These types of disasters haven’t been relative to one area or another, but they do have one thing in common – they’ve managed to destroy homes, lands, and the lives of people who have affected.

The worst part about all of this activity is the people who manage to live through it with their lives, but not much else. Certainly, the fact that they managed to live through a flood or earthquake with their lives is great–heaven sent–and we should all be thankful that we can at least say we’re living to see another day. However, once you get over the fact that you’re alive to live another day, you’ll realize that you’re living without the comforts of the home you once shared and the things within.

When it comes to rebuilding your life, it’s not unheard of for people to fall into debt faster and further than they were before. Think about it – you have nothing left and unless you’ve managed to squirrel away enough money to replace everything that you’ve lost, chances are, you’re going to start from the very bottom rung all over again, especially if you are victim to a disaster not covered by insurance. That in itself can be devastating and may leave you unprepared for what you need to do next.

So how do you avoid losing your home and everything in it?

Well, as with everything in life, you can’t always be prepared against every matter that comes along. However, when it comes to making sure that your home is truly safe, you need to get a hazard disclosure report to know the full extent of the damage that your house is susceptible to.

What is a hazard disclosure report? In terms of real estate, it’s the disclosure that an area is within a natural hazard area; realtors are legally required to disclose this information.

In the state of California, realtors are required to tell their home buyers about areas that are flood, earthquake, fire, and seismic hazards. This is true for any area that might be prone to different types of natural disasters, including hurricanes. Knowing about the area that your house sits in will help to minimize the damage that you can expect. For instance, let’s say that while house hunting you find a home that sits right in the middle of a flood hazard area; you can ask what the likelihood of a flood hitting your house could be.

This can help you decide if you want to actively purchase the home or if you want to go about flood proofing it. Just remember that if you decide to purchase a home in a hazard area, that you’ll most likely spend more safeguarding it, assuming that a previous homeowner hasn’t done so already. Just because your home is a ways from say, a wildfire hazard area, doesn’t mean it is completely out of danger.

Make sure that you are aware of just how far – or close – you might be to a hazard area. As California, Arizona, and Colorado residents are aware, summer time is worst for wildfires, with fires sometimes blazing further than anyone anticipated. Even earthquakes can have after shocks miles further from the epicenter, make sure you’re prepared for all contingencies.

July 3rd, 2013

Paying Off Debts –Which Ones Should be Paid First [Guest Post]

No one plans to go into debt, but many people wake up one day to find themselves in trouble. It’s an insidious problem that creeps up over time and is exasperated when an overused maxim is ignored – the devil is in the details. There are two important areas of money management that can help you keep your debt to a minimum. First are the small print details for each account that may contain snags that can compromise your efforts. Second is the way you prioritize the order of your payments.

The essential details of each financial account are included in the terms and conditions. This includes for saving accounts, where you hope to grow your money, credit accounts and other finance related agreements. While many people avoid reading the small print because they expect it to be too technical, it’s good to know federal laws have mandated that they be made clearer and easier to understand for the average American. Become educated about the effect these details could have on your finances or potentially pay the piper down the road. For example, credit card agreements generally charge a penalty for paying late. If you ignore the terms and repeatedly pay late, you’ll make little progress in getting out of debt.

The benefits of prioritizing payments may be less apparent. If you choose to make payments in an aimless way, you could end up making your situation worse, especially if you have limited funds. Planning the best order in which to pay your bills is highly personal and dependent on the types of bills you have, but there are some general rules that everyone should follow.

Number One Priority – Where You Live

Home is the center of our lives and the most important debt to protect. This should always be your first priority. Falling behind or defaulting on your mortgage or rent payments is the first step down a slippery slope that eventually ends in foreclosure or eviction, if left untended. Losing your home is one problem that is difficult to correct. Being habitually late in making payments will damage your credit score. In either case, landlords and lenders will be less than cooperative in getting you back into a new place if you find your self removed from a residence.
Two additional payments attached to homeownership that need to be included in your top priority list along side the mortgage or rent payments.
Property Taxes –An easy way to make sure your property taxes are paid is by adding them to your mortgage payment. If your mortgage holder doesn’t provide this service, pay them monthly as you do your cell phone or cable bill. Avoid waiting until the annual payment is due, unless you’ve been setting the payment aside during the year. A year’s worth of taxes is often substantial and a burden that can be eased by planning ahead. Laws set in place allow a tax lien to be imposed on your property to secure the payment of taxes. This will make selling the property impossible until the taxes have been paid in full.
Property Insurance – Not necessarily a debt, but an essential payment to protect your investment. Lenders and landlords require insurance coverage to protect their investment and property. As long as you carry a mortgage with a bank, the loan is contingent on your home being properly insured.

Asset Backed Debts

Loans that are approved based on collateral that you’ve agreed to put up is the second on the list of priorities. These include loans for real estate, automobiles and luxury items like jewelry and boats. If you fall too far behind, the lender can repossess your asset, resell it and still expect you to make good on the loan – leaving you with a bill for a product you no longer have. In the case of a car loan, there may be additional unintended consequences of not only the loss of transportation but it may put your job in jeopardy.

Income Taxes

The IRS has the authority to put a lien on your assets, if you fail to pay your taxes. So your home, the boat you love, the hunting cabin in the woods, even the money in your bank account can become the property of the U.S. Government. They also have the legal right to garnish you wages to pay your taxes. And don’t forget about your state taxes; they too will garnish you wages, take you to court and place liens on your assets to recoup the tax revenue you fail to pay.

Federal Student Loans

Most of your debts may be dissolved when you declare bankruptcy, but not student loans. It’s the one obligation that will never go away through bankruptcy. The IRS has the authority to withhold your tax refund and apply it to your student loan debt. Your wages may be garnished and you could lose out on other opportunities to use federal loans for further education or subsidized loans for housing.

Medical Bills

Unpaid medical bills can ruin your credit rating and result in your wages being garnished or a lien placed on your assets. If you’re finding it difficult to pay your medical bills, many healthcare facilities will help design a payment plan that works with your situations. If you ignore your obligation to pay your medical bills, the account may be sent to collections to attempt to get you to pay up. If that isn’t successful, you may be sued for payment.

Unsecured Debts

Unsecured debts like credit cards may be last in our list of payment priorities, but don’t be confused in thinking that this type of debt is less harmful when neglected. Always make the minimum payment or more on all unsecured debts. Miss a payment and the credit card company will attempt to coerce you to pay. Failing, they will send the account to a collection agency to try again. In the worst-case scenario, the card issuer may sue you and ask the court for permission to take your assets or garnish your wages.

A list of payments priorities will help to keep you organized and focused on what’s important but should never be seen as an invitation to avoid your responsibilities. There’s just too much on the line that can impact your financial future. Always honor your debts, even if you can only make a small payment each month.

Noreen Ruth is a writer for www.debtomg.com and multiple financial blogs and websites. She strives to provide readers with the most up-to-date information on debt management, credit services, saving money and other financial issues. Her goal is to help educate consumers about topics that may impact their ability to manage their credit/debt responsibly.