While I am taking the day off, here are links to some great articles -- the best FMF had to offer last year:
Enjoy!
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Posted in FMF Speaks | Permalink | Comments (1)
For those of you new to Free Money Finance, I post on The Bible and Money every Sunday. Here's why.
Recently the Christian Financial Alliance asked several bloggers the following question:
“What is one financial mistake you have made (at any point in life) that God used to teach you?”
Here was my response:
“For me it wasn’t one individual mistake, but the fact that I did not manage my finances according to biblical principles — and thus my net worth suffered. When I discovered what the Bible has to say about earning, saving, investing, giving, and the like and then applied it to my life, things changed dramatically for the better and I’ve never looked back.”
You want specifics on what I applied and how those actions helped me financially? See The Bible Will Make You Rich for details.
Posted in The Bible and Money | Permalink | Comments (0)
Here's a piece from CNN Money that says working out can pay off big-time. Their thoughts:
Exercising three or more times a week leads to 6% higher pay for men, on average, and 10% for women, Cleveland State researcher Vasilios Kosteas reported recently.
The hike is due to exercise-induced productivity boosts, he says, and is separate from the well-established link between obesity and lower earnings.
6% is a nice chunk of change over the course of a career. Let's take two guys, each starting their careers at age 22 earning $30,000. One works out and thus his salary is 6% higher than the other's. They each average annual raises of 3%. At age 65, the guy who works out has earned $160k more, plus likely has all the added benefits of better health and lower costs (medical bills, life insurance, etc.) that those who work out get. Pretty sweet, huh?
Of course there's more money in simply growing your career a "meager" 1% a year, but why not do both -- grow your career PLUS workout for an extra 6%? It all adds up, right?
Posted in Career 2011+ | Permalink | Comments (7)
As we all know, Americans are dreadful at saving for retirement. I have run post after post throughout the years showing the stats of how ill-prepared most are for the day they won't/can't work.
Of course there's Social Security, but anyone who is counting on it for their full retirement is going to be unpleasantly surprised. It's just not enough money for most people to survive on and have a decent quality of life.
So what should we do about this problem? After all, it's our collective problem -- not just an issue for those who don't save. We don't want homeless 70-year-olds sleeping on our streets or gangs of elderly people breaking into our homes to survive do we?
One solution is to force Americans to save more for retirement -- similar to the way we force people to pay for Social Security. This piece from Market Watch sums up the idea as follows:
It’s time for the U.S. to create a mandatory, defined-contribution plan, not unlike those in other parts of the world such as Australia or the United Kingdom. Or so says Meir Statman, author of “What Investors Really Want” and a professor at Santa Clara University.
“Libertarian-paternalistic nudges have moved many non-savers into defined contribution retirement savings, but left many behind, along with those with limited access to defined contribution retirement savings plans,” Statman wrote in a paper that’s currently being considered for publication in a highly regarded professional journal. “It’s time to switch from nudge to shove and replace libertarian-paternalistic voluntary defined-contribution accounts with fully paternalistic mandatory defined-contribution accounts for all.”
The article doesn't make a conclusion -- whether this is a good idea or not -- it simply details the proposal by Statman as well as looks at other, similar plans in countries throughout the world.
I kind of have mixed thoughts on this one. On one hand, I do not want the government involved in handling/managing my retirement money. If anything can make a bad situation worse, it's government oversight, involvement, and management.
On the other hand, something needs to be done or else we're all going to be footing the bill for the hordes of elderly people who didn't save while they were working.
I'm interested in your thoughts on this one. Should there be some sort of forced retirement savings? Are there other solutions that would be better? Or perhaps you don't see any problem at all.
Please leave your comments below.
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Here's a piece from the Wall Street Journal that debates the pros and cons of paying your kids for getting good grades. So my question for you today is this:
Do you pay your kids for good grades?
We do not pay our kids for grades. However we have set up an incentive plan for our daughter. Here's what happened...
When she was younger she had a Spanish teacher that she didn't like (at a local co-op -- our kids are homeschooled for the classes we can teach, but neither of us knows a foreign language). So as she approached high school, she was adamant that she would not take a foreign language class. Our problem was that our state requires at least two years of foreign language to graduate from high school.
So while our daughter didn't want to take a foreign language, there was something she wanted: an iPad.
Seeing the opportunity, here's what I offered her:
She loved the idea and we had an agreement!
I found a Spanish tutor on a recommendation from a friend. The tutor was a teacher at a local high school and tutored students on the side. My friend's kids had taken the teacher's classes and loved her.
My daughter hit it off with the teacher and they started meeting every other week when my daughter was in 8th grade. Now at the semester break of her 9th grade year, she's completed high school Spanish 2 and wants to keep going. I'm now hoping to get more than the Spanish 1 CLEP credits out of the deal. :)
One problem we ran into was that it's going to be better for my daughter to take all her Spanish classes and then take the CLEP tests. But that's a couple years down the road. So while she had completed her classes and COULD take the CLEP test, it's better to wait and see if she can pass multiple Spanish CLEP tests (and thus enter college with 6 to 9 credits rather than 3.) But she's basically earned the iPad now -- she's done everything we asked (and according to the teacher would be ready to pass the Spanish 1 CLEP) except for actually passing the test.
So we reached a compromise. We bought her an iPad mini (which she preferred over the iPad). If she passes the Spanish 1 CLEP, then she's already received her payment. If she doesn't, she will reimburse us the cost of the iPad mini from her savings.
BTW, we gave my son the same deal (he's now taking Spanish with the same tutor) and I even had offered to let him pick a class different than Spanish to pass the CLEP for. He doesn't want an iPad, but does want a new phone, so I offered that as an incentive. His response: "Nope. Too much work." :)
Anyway, that's it for my school-incentive efforts. Do any of you have stories of your own in this area?
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For those of you new to Free Money Finance, I post on The Bible and Money every Sunday. Here's why.
For the rest of the year I'm going to be highlighting verses relating to the poor on Sundays as a reminder of why I'm doing my $25k Red Kettle Challenge. Here are two for today. I've already shared these, but this time they are from the Message translation:
Proverbs 22:9: Generous hands are blessed hands because they give bread to the poor.
Proverbs 21:13: If you stop your ears to the cries of the poor, your cries will go unheard, unanswered.
Remember, I'm matching your donations dollar for dollar, so everything you give doubles in value! If you'd like to donate, go to my online Red Kettle.
Hope you're having a blessed holiday season.
Posted in The Bible and Money | Permalink | Comments (0)
Posted in Making Money 2011+ | Permalink | Comments (2)
Turns out the latter is 39% better than option #1 and 14% better than option #2. The reason? Costs. From Money magazine's December issue:
It typically costs charities about $15 to raise small gifts. That means you're better off giving more to fewer charities:
- 20 gifts of $50 each: $300 in fundraising costs; $700 to benefit the cause
- 10 gifts of $100 each: $150 in fundraising costs; $850 to benefit the cause
- 2 gifts of $500 each: $30 in fundraising costs; $970 to benefit the cause
I have seen this play out in real life -- from the donor's side.
I used to "spread around" my contributions, trying to give a lot of charities a little bit of money. Then, as you can imagine, I received tons of extra solicitations from every one of them: mailings, calendars, address labels, small "gifts", requests with stamps, phone calls, and on and on. The avalanche of marketing materials was overwhelming -- and the costs must have been tremendous.
Over the past couple years I have purposely focused our giving on only a few charities. We now receive much less "marketing" and the costs in the system are much lower as a result. So more money is actually doing the work we want it to. It's been a lot less stressful opening the mail as well. :)
So if you're a giver, you may want to consider giving to fewer causes and in larger amounts. Doing so means that more of your money is going to the purposes you intend for it.
Posted in Giving | Permalink | Comments (11)
Posted in Carnivals, Star Money Article | Permalink | Comments (0)
The December issue of Money magazine lists this interesting stat on the last page:
The median retirement savings for households near retirement (55-64): $120,000
One word: yikes!!!!
Let's look at the math a bit:
This plus Social Security is going to make for slim pickings when it comes to funding retirement. Is it any wonder that "work longer" seems to be the #1 response to "how are you going to afford retirement"?
It's this sort of low-end, barely-getting-by retirement that I'm trying to avoid. In fact, I want to be on the opposite end of the spectrum -- I want to have enough saved so I can live comfortably at my current standard of living from just the earnings on my net worth and never have to spend any principal. How do I plan to get there? A combination of the following:
I'm still a few years away from seeing if this plan has legs to stand on. You'll be among the first to know one way or the other. ;)
Posted in Retirement 2011+ | Permalink | Comments (33)
Posted in Saving Money 2012+ | Permalink | Comments (15)
What are the current financial issues you're facing (saving, paying off debt, etc.)?
Two key issues, one is trying to reduce expenses while trying to increase income. And the second one is related to housing.
My wife and I are thinking on having a second child, but will need to either move to a bigger home or expand our new one. After doing the financial math and considering what is available in the market for other houses, it seems that it is cheaper to renovate than to move to any of the available bigger houses. The key decision I'm struggling with now is how to finance this renovation.
Option 1 is through short term loans (401K loan -- 4.5% but with the benefit that I'm paying my self back and the 4.5% interest goes back to my 401K account and also use some credit card leverage (35K - currently I always pay it by month end). Then I'll refinance after renovation is complete and pull some money out to pay most short term loans.
Or Option 2, which is through a not well known 203K loan (an FHA loan that allows you to borrow principal plus an amount for renovation), low fixed rate of 3.25% for 30 years, requires FHA upfront payment, but puts the housing payments at $2,740 for 30 years. Keep in mind that for the first 4 years the comparison can't be made apples to apples as the interest of the 4.5% is pay back to me with option 1 while with option 2, the interest of 3.25% is to the bank.
What should I do?
What are your plans for the future (retire early, build your career, etc.)?
Maximize income while creating a savings funds so that in the next 5 years I'm able to open my new business. As I do business strategy and transformation consulting, I would like to do business turnarounds on my own (e.g. purchase a small company and flip it).
What's your best piece(s) of financial advice and/or your general philosophy on personal finances?
Absolutely 'Live within your means", but if you want to have a nice live and great means, then maximize your income so that you could continue to live within your means but your "means" are higher / as desired. I'm also a big fan of using Mint.com and creditkarma.com both are free application, great mobile versions and help you tremendously in managing your financials (first one) and your credit score (second one).
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Posted in Career 2011+ | Permalink | Comments (8)
For those of you new to Free Money Finance, I post on The Bible and Money every Sunday. Here's why.
For the rest of the year I'm going to be highlighting verses relating to the poor on Sundays as a reminder of why I'm doing my $25k Red Kettle Challenge. Here's one for today:
Proverbs 14:31 (NIV): He who oppresses the poor shows contempt for their Maker, but whoever is kind to the needy honors God.
Remember, I'm matching your donations dollar for dollar, so everything you give doubles in value! If you'd like to donate, go to my online Red Kettle.
Hope you're having a blessed holiday season.
Posted in The Bible and Money | Permalink | Comments (0)
As the President and Congress debate about taxes on the "wealthy" -- defined as those making $250k more per year -- NBC News brings up an issue we've talked about several times, the fact that how much you make goes farther in some cities than in others.
And the differences can be massive. Consider these few quotes from the piece:
You can buy a four-bedroom, two-bathroom house in Redford, Mich., (just outside of declining Detroit) for $60,000, or pay $1.7 million for a similar home in Los Altos, Calif., in the heart of Silicon Valley.
You need to earn $250,000 in Los Altos, Calif., to live the life that $60,000 provides in Fort Smith, according to the addicting cost-of-living-comparison calculator at Sperling's Best Places website.
Now some will counter with, "Yeah, but you can make more money in higher-cost-of-living cities." While this is true, the higher pay is not enough to make up for the higher expenses (on average.) Of course there are non-financial issues of living in one place or another (like nearness to family) that could make the financial hit worth it. That's up to each individual/couple to decide for themselves.
The piece then offers a way to really super-charge your finances -- combine a high income with a low cost-of-living city. Their thoughts:
You can really cash in on cost of living discrepancies if you line up a telecommuting programming gig at Silicon Valley rates and then make your home in the outskirts of Detroit or on the Arkansas-Oklahoma border.
I'm guessing that this sort of arrangement is both more and more popular (as companies want to keep/get the best employees) as well as realistic (with technology today, almost anyone can work remotely at least part of the time).
A similar approach would be to live in a low cost-of-living city but have a high income job in that city. That's been my career strategy. You all know that I have only lived in low-cost cities during my working years. You also know that I earn a decent salary. Put the two together, and it's financial magic.
I'm guessing some of you are in the same boat. Anyone else out there using the high-income, low-expense city strategy?
P.S. The reason I put "wealthy" in quotes at the top of this post is because the term "wealth" refers to net worth IMO -- how much someone owns once all their debts are paid. And yet the debate in Washington associates "wealth" with income. We know from common sense that those who make more money have a greater opportunity to accumulate more and have higher net worths. But we also know that this opportunity is often squandered, that those who earn more tend to spend more, and thus their wealth is not close to what it could be. I talked about these differences when I wrote about income statement affluent versus balance sheet affluent people.
Posted in Saving Money 2012+ | Permalink | Comments (16)
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Many regular FMF readers are familiar with Old Limey, a regular, popular commenter here. Through his comments we know that he is a retired engineer who took his relatively modest retirement savings, invested it during the dot com boom, and turned it into a multi-million dollar portfolio.
I recently emailed Old Limey to ask if he'd write a series for FMF on "how to be successful as an active investor." Since he has regularly made comments about how others can/should be successful at active investing (versus passive/buy and hold investing), I thought he surely had suggestions for how the rest of us could succeed as well. I even thought I might give the effort a try with part of my portfolio. And, of course, I knew the readers would LOVE hearing from him.
He responded quickly with the following thoughts (edited for length):
For the following reasons I am not willing to write a series on active investing.
1) I am no longer an active investor. These days I primarily only own municipal and corporate bonds, and CDs, that will be held until they mature between now and 2040.
2) Being an active investor requires a lot of knowledge that requires much reading to acquire. You also need to subscribe to a large database of funds, ETFs, and indexes, the cost of which is about $900/year. The database also needs to come with a very comprehensive charting, ranking, and analysis program. Learning how to use this software is beyond the capability of the average person and requires a great investment of time, first to get up to speed, and then on a daily basis whenever you feel that it's necessary to move money from one investment into another. It's really out of the question for a person that has a very busy and time consuming day job. You need to have a passion for making money as well as an education that is very solid in mathematics and analytical techniques.
3) Once you start you need to do a post mortem on every trade that you make and learn from both your successes and failures.
4) Active investing is an ongoing learning experience and it takes a very disciplined individual to become successful. You have to be the exact opposite of a Buy and Hold investor. You have to abhor losing any of your precious money, especially since the more money you have, even small percentage losses can result in losing a large amount of money.
5) You need to attend lectures and seminars, read some books on investing, and learn from some of the most experienced active investors around.
6) In order to become a successful active investor you have to be very disciplined and not allow your emotions to get in the way of your decisions.
7) The more experienced you become, the more successful you will be, but you have to have a sense of when to be a participant and when to stay out.
8) I went through some stressful periods as well as some very exhilarating periods. Some people just aren't cut out to be active investors, especially if they are also experiencing stress from other sources such as work related and family related situations.
9) I was very active from 1993 through 2007 and it was a great relief to reach a point where I had enough money to quit the rat race, move to the slow lane, and settle for income rather than capital gains.
10) Lastly, I feel that the current state of the US economy, debt, and employment situation is far too dangerous to take the kind of risks that are needed. Don't underestimate the unique and incredible impact that the Internet and the Computer revolution made. This revolution fortuitously started just as I was retiring and was starting down the path of becoming an active investor.
When I was writing the software that I was able to market very successfully, I was working at home, for 2 years, 7 days/week, from 8am to midnight with small breaks for food.
That mammoth task ended one day when my wife came into my office with a hammer in hand, vowing to smash my computer if I didn't find a way to wrap it up soon and market it.
She was a great help when an ultimate 1602 orders started to roll in and we were kept very busy making CDs, having manuals printed, and hauling packages to the Post Office. That MS-DOS software is now obsolete.
A fellow program developer of mine told me that he used to stay in his office and his wife would put a tray of food outside his door, He came to the same resolution that I did in order to save his marriage.
These days, I don't see anything comparable for an extended Bull market on the horizon, all I see is a lot of strife, tension and unrest all over the world.
This is a totally different and far more dangerous world than existed from 1993 through 2007.
Here's my summary of Old Limey's thoughts above on why it's very difficult to be a successful active investor:
1. It requires a VERY unique individual -- one who has just the right temperament, abilities, and amount of time to make such an effort successful. This criteria alone eliminates all but a handful of potential candidates.
2. The market conditions need to be correct even for those with the talents in #1. It was just right when Old Limey invested, but today's market is not a fertile field for investment gain.
This basically says that virtually no one can be successful with active investing today.
I was a bit surprised at this response since Old Limey seems to be such an advocate of active investing. I noted this in my response and he replied:
Active investing is of course still alive and well today, particularly with many investors that trade stocks.
Even an index fund investor could become an active trader if he followed a simple trading strategy. For example, a very simple approach would be to follow four indexes and maybe put 60% in the strongest one and 40% in the second strongest. You would then need to use an analytical method that calculated the relative strength of the four indices. Then, every day you would check the relative strength values to ensure that you were still invested in the strongest two out of the four.
To refine it even more you could layer on market timing by saying that if the S&P 500 falls below its 200 day moving average you would sell your two positions and move into some kind of income investment. Then when it moves back above its 200 day moving average you sell the income investment and move back into the two strongest indexes out of the four you have chosen. A simple system of this type would have saved a Buy and Hold investor from taking such a beating in the huge drop and then got him back in soon after the recovery started.
One module in the software that I wrote would have enabled a person to test out this strategy from 9/1/1988 (or a later date of your choice) to the present day and then play around with all of the variables until you found the combination that had the greatest success as measured by making the largest overall gain along with experiencing the smallest max. drawdown. It's the drawdowns that are so hard to live with. On the day that the max drawdown occurs you are sitting there having experienced a huge drop in the value of your portfolio but you have no idea whether you have hit bottom. That's the whole purpose behind active investing. It's attempting to extract the greatest gains while suffering through much smaller drawdowns.
The obvious criticism of approaches like this is that history usually doesn't repeat itself, but it would almost always be better than Buy and Hold. What I have described is just one simple strategy. There are of course scores of different strategies that have been developed. The software I developed had over 80 modules, each one using a different strategy. When I wrote my software I was in contact with over 250 users of the database and received lots of good ideas from the best of these experienced investors. I also gained a lot of information and ideas from attending the annual conference that was held at a different city each year.
Another thing is that 20 years ago there were only a fraction of the investors that exist today and news travelled a lot slower. This helped the active investor to outshine the investors that were not using any kind of backtested fund selection and market timing techniques. Today we have a very different environment with the Fed supplying stimulus money to the large investment banks that use it, largely for their own benefit to drive the market the way they decide. They also use supercomputers that run preprogrammed methods to make thousands of stock trades per day, some trades the buy and sell orders are less than a minute apart in order to reap thousands of small gains with negligible losses. I read an article that mentioned that the very best graduates of MIT in Computer Science end up working at the huge investment banks and not in technology companies here in Silicon Valley.
The other thing I should mention is that if your active trading is taking place in a market and during a time period in which the general trend is strongly upward everything gets a lot easier. My huge gains between 1993 and March 2000 were the result of trading in funds that concentrated in the Nasdaq companies that were in steep uptrends. When the top arrived and it then started steeply down there was a huge rush for the exits and I got totally out over 3 trading days, and stayed out for quite a while until things settled down. A very good sector that follows the rise and the fall of the stock market is the Junk Bond sector. Its huge advantage over stocks is that it has far, far less volatility. This very low volatility gives you a lot more time to make your trading decisions. A friend of mine runs a small Hedge fund and sends me a copy of his monthly market letter, all he ever owns are junk bond and various income funds and yet he far exceeds the performance of stock indices and maintains very low drawdowns. This market letter would help most Buy and Hold investors but for people that aren't invested in his fund the price is $1,400/year. I get a free copy because he used to use my software, as did quite a few people that published market letters. If you look at a longtime chart of the Nasdaq 100 index you will see the huge peak that topped in March 2000, this peak outshines every other stock market index and looks like a profile of Mt. Everest (a peak I was very close to in 1983 when I climbed a nearby trekker's peak that was close to 20,000ft.).
Ok, so you can be successful with active investing today (or at least better than the results you get with passive investing), but it requires:
1. A VERY unique individual -- one who has just the right temperament, abilities, and amount of time to make such an effort successful. This criteria alone eliminates all but a handful of potential candidates.
2. The market conditions need to be correct even for those with the talents in #1. Today's market is not conducive for active investing success.
Personally, this is disappointing to me, but not surprising. I had hoped that active investing was available for the masses (or at least a good sub-section of the population) since I wanted to give it a try (and share my results with you.) But having this conversation with Old Limey reinforced my thinking that it's very difficult (if not impossible) to be a successful active investor. So I'll stick with my simple index fund investing on one hand and concentrate on real estate investing on the other. This seems to be a good balance between growth (stocks and appreciation of real estate) and income (generated by the real estate).
And in case you're interested, here are a few other pieces I've written through the years that suggest it's rare to be a successful active investor:
Posted in Investing 2011+ | Permalink | Comments (32)
For those of you new to Free Money Finance, I post on The Bible and Money every Sunday. Here's why.
For the rest of the year I'm going to be highlighting verses relating to the poor on Sundays as a reminder of why I'm doing my $25k Red Kettle Challenge. Here are two for today:
Proverbs 11:24 (NIV): One man gives freely, yet gains even more; another withholds unduly, but comes to poverty.
Proverbs 14:31 (NIV): He who oppresses the poor shows contempt for their Maker, but whoever is kind to the needy honors God.
Remember, I'm matching your donations dollar for dollar, so everything you give doubles in value! If you'd like to donate, go to my online Red Kettle.
Hope you're having a blessed holiday season.
Posted in The Bible and Money | Permalink | Comments (0)
Posted in Millionaires | Permalink | Comments (15)
Where to Get Financing
When seeking financing, the best place to start is with traditional banks using conventional financing and government backed loans. These are known as agency loans and nearly every person who has ever taken out a house loan on their personal residence has this kind of a loan. They are backed by agencies such as Fannie Mae, Freddie Mac, or FHA. These loans typically have better rates than those not backed by a government agency and they also have longer terms. Many agency loans are amortized over 30 years and not required to be paid in full for 30 years. It’s almost impossible to find a private non-agency loan with those terms.
Luckily investors are able to qualify for these loans if the property has 4 units or less. For the first 4 properties these loans can be acquired as easily as they can on your primary residence. You can get up to 10 agency loans but anything beyond 4 gets considerably more difficult and there are currently very few lending institutions who are willing to offer agency backed loans if you have more than 4. If you have hit your limit of 4 agency loans you will want to contact as many lending institutions and brokers as you can find until you find one that will continue to do agency loans beyond 4 properties.
Other financing options include lines of credit on your personal residence or on any investment properties you may have that have appreciated in value. Lines of credit offer the advantage of allowing you to take out money when you need it and pay it back when you don’t. They are a great cash flow management tool. The next financing option is a private or commercial loan that is not government backed. The terms and rates on these will be less favorable so you need to make sure it does not put your cash flow in jeopardy. You can also take out loans using other assets as collateral such as stocks, bonds, jewelry, cars, any assets you have that have value in them that you want to extract for the purposes of securing more financing capacity. You could also consider borrowing from friends or family if you are in a relationship that supports that and understand the relationship risks that can come from that type of arrangement.
It is worth noting that OPM can be as addictive and seductive as the drug those initials sound like, so it’s important to remain disciplined when borrowing money. Certainly one can put themselves in a highly over-leveraged state doing things like this. I am not suggesting you should leverage everything you have to purchase real estate. I am merely pointing out that there are multiple ways to get access to financing and capital. As long as you keep your debt to equity ratio at a reasonable level and keep your cash flow margin well within the safety range I would not have much concern about any of the steps I have outlined here. I would feel comfortable with a debt to equity ratio that did not exceed 80% and a cash flow margin that stays above 10%. If that debt to equity ratio is higher than some people would feel comfortable with, they should choose a lower number that they feel meets their margin for safety.
Lack of access to capital is probably the number one frustration of most beginning real estate investors. Everyone runs up against the money roadblock. Sometimes the only path is to wait until you can save enough money to go around the roadblock that is right in front of you. Of course there is always another roadblock after that one. However, the more cash flowing properties you can acquire the more cash they will throw off. Eventually they will be the source of removing the capital roadblocks. But until that time arrives which can be quite a long time for many real estate investors, you need to consider every option for getting access to capital and always be on the look out for new sources of funds if you want to keep your real estate business growing and expanding.
To read the next post in this series, see Real Estate 101: Taxes.
Posted in Real Estate 2011+ | Permalink | Comments (28)
Posted in Carnivals, Star Money Article | Permalink | Comments (1)
A big question in the presidential campaign a few weeks ago was "are you better off than you were four years ago?" Both sides had their points-of-view (of course) and tried to influence the electorate to their way of thinking, hoping it would lead to more votes.
Personally, I avoided anything related to politics this year on FMF. Why? There were several reasons:
1. This is a personal finance blog, not a political blog. Though money and politics are clearly related, there are so many other things tied up in politics that having a money-only discussion was pretty much impossible IMO.
2. People don't think rationally during political discussions, especially in years where the race was (supposed to be) as close as it was. I was sure nothing positive would come from bringing it up.
3. I was personally so tired of all the commercials, phone calls, mail, and on and on that I was sick of politics by mid-May and wanted to spend as little time and effort on the subject as possible.
4. IMO, it doesn't really matter that much anyway. First, I think there isn't really that much difference in the impact of one party's plans over those of the other -- at least in such a short period as four years. And second, while the economy/government certainly has an impact on your finances, it's not the biggest factor influencing your financial health by far (see below).
But now that we're a ways away from the election, the smoke has died down, and the winners have celebrated and the losers licked their wounds, I thought I could address the question for myself with little negative backlash (I can hope, can't I?). Am I better off than I was four years ago?
The simple and clear answer is "Yes, I am better off than I was four years ago." Much better off, in fact.
But this "simple" answer needs a bit of perspective. Namely:
I have been better off every election year than I was at the start of the previous four years. It didn't matter who was president or what the economy was doing, my answer has always been the same: "Yes, I am better off than I was four years ago."
The reason I can answer this way has very little to do with who was running the country and MUCH more to do with what I did during those four years. Namely, I took the steps necessary to grow my finances -- the few, key moves that anyone can take to grow their net worth. I spent less than I earned, grew my career, saved, invested, and avoided bad money mistakes. These basics, and not who is running the country, are much more important in determining whether you answer "yes" or "no" to the "better off?".
Of course, the government can have a major impact on finances, but this is generally only in very extreme situations. For instance, if the whole economy imploded (much more than what we've seen over the past few years) or if inflation ran rampant, it would impact EVERYONE negatively -- and then almost everyone would have the same answer ("no"). But absent a disaster like that, what YOU do has much more impact on the status of your finances.
So my recommendation is to focus more of your effort and energy on what matters most and what you can influence -- taking the correct steps you can to grow your net worth. And of course you can vote and be active in politics as you see fit -- I'm not saying to throw up your hands and forget the government (besides, there are more issues and reasons to vote than just money). But don't blame or credit a president for your financial gain or loss, blame or credit yourself.
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Would you like to have two books absolutely free? Well have I got a deal for you...
The first is Get Noticed & Get Hired: Action Steps, Strategies and Resources to Become Empowered & Employed [Kindle Edition] which for this week is absolutley free (it will go back to being a for sale item next week.) A summary of the book from Amazon:
Going through a period of unemployment can be one of life's most stressful situations. In many cases it seems to trigger a domino effect of pressures and strains ranging from emotional to financial to relational. Television and news reports are filled with stories about people who have sent out hundreds of resumes without getting a single interview. Many who have made it to the interview stage are shocked not to be selected even though they had the right experience and skill sets necessary for the position.
In Get Noticed & Get Hired, veteran corporate executive Steve Matter delivers an entire workbook for directing you from job loss to becoming empowered and employed.
This book is filled with action steps, resources and strategies to help you focus and prepare for your journey back into the workplace.
To get your free book, click the link above and order away!
The second book is "The Secret of Generosity". A summary of the book from Amazon:
Have you ever felt like your pocket has a hole in it? Big expectations followed only by even bigger disappointments? If so, you are not alone. Knowing that His people felt this way, the Lord spoke into our emptiness. In the only direction we aren't looking, He pointed the way towards redemption and restoration. Generosity has a secret, a deep, liberating, and life-altering secret. Discovering it will bring life to our souls and hope to our hearts.
Here are the details on how to get it:
For the month of December, anyone who emails the author ([email protected]) and puts "Free Ebook Giveaway" and the name of the site they saw the deal on, will get the ebook (PDF) emailed to them for FREE. Details can be found here.
Enjoy!
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For those of you new to Free Money Finance, I post on The Bible and Money every Sunday. Here's why.
For the rest of the year I'm going to be highlighting verses relating to the poor on Sundays as a reminder of why I'm doing my $25k Red Kettle Challenge. Here are two for today:
Proverbs 19:17 (NIV): He who is kind to the poor lends to the LORD, and he will reward him for what he has done.
Proverbs 14:21 (NIV): He who despises his neighbor sins, but blessed is he who is kind to the needy.
Remember, I'm matching your donations dollar for dollar, so everything you give doubles in value! If you'd like to donate, go to my online Red Kettle.
Hope you're having a blessed holiday season.
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