I’ve Paid For This Twice Already…

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

Archive for the ‘goals’ Category

Have you Considered Investing in an Apartment Building?

Wednesday, September 4th, 2013

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,
bonds,
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!

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

Wednesday, July 3rd, 2013

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.

The Home Stretch Can Be As Difficult As The Start

Wednesday, September 9th, 2009

My family has come a long way in the past two and a half years since we started this serious debt elimination journey. When we started, almost half our monthly income went straight to non-mortgage debt, and it had a huge impact on our everyday life. The idea that someday we’d pay off over $30,000 and have less than two hundred dollars a month that *had* to go towards debt was a dream I wasn’t sure we’d realize. But we have, and even though we’re almost done – the journey isn’t over yet.

The final stretch, when you’re at the start, seems like it’ll be the easiest part. As you eliminate debt, more resources become available, and more can be allocated to fight the good fight. Momentum is on your side – the snowball rolls downhill faster and faster until it seems nothing can get in the way.

But, that isn’t always the case. Just as any other part of the debt elimination journey, setbacks can appear at the end as easily as the start. The length of the journey itself can be daunting – that initial adrenaline about completion can only last so long. And as more things creep into sight, debt elimination seems like it might have been the least complex part of the puzzle.

I haven’t completely lost focus – we’re still making progress (which I need to update on the numbers page, we’re closer than that currently reflects). But it has been much easier to get distracted into dealing with other things. As the debt becomes less, it almost seems less urgent – at the beginning, it was so much as to be overwhelming, and put a serious weight on our finances that felt almost inescapable. But as we’ve beaten back that debt monster, the threat of imminent destruction to our finances has become less (or at least, has felt less) because of debt. It has been easier to prioritize other goals before the final debt elimination. It has, in a word, become less urgent. Not in fact, but in feeling.

And the less urgent the debt elimination feels, the easier it is to not focus on it when other things get in the way. And that’s how the home stretch becomes an endless silent struggle. A lot of things have changed for us in the past two years. A lot of good, and some bad as well. But even though there may be other things affecting our lives that we never anticipated, this final debt elimination stretch will not continue to drag on. The refocusing of our finances back to where it began starts now.

First on the list – making this month’s student loan payment and then updating the neglected numbers page. Nothing like a Tell All Thursday to get things back on track. I doubt we will completely eliminate the non-mortgage debt by the end of 2009, but I’d like to beat the original December 2010 goal by as many months as possible. And figuring out where we are is how we’ll get to that point.

Using The Prioritizer To Analyze Your Dreams

Wednesday, June 10th, 2009

A while back, I talked about The Prioritizer, a tool I first read about on The Simple Dollar used primarily for comparing different financial goals. The tool asks a series of comparison questions to determine the order of priority among a number of specified goals, and although it was designed as a financial tool, it can be used to compare any set of stated goals, financial or otherwise.I’ve received emails since from a readers discussing balancing divergent goals, such as debt reduction vs triathalon training, or saving for retirement vs starting a business, and asking for feedback about how to prioritize these unrelated but important to them activities, and I was instantly reminded of The Prioritizer and how I had used it to compare a number of my own goals in terms of my financial commitment to each of them. The goals were not necessarily all directly financially related, although each had a financial component and ramification to it.  So I thought I’d run through what The Prioritizer is, and how it can be used to understand what is deeply important to you and how to find balance.

Using The Prioritizer is pretty straightforward. You begin by entering up to fifteen goals by name, one per line. These are just simple descriptions of each goal, such as “Retiring at Forty” or “Vacationing in Rome”.  Once you’ve entered your goals, the Prioritizer gives you a list of pairings of your goals, and you rank one of each pair as the more important to you.  Think about each pairing before you choose – really decide which of those two things is more important in your life.  This is the key.  Comparing the goals two by two is much less overwhelming than trying to compare everything at once.

Once you’ve done that, the Prioritizer uses the data you’ve entered to rank your goals from most important to you to least important, with a percentage ranking next to each.  the higher the percentage, the more important to you.  The beauty is in the simplicity.  This isn’t anything you couldn’t do yourself with a number of pro/con lists, but it does it automatically for you and gives a simple list ranking your goals for you.  From this, you not only know how your priorities rank – but how much more (relatively) important one priority is than another.

Is it perfect?  Of course not.  It is a tool like any other – but it may give insight to you when you’re stuck trying to compare apples to oranges.  When I’ve been stuck looking at a number of different goals and not sure where my priorities truly lie, I’ve been able to use this tool to make things a bit more clear cut.  And readjust my financial focus (and otherwise) appropriately.

Tell All Thursday – What’s Your Emergency (Fund)?

Thursday, April 23rd, 2009

When we originally started seriously getting out of debt, we set our emergency fund at $1000 kind of arbitrarily.  There was a reason specific to our family – I had had about $1000 for the past two years in our savings account and it was usually enough to bail us out of any problems, but mostly, it was honestly because I’d heard that number thrown around so much (thanks to Dave Ramsey) that we chose it.

When $1000 was serving us as a default emergency fund in the two years prior to this blog, our family and home situation was quite different than it is now.  We had one child and we rented an apartment.  Now we have two children and we own a home, which adds its own set of challenges.   Several times in the past two years we’ve been hit by unexpected situations that the $1000 wasn’t enough to cover (new furnace, replacing car engine), and a few other times we’ve completely emptied the fund to meet the challenge of an emergency (when my dad passed away, different car repairs, home repairs).

So we made the decision for 2009 to raise the emergency fund to $2500.  I naively thought that wouldn’t be too difficult – it hadn’t taken too long to get to $1000 and when we’d had to use it we’d built it up again quickly.  But almost like the world was challenging us, increasing to $2500 has been full of setbacks.  Not only in draining the emergency fund when emergencies have happened, but also having to divert money that would go towards the emergency fund to pay for things that have come up (most recently, taxes that I’d underestimated, and a repair to our front porch which had a rotted-out post so the roof would not start to sag.)  And with the worsening of the economy, we’ve had income setbacks – I am earning less than I was a year ago with my different freelance efforts, and my spouse’s salary has been frozen for the forseeable future.

We’ve been able to maintain the status quo without going into more debt, for which I am thankful.  And I’m not unhappy or complaining – it is more bemusement.  And we forge on!  However, my priorities for after the emergency fund have begun to shift.  The emergency fund stands at $2200 as of now.  Will it stay there?  Who knows.  But I anticipate being able to reach the desired $2500 in May.  At that point, we were going to start saving for a new-to-us car.  But I think we’re not, yet.

I started this blog to help us get out of debt.  And it has, greatly.  I’ve shifted priority in 2009 from eliminating debt to saving money, and I’ve come to the realization that it is time to shift it back.  We’re on the home stretch, with one non-mortgage debt remaining of about $9000.  Yes, the Saturn could die.  Yes, we could need to replace it.  That is still true – but at the same time, eliminating our debt is also an important priority and for now, we’re going back to it.  Finances is part practical and part psychological – and my brain needs to focus on debt elimination right now for the simple fact it is concrete and in the here and now.

So the student loan will soon come under attack.   We’ve been paying $300 a month towards the loan so far in 2009.  The rest of our budgeted towards debt repayment amount, at least $500 and sometimes more, has gone to the emergency fund.  But now we’re going to flip that.  $300 a month will go into our “long term savings” which is a new-to-us car fund right now.  And then, $500 or more per month will go towards the student loan.  Hopefully more, but that depends on my income earning ability.  I’m working on it, though.  :)   Viva la snowflakes!

Debt updates and a new timeline next week!  I need to play with numbers and work out some scenarios.  :)   I know that many of you will find this crazy, and others will find it right on, and that is okay – agreement is optional.

What’s your emergency fund minimum magic number and what factors play into that?  What comes next – debt repayment or other priorities?

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