Free Money Finance

Millionaire Interviews

I am in the process of moving this series from Wealth Lion to FMF. So here's the post that got it all started...

This blog is about how to grow your net worth.

To this end, I have been (and will keep) sharing the tips I've learned along the way, but I want to offer a broader perspective for my readers' sakes. Yes, I think I have something to offer, of course, otherwise I wouldn't spend the time running this site. But I'm certainly not the end-all expert on how to grow and manage wealth.

There are many ways to become wealthy and probably even more ways to manage wealth once you have it. So I wondered what voices could I add to mine to offer additional thoughts and tips on becoming and staying wealthy.

Well, there is certainly no lack of so-called experts out there. You can find them all over TV shows, on the radio, in print, on the web and so forth. But while many of these people know how to speak, write, and talk about managing money, they know it only in theory, not in practice. Yes, they know what to say and report on what to do, but they don't know how it really works. Why? Because they are not wealthy themselves. They spit out facts, but there's no insight, no extra tips, no real-life application because they haven't lived it themselves. No, these people would not add anything useful to the conversation.

Then there are the wealthy who have "made it" in some form or fashion. They are generally famous to some degree and most times have greater wealth than the average person could ever hope to attain (I'm talking $10 million+, and generally much more). They have started multi-million dollar businesses, are very talented in some way (sports, music, etc.), been in the right place at the right time, and so forth, and now are very wealthy. Yes, they certainly have something to share and their stories would be interesting. But since much of their results are not something the rest of us can replicate, I don't think adding their voices here would be as beneficial as I'd like. 

I prefer the everyday person. The one who started from nothing (or close to it) and became wealthy over time. The person who knows the ins and outs of growing and managing wealth because she's lived it. The person who is just like the rest of us -- a "normal", "regular" person, who we can relate to. And best of all, a person who has practical tips and insights that work in the real world -- ones that we all can apply to grow our wealth.

That's why I'm starting my "Millionaire Interviews" series. It will be a category here at FMF where I interview everyday millionaires. Here's how it will work:

• The interviews will be with people who have a net worth of at least $1 million. The levels of their wealth will vary and will be shared on each post. Some will have several million dollars to their names..
• I will ask them a series of questions and they will respond. They also have the right to add their own questions to the interview if they think I left out something important.
• As you might imagine, I want to keep the identity of these people guarded (to the extent they want to be guarded.) So I won't even use their initials in the posts -- I'll simply give them a number, starting at "1" and counting up.
• As you read each post, you can not only learn from them but also ask them questions. If they feel comfortable doing so, they will respond. I am guessing that some will and some won't.

These posts will hit at random. We may have a couple in one week and then none for a month or two. There's no set schedule. It's dependent, as you might imagine, on me finding millionaires willing to be interviewed. To that end, if you have a net worth of at least $1 million and are willing to be interviewed for this series, please drop me a line. We would all appreciate hearing your story.

So stay tuned. Millionaire Interviews will be coming your way shortly...

Help a Reader: Going Back to Work after 12 Years

Here's an email I recently received from a reader:

I am a 50 year old woman who has been at home raising a family.  For a lot of reasons it is time for me to begin working outside the home again. 

I became a stay-at-home-mom in 2001 and have not looked for a job since 1992.  My focus has been raising my daughter and volunteering in my community, not growing my career.  While I have a college degree, a variety of skills that I believe are marketable, and confidence that I am employable, I feel overwhelmed and am not entirely sure where to start.  

Have any of your readers been where I am?  What would be some good first steps, and what are the pitfalls to look out for?

What's your advice for her?

A Nice Touch from Vanguard

I recently received a card in the mail from Vanguard. It read (in part):

Happy anniversary! You've been a client-owner of Vanguard for 20 years.

It went on to thank me for my loyalty, congratulate me on "reaching this milestone," and so forth.

Overall, I think it was a nice touch from them.

I have been with them a long time and IMO they are a great company. I'm hoping for another 20 years (at least!) together.

For those of you interested, here are the three funds I use the most at Vanguard.

I almost went through the exercise of calculating how much I've saved/earned with Vanguard in 20 years simply because my expense ratios have been almost nil compared to an industry average of over 1%. As we all know, 1% compounded over 20 years adds up to some BIG MONEY!

Reader Profile: VA

The following is the latest post in my "Reader Profiles" series. Each post in this series details the financial situation and challenges of an FMF reader. The purpose of this series is to help us all identify with people like us (in similar situations -- not all will be, of course, but eventually I'm sure you will find someone like you here), get to know the frequent commenters on the site, and hear some financial wisdom/challenges from people other than me.

If you're interested in contributing to this series, then drop me an email. The series seems to be very popular with readers and I need a steady stream of new ones to keep it going.

Also, please leave constructive comments, questions, and so forth. Simply telling someone what a mess they have, how they have made poor decisions, and so forth is not helpful. There is a way to say, "That was a mistake, but here's what you can do to correct it" that both acknowledges the problem and offers a solution. It's this sort of feedback that this series is intended to solicit.

Next in the series is FMF reader VA. She answered my questions (in red below) as follows:

Please tell us a bit about yourself.

I am a 29 yr old female. I currently live in New York, NY and have lived here for six years. This city is expensive! My situation has improved a lot over the last two years, due to a higher salary and better managing of my finances. But I know I still have a long way to go. I am single.

Describe your financial situation (who works in your family, how your income is (general), how your expenses are, etc.)

Income: $3200 take home pay/mo, post-deductions (health insurance ($100), subway card ($112), 401k ($420) are monthly expenses deducted pre-tax.)

• Total After Tax Expenses: $2382
• Rent: $1285 (soon to be $758)
• Utilities (electric and gas): $60
• Student loan: $170
• Newspaper: $15
• Food (groceries, restaurants and bars): $430
• Travel: $222
• Other: $200

This leaves savings of about $800/mo. I also receive an employer match to my 401k of about $200/mo. My employer pays for my cell phone, and I do not have internet or cable service at home.

Assets:

• Emergency Fund: $5000
• Investments: $5000
• 401K: $10,500

Debts:

• Student Loan: $5000

I've decided after two years of living alone that I can no longer afford it. Next month I will be getting a roommate -- savings of $500/mo!

What are the current financial issues you're facing (saving, paying off debt, etc.)?

By getting a roommate and increasing my cashflow by $500, I need to decide where to allocate the extra money. I feel that I'm behind on retirement saving and will likely increase my contribution by 2%. (Current is 8% with a 4.5% match). Next, should I pay off my student loan or put more into my emergency fund and investments?

What are your plans for the future (retire early, build your career, etc.)?

I plan to continue to "catch up" and aggressively save. It would be great to develop some side income as well. As far as the living situation, I don't know how long the roommate arrangement will last. I would like to move in with my boyfriend eventually. However that worries me as he has a large amount of law school debt, over $100k. I also worry about my long-term prospects in this city, as entering the real-estate market seems impossible. I do love it here and enjoy my job, perhaps it's worth the sky high rents. My overall goal is to save as much as possible to give me more options.

What's your best piece(s) of financial advice and/or your general philosophy on personal finances?

General philosophy is to spend where it counts. I love traveling and occasional restaurant indulgences. However my lifestyle is simple, free of gadgets and "stuff". I learned some financial lessons a little late in the game, and I wish I had saved more in my early 20s. Save early!

Update on FMF and WL

It's been a couple months since I launched Wealth Lion (WL) and thought it was time for an update on where I’m going with both sites.

If you recall, having an extra site started because of two issues:

• I was having problems with my blogging platform, Typepad (too much spam and not enough flexibility)
• Readers had conflicting thoughts on what they wanted to read on a personal finance website.

I had some options available to me (like switch FMF to Wordpress), but I thought it could kill FMF (I've seen sites try to make the switch and it's been a technical disaster). Besides, I was up for creating something new and learning a new blogging platform, so I started WL using Wordpress. I also thought that if the new site took off, perhaps I'd risk converting FMF to Wordpress and if it tanked the site, I'd still have one site that worked.

Almost from the start, WL really took off.  Readers over there took to it quickly and a good community of people developed.

As for FMF, I have focused more on reader provided content (namely reader profiles) and excerpts over the past few months. I have done this for the following reasons:

• Readers told me they like Reader Profiles. :)
• These are easier posts for me to "create" and I was busy getting another site up and running.
• These are easier posts for me to "create" and I was busy getting a new job.
• The summer is a slow time anyway, so if there was ever a time for "less of me", it's June, July, and August.

So everything is peachy, right? Not really. Not everyone liked the changes. I received several comments on a post a couple weeks ago or saying so. Hopefully the information above explains to everyone why I did what I did.

In addition to the comments, a few things happened over the past couple months that have made me reconsider everything:

• Typepad has settled down. It's still not as flexible as I'd like, but the spam is certainly under control now.
• Wordpress is taking me much longer than expected to "master." I'm enjoying the process, but it's going to take a long time to get where I'd like to be (especially compared to Typepad which I've used for years and completely understand.)
• I got a new job. As you might imagine, I'm going to be pretty swamped over the next several months.

So, given the above turn of events, here's my plan for the foreseeable future. These could change, but here's my current thinking:

• WL will go on slow decline. I won't be posting there and actually will be moving some posts from WL to FMF. This is unfortunate given how the community has grown over there, but at this point I'll be lucky to keep one blog running time-wise.
• FMF will post at least three times per week and will get closer to normal in September. It will include the following types of pieces: short “commentary” posts by me (which is historically what FMF has featured), Reader Profiles, and Help the Reader pieces. I will also run some guest posts and excerpts as long as I feel they are good.
• I will move several types of posts from WL to FMF. These include: my millionaires series, a few new, longer pieces, some articles that I had originally run at FMF but then had removed, and the above-mentioned posts that originally appeared on WL. This means that some readers will see "re-runs" here on FMF as I re-post them. Please be patient with me through this process.

In the future, I might take the risk and change FMF's platform to Wordpress. But not at this time. I have all I can handle for now.

So this is my current plan. I realize it's been a bit of a rollercoaster for FMF readers as I've focused more on WL, and I apologize for that. I'm also sorry for WL readers who embraced the site only to see it go by the wayside. Hopefully the "new" FMF will fill the needs of both sets of readers.

As always, thanks for taking the time to read...this blog would be nothing without you.

Save Money by Moving to Ecuador

The following is a guest post from Mr. Everyday Dollar.

Seemingly out of nowhere, Ecuador has shot to the top of many lists touting the best countries to retire to. The country popped out on top in International Living's yearly poll, and ABC News recently did a segment that profiled Americans finding paradise there. So what are the reasons an estimated 5,000 to 10,000 Americans have flocked to this tiny country tucked in the northwest of South America? One reason is certain: an incredible value for their everyday dollars.

Let's dive deeper into Ecuador and figure out if it's really better than other similar countries by taking a look at its true cost of living and going over a few questions we should ask ourselves before buying a one-way plane ticket, packing up our homes, and heading south of the border.

(1) Why Ecuador?

Thailand. Mexico. Italy. Panama. There's a lot of options available for people who are looking for a safe, somewhat developed, and cheap country to live in. So, what makes Ecuador top dog?

• Ecuador is just a 5-hour flight from Atlanta, which makes getting to and from to the U.S. relatively fast and inexpensive.
• Ecuador boasts people that are known for being friendly and family focused. Many Americans report being welcomed with open arms into their communities, which makes living there easier and happier.
• Ecuador has culturally vibrant cities like Cuenca and Quito which offer a bustling food scene with world-class chefs, great museums, and fine symphony orchestras.
• Ecuador enjoys pleasant weather year-round, which is why most residents have no heating or air conditioning.
• Ecuador boasts rainforests, beaches and the Andes mountains to explore; all of which are tucked into a country the size of Wyoming. Plus, there's the amazingly biodiverse Galapagos Islands.
• Ecuador is known for its top notch medical facilities and doctors.
• Ecuador has adopted the U.S. dollar as its currency, meaning there's no complicated math to perform in your head to figure out how much anything will cost in dollars.

(2) Monthly Living Costs

Just like some people in the U.S. live on $5,000/month while others are able to live on a fraction of that, the same can be said of living in Ecuador. It will cost as much or as little as you want, depending on your lifestyle and the level of comfort you want.

With that in mind, let's cover the monthly costs for two people living what I consider to be a comfortable lifestyle. With its old world feel, low crime, and many public parks, we'll base ourselves in the city of Cuenca along with its other 500,000 residents and fast growing expat community.

Food

Food in Ecuador is very cheap compared to the U.S. You can eat dinner out for $2.50 and wash it down with a beer for $1.00. A good rule of thumb is to expect to pay 50% less on groceries and restaurants living here. Monthly cost: $200

Healthcare

Out-of-pocket expenses for doctor visits, procedures, and drugs are a fraction of what you would pay in the U.S. The International Living poll concluded that health care in Ecuador costs 10 to 25% less than what it does in the States. This means a visit to the doctor will cost, on average, between $25-$45 if and when you need to go. Monthly cost: $0

Housing & Utilities

A newer house containing 2,000 square feet, four bedrooms and two and a half bathrooms in a safe area about five minutes from the city center will cost around $350 a month. An apartment with 1,800 square feet, three bedrooms and three bathrooms in a hip neighborhood close to the river will run around $400. Don't forget to figure in an additional $35 a month for internet service, $20 a month for electricity, $10 a month for water, and $10 a month for the propane hot water unit. Monthly cost: $475

Transportation

A one-way ride on the bus is a quarter (yes, as in 25 cents) while a month-long bus pass will cost $15. The bus pass only makes sense if you ride it more than 60 times per month. We'll opt for two of those. Monthly cost: $30

Miscellaneous

A cell phone with a prepaid SIM card will cost around $12 a month, and we'll take two. We'll throw in an extra $200 for entertainment, clothes, and other expenses that will inevitably pop up. Monthly cost: $224

Total Monthly Cost (for two): $929

(3) The Questions You Need to Ask Yourself

First, understand that little to no English is spoken in some areas. If you don't know Spanish, are you willing to learn the language? Granted you certainly can get by with English and knowing a few common Spanish words or phrases, but knowing the primary language will help immensely with quality of life: forming new friendships, making daily interactions with Ecuadorians more pleasant, and gaining a deeper understanding of the culture. Basically, it will help make you feel like you're not an outsider.

Second, things do not happen as quickly or efficiently in Ecuador as they do in the U.S. Are you willing to be patient and spend countless hours on the phone getting internet service installed? Or swallow the cost of an item you purchased that broke, because there's no return policy? These are things to think about.

Third, and perhaps most importantly, things you take for granted now will be a distant memory if you decide to pick up and move to Ecuador: your favorite type of peanut butter won't be available, you won't get to wash your clothes in hot water because they don't hook washing machines up like that, and the sidewalks and streets have a few too many unfixed potholes in them. Of course, and perhaps the most important, your family and close friends will be far away.

Moving to Ecuador can certainly be a dream come true for many of us wanting to stretch our everyday dollars. However, be sure to both do your own homework and visit the country before moving there. You may decide it's not a good fit for you and that's good to know upfront as opposed to later when you've already made that cross-continental move. But as many already have, you may very well fall in love with the country and the people and decide to move there. To many, you'd be hard pressed to find a better place. 

Help a Reader: Buying a Car

Here's an email I recently received from a reader:

So, we paid off our car and we have a growing 'Auto' savings account where we're sending the payments we were making on the car. The idea is that we'd be able to pay cash for our next car when the time comes and our current car falls apart underneath us.

In the meantime we've been able to borrow from the fund for car repairs that keep the car running longer.

Question is: While I love not having the payment and I love saving the money, when the time comes should I invest the saved money if I can get a sufficient return and borrow the money for the car if I can get a low enough rate?

What are your thoughts for him?

Help a Reader: Building a Home

Here's an email I recently received from a reader:

My wife and I just purchased and moved into a property that we have been looking for for years. We bought 7 acres hidden by trees with complete privacy and not too far from both of our jobs/her schooling. We were searching for a home to fix up or land cheap enough to build on. What we found instead was land with a home/apartment/shop with a partially built new home. The previous owners lived in the 'home' that is a little over 800 sqft that is on the second floor of a 900 sqft shop. The 'home' was pretty dated and needed a bit of work, but we ripped out the floors and redid them, redid the whole bathroom, and we plan to redo the kitchen on the ikea budget. The son started building a home next to the existing 'home' and got the foundation, plumbing, walls, trusses, roof, and electric pole done. It needs wire, windows, drywall, and all other interior finishing done, as well as insulating, painting, and the works.

Our plan is to live in the smaller home while finishing the partially built new home (around 2500 sqft). We live off of my income and have a little left over to do a few things at a time. My wife is in grad school and will be graduating this December and should be getting a job bringing in around $2500 a month after taxes. The plan was to use this income to finish building the home. I still really like this idea, but I'm starting to rethink the timing and budget we originally came up with.

Here are the basic numbers:

• Current home/land value: $115000
• Current Loan amount: $80000 (purchased for $100000 and put 20% down, only been in the place for a month)
• Timeline to build: No longer than 2 years.
• Amount of money from second income in 2 years: $60000
• What we thought it would cost to finish: $60-75000.
• What I honestly think it will cost to finish: $100-120000.

So now onto my question (sorry for the length). Do you think our plan is a good idea? Should we use income as generated to build this house? We currently fully fund Roth IRA for me, 10k (including company match) into 401k for me, 3500 in Roth IRA for my wife, so I think the retirement is doing ok.

Or, do you think that I should get a construction loan for $100k, finish the house, and have a $600 a month more mortgage payment?

I'm thinking if we do that, we could use her income to pay down the mortgage quickly and fully fund the retirements, and have extra cushion. Oh, and to throw a curve ball, we want to have children in the next year or so....

What are your thoughts for him?

Star Money Articles for the Week of Aug 12

Just a reminder that Wealth Lion has posts on Mondays, Wednesdays, and Fridays. If interested, you can subscribe to Wealth Lion and get all the updates first-hand. I will not be posting weekly summaries here for much longer, so consider yourself warned if you miss out on the great stuff there. :)

Here are the latest posts:

• My New Job - If you missed it when I posted on Thursday, here's your chance to catch up with the news.
• Millionaire Interviews 2 - The second post in my popular series. And we already have a trend beginning...
• Five Steps to Six Figures in Seven Years - Want to earn six figures in seven years? Take these five steps.
• Moderate and Selective Frugality - If you pick and choose where to be frugal, you don't have to "get crazy" when it comes to saving money.

And here are a few other posts I found interesting:

• Get Rich Slowly canceled cable.
• Financial Samurai says to tell yourself hard truths.
• Wise Bread offers grocery savings tips.

Enjoy!

Win a Box of Books (#28)!

Here's a chance for you to win a (small) box of personal finance books. The books included are the following:

• Second-Act Careers: 50+ Ways to Profit from Your Passions During Semi-Retirement
• Cut the Crap, Get a Job! a New Job Search Process for a New Era
• Give Yourself a Raise
• The Sound Mind Investing Handbook - A Step-By-Step Guide To Managing Your Money From A Biblical Perspective 5th Ed

Here's how it will work:

1. All you need to do to enter is to leave any comment on this post. Be sure to leave your email address (no one else will be able to see it) when you leave the comment.

2. In a week or so, I'll select the winner at random and announce the winner on this post.

3. I will email the winner, get their contact information, and arrange for them to receive their prize.

As always, the standard rules apply.

Good luck! Post a comment below for your chance to win!

Reader Profile: JS

The following is the latest post in my "Reader Profiles" series. Each post in this series details the financial situation and challenges of an FMF reader. The purpose of this series is to help us all identify with people like us (in similar situations -- not all will be, of course, but eventually I'm sure you will find someone like you here), get to know the frequent commenters on the site, and hear some financial wisdom/challenges from people other than me.

If you're interested in contributing to this series, then drop me an email. The series seems to be very popular with readers and I need a steady stream of new ones to keep it going.

Also, please leave constructive comments, questions, and so forth. Simply telling someone what a mess they have, how they have made poor decisions, and so forth is not helpful. There is a way to say, "That was a mistake, but here's what you can do to correct it" that both acknowledges the problem and offers a solution. It's this sort of feedback that this series is intended to solicit.

Next in the series is FMF reader JS. She answered my questions (in red below) as follows:

Please tell us a bit about yourself.

I'm a 35 y.o. Single female living with my three cats, yeah I'm a crazy cat lady, in the "bad" part of the same state as FMF, near Detroit.  I work downtown and live in one of the inner suburbs.  I've lived here for a whole 5 months.  I have a new 3 bedroom 2.5 bath "city house" on a 40x110 lot which means I can mow my lawn in 20 minutes.  My neighborhood is a mix of old tiny bungalows and houses like mine where 900 sq ft bungalows were torn down and replaced new space efficient slightly larger houses (1500-2000 sq ft.).

Describe your financial situation (who works in your family, how your income is (general), how your expenses are, etc.).

I prefer not to say what I do only that I've worked for the same employer for 13 years now and Detroit is my 3rd office, I was in New York City and Middle of Nowhere GA prior to this my employer paid for both of my moves.  I'm in a pretty specialized field one that I get to retire early from and am pretty much at the top of it without going into management.  My current base salary is $130,000, I am sometimes required to work weekends and holidays and am compensated for that as well.  My employer also provides me with a car for work, but only for work I am allowed to drive it to my home but cannot use it to drive someone like a family member around in it or even to stop the the store for milk on my way home from work.  My employer also still offers a pension, I expect to receive 35-40% of my salary depending on when I retire.

I'm an accidental landlord, and rent my old co-op apartment in Bayside Queens out to a long term, they are renewing for a 5th year, tenant for $1,500 a month.  My parents and I also co-own a vacation place that we rent out when we aren't there to subsidize it's cost, we don't make money on it and never really intended too.

Assets:

• Primary residence $291,000
• NYC Co-Op  $210,000
• Vacation place (1/2 value) $125,000
• 401k:  $287,000
• IRA:  $62,000
• Emergency Fund  $24,000
• Short term savings Fund:  $18,000
• Non-retirement investments:  $21,000
• Available for whatever:  $2000-5000 depending on the time of the month
• Pet Emergency Fund:  $9,000

Monthly Expenses estimated:

• Primary Home Mortgage $2,200 a month and I owe approximately $223,000 on a 15 year mortgage at 2.375%  I'm accelerating slightly my payoff actual due is approximately $1,600 with escrow.
• Condo Mortgage:  $645  (again half of the amount we owe $54,000 total) NYC Co-op Maintenice:  $850 Utilities (gas/water/cable/power estimated.)  $250 Cell Phone:  $65 Retirement $1916  (Maxed out 401k and Traditional IRA which is converted to a ROTH IRA yearly)
• Food:  I'm not really sure up to maybe $500 and that includes eating out and pet food.
• Fuel:  $100

I budget by scarcity, when I'm paid I have automatic transfers that move money from my checking to my savings and investment accounts, what's left is what I have to live on for the rest of the month so I tend not to pay to much attention to single budget categories.  I also tend to put most of my living expenses on my Visa and look to it to see if I'm spending more than normal which I have been for the last few months as I'm settling into my new house. 

The Pet emergency fund started as one of those automatic transfers so that if a larger bill came up I wouldn't have to make a financial decision instead of an emotional one.  I don't know if I'll every used the whole thing or if I'll use it and more.

What are the current financial issues you're facing (saving, paying off debt, etc.)?

It's just in the past 6 months to a year the I finally feel back on track to where I wanted to be finically 5 years ago when I became an accidental New York landlord.  I bought my NY co-op thinking that I knew all the important things about the complex.  For those of you who've never heard of a co-op basically it is similar to a condo except instead of owning a specific unit, I won 330 shares in the complex which entitles me to a permanent "lease" of my unit.  What it means in reality, there is a 3rd party in all sales, buyer, seller and the co-op board.  What I didn't know when I bought was the complex has a floor price for sales (which may be illegal court rulings have gone both ways) and I was trying to sell it in 2008 when prices were falling.  I had 2 sales that fell through in the year I had my place on the market before it went to either for sale of for rent and I got a renter before I got a sale.  At first I was losing about $100 a month, then my adjustable rate mortgage adjusted down and I made a bit, Last fall I paid off the mortgage for personal not fully financial ones.  Basically cash flow, I wanted more money available monthly that I could apply to other things.

What are your plans for the future (retire early, build your career, etc.)?

I'm currently beefing up my short term savings, I want to get that up to about $50,000 so that I can buy my next vehicle, I drive a 2000 Jetta, in cash.  I'm also planning on taking my first major vacation ever next year, I'm looking at 2 weeks in Europe.  After I get my short term savings where I want it I will be turning my focus to really funding my non-retirement investments which I think are low for my income level.  I do still add money to my investments each month but not as much as I want. 

What's your best piece(s) of financial advice and/or your general philosophy on personal finances?

My #1 personal philosophy when it comes to finance:  I have all of my needs covered and most but not all of my wants; therefore, my financial decisions are all about evaluating my wants.  I make a great salary but I also can see myself spending it all on stuff that really isn't all that important as well.  When I decide that I "can't afford" something it's not about what I didn't buy but instead it's about what I now can buy that I want more instead.

FMF Update

For those of you wanting to be in the know, I've just posted a special Thursday edition on Wealth Lion. It details my new job. ;)

Check it out if interested...

Reader Profile: KC

The following is the latest post in my "Reader Profiles" series. Each post in this series details the financial situation and challenges of an FMF reader. The purpose of this series is to help us all identify with people like us (in similar situations -- not all will be, of course, but eventually I'm sure you will find someone like you here), get to know the frequent commenters on the site, and hear some financial wisdom/challenges from people other than me.

If you're interested in contributing to this series, then drop me an email. The series seems to be very popular with readers and I need a steady stream of new ones to keep it going.

Also, please leave constructive comments, questions, and so forth. Simply telling someone what a mess they have, how they have made poor decisions, and so forth is not helpful. There is a way to say, "That was a mistake, but here's what you can do to correct it" that both acknowledges the problem and offers a solution. It's this sort of feedback that this series is intended to solicit.

Next in the series is FMF reader KC. He answered my questions (in red below) as follows:

Please tell us a bit about yourself.

We are a small family of three; myself (age 49), my wife (age 49), and our son (age 17). My wife and I have been married 21 years and both have been with the same employer for 25 years (public education). We have lived in the same house for over 20. In other words, we have a very stable existence.

Describe your financial situation (who works in your family, how your income is (general), how your expenses are, etc.).

Financially, I feel more secure now than at any point in my life. Our income, before taxes, is 115k per year. Our only debt is the house, which we just re-financed at 3% for 15 years. We owe 106k on it and probably have only 25k in equity. The new 15 year mortgage pushed us back four years (we had 11 years @ 5%). My decision to extend the loan was not an easy one, but ultimately came down to cash flow as our monthly payment dropped $330/month. (I still am not sure that this was the best decision; payment dropped, less interest, but paying off the principle at a much slower rate). This (reduced mortgage payment) is money going towards college savings.

We carry no balance on our credit cards, but use them extensively to accrue frequent flier miles (have paid no interest in 4 years). All three cars are paid off and will serve us for years to come. We have 20k in cash savings for emergency funds that will ultimately go towards my son’s education. I am keeping it in savings, as the stock market bubble has not burst yet. Plus, this money may be used in the next 12-18 months and I want it liquid. We have another 20k in annuities and a Roth that will also go towards college (they can be withdrawn early, without penalty, if used for education). My wife and I both have state pension plans (11.5% of salary is contributed annually), so retirement is being taken care of.

As a side note, just five years ago, we had no money in savings and lived paycheck to paycheck. We also had a considerable amount of consumer debt. I did not sleep well in those days!

What are the current financial issues you're facing (saving, paying off debt, etc.)?

Our biggest challenge right now is college savings. I would like to pay as much as possible, but have discussed the plan of 1/3s with our son. Mom and dad pay 1/3, 1/3 in loans (that he is responsible for), and he works jobs for the other 1/3. Fortunately, our son is very bright and has (or will have) knocked off a year or year and a half of college while still in high school due to dual-credit classes. At $20k per year for a state school, this is a huge advantage. He also will likely qualify for a state scholarship (due to grades and SAT score) that is 6-9k per year, renewable. However, he wants to enter a program that requires a graduate degree, so his college years will be extended. We are currently putting away $1000- 1500 per month for college and retirement (apart from our pension accounts).

Our current monthly expenses:

• Mortgage 834
• Son’s health insurance 118
• Cell bill 77
• Utilities 200-300 (water, sewer, gas, electric)
• Satellite/internet 110
• Fitness memberships 70
• Cash 600 (gasoline, personal care, son’s allowance, etc)
• Groceries 700 (our son eats A LOT)
• Household 700 (toiletries, beauty, entertainment, junk)

I keep a very strict budget and have tracked expenses since 1995 in Quicken, so I have a very good handle on where our money goes.

What are your plans for the future (retire early, build your career, etc.)?

Retirement can come as early as age 52 for my wife and I. If we wait until 54 (30 years in the pension plan), the pension is considerably higher. I am thinking seriously about retiring at 52. I am a school principal and the job is taking its toll on me. Although I would retire from education, I would not quit working. There are no health benefits in the state retirement, so I would find part-time work to assist in paying for that and I am definitely too young to sit home and watch Oprah. My wife will likely continue working until 54, or beyond, at her current position. I have calculated that our pensions will allow us to live in a similar lifestyle as to what we currently enjoy. Social security would be a bonus.

I do not anticipate ever paying off my house and living in it rent-free. We have discussed several options for retirement; my wife’s family has a tremendous amount of property in the South that we could retire to and live cheaply (free). In fact, much of the land is leased or in government programs and produces income. My wife and I have also discussed retiring abroad; Ecuador, Belize, or parts of Mexico (contrary to news reports, most of Mexico is safe). We have travelled extensively to these areas, but fully understand that living there is very different from vacationing there.

No decisions will be made until our son graduates college (he is a high school senior this fall) and gets settled in a career.

What's your best piece(s) of financial advice and/or your general philosophy on personal finances?

Do not get caught in “Keeping up with the Joneses”. Before the crash in 2007/8, many of our friends were buying huge SUVs, huge homes, boats, etc. They were way over-extended. Many conversations seemed to focus on what everyone else had and were buying. The crash resulted in several divorces and bankruptcies among our close friends. We almost made these mistakes too, but were fortunate to avoid them. Because of this, we weathered the recession unscathed. Live below your means!

In addition, take care of your credit score. Ours hovers between 770 and 815 and because of it, our last three car loans were at 0%, 0%, and .9%. Use sites like Credit Karma and Freemoneyfinance to educate yourself on how the system works.

Reader Profile: KW

The following is the latest post in my "Reader Profiles" series. Each post in this series details the financial situation and challenges of an FMF reader. The purpose of this series is to help us all identify with people like us (in similar situations -- not all will be, of course, but eventually I'm sure you will find someone like you here), get to know the frequent commenters on the site, and hear some financial wisdom/challenges from people other than me.

If you're interested in contributing to this series, then drop me an email. The series seems to be very popular with readers and I need a steady stream of new ones to keep it going.

Also, please leave constructive comments, questions, and so forth. Simply telling someone what a mess they have, how they have made poor decisions, and so forth is not helpful. There is a way to say, "That was a mistake, but here's what you can do to correct it" that both acknowledges the problem and offers a solution. It's this sort of feedback that this series is intended to solicit.

Next in the series is FMF reader KW. He answered my questions (in red below) as follows:

Please tell us a bit about yourself.

I've always had an interest in personal finance from a very young age.  I read books about investing, finances, and even majored in finance in college and work in finance & accounting as a financial analyst.  In fact, I made my first investment in the stock market when I was in 7th grade, so it's embarrassing to admit that somewhere along the way I screwed up and I need the help and suggestions of your readers.

I graduated college just before the recession took a grip on the economy and managed to get a good job offer at $50k/year plus an $8k sign-on bonus.  Although I graduated about $30k with student loans, I managed to pay them off in two years.  Unfortunately the economy was too rough on my employer and my position was eliminated in a layoff, but I did get a generous severance package and found a new job within 2 months that came with another sign-on bonus.  Around this time I also collected on a five figure legal settlement and took advantage of the $10,000 first-time home buyer credit.  Things were going great and then I got married in September 2010....

You see, I knew my wife had student loans, but I didn't' find out the exact $ figure until a month before our wedding.  She estimated the student loans to be around $30k which I was not happy with, but willing to accept.  When we looked up the actual figures, it was nearly 3X that amount!  I was shocked and so was she (she was totally in the dark as to the loans she signed up for because her parents did all the paperwork and all she did was sign her name).  To make matters worse, her degree is in early childhood education which means her career options are extremely limited.  The choice is $10/hour working in a daycare or $33,000/year (if you're lucky) with benefits as a public school teacher.  After a year of searching, she was lucky to find a job as a public school teacher, but with a monthly payment of over $700/month on the student loans, the income simply can't justify the student loan balance.

Unfortunately for me, between huge tax credits, sign-on bonuses, and legal settlements, I was getting many one-time payments that padded my bank account and I guess I had lifestyle inflation.  I was spending more than I made each month and was able to get away with it for years because of all the one-time mini-windfalls, but now that my savings has dried up I'm hitting reality.  I analyzed my actual spending on Mint.com and found that I was spending about $2-3k/month more than my income which also explains how I accumulated $19k in credit card debt in just a few short months.

In response, I made myself a budget to help get my spending under control but I'm still coming up short even after making draconian cuts even under the newly revised budget (see below).  What can I do?  I'll be 29 in a few months and my wife will be 27.  Please help by leaving me some feedback in the comments!  I promise to read all of them!

Describe your financial situation (who works in your family, how your income is (general), how your expenses are, etc.).

Both my wife and I work full time. Here is our budget (please note that I took annual and seasonal payments and divided them by 12 to show a monthly cost even though I'm not actually paying all these expenses every month):

Income

• My Wages (net): $3,106.32
• Wife's Wages (net): $2,201.74
• Rental House Rent: $552.00

Expenses

• Non-Home Debt Service Total: $2,318.60
• Student Loans - Wife: $700.60
• Credit Card: $1,618.00
• Note - the credit card payment is what I need to pay to pay off the balance before my 0% APR interest expires in May 2014

Home Expenses Total: $1,298.56

• Mortgage $650
• Allowance for Repairs/Maintenance $277.50
• Property Taxes $258.33
• Homeowner's Insurance $46.42
• Pest Control Service $35.63
• Lawn Weed & Feed Service $30.68

Rental House Expenses Total    : $691.74

• Mortgage $287.69
• Allowance for Repairs/Vacancy $200.00
• Property Tax $65.00
• Home Insurance $64.67
• Water Bill $55.00
• Lawn Weed & Feed Service $16.46
• Permits $2.92

Auto Expenses Total (we have 1 car we share): $442.15

• Gas $304
• Tolls $55
• Insurance $53.15
• Oil Changes & Estimated Maintenance $30

Food Expenses (2 people) Total: $515.00

• Groceries $350
• Fast Food $75
• Restaurants $90

Utilities Total: $424.50

• Mobile Phone & iPad 3G $185.79
• Electric & Gas $120
• Water Bill $60
• Internet $55
• Home Phone $3.71
• Cable TV (can't afford) $0

Everything Else Total: $510.42

• Vacations $250
• Pets $75
• Miscellaneous $50
• Life Insurance $100k/30yr - me $20.42
• Life Insurance - Wife (can't afford) $0
• Electronics $30
• Personal Care/Hygiene Items $20
• Clothing $25
• Gifts $25
• Medical/Doctor $15
• Charitable Contributions (can't afford) $0   
• Entertainment (can't afford) $0

Net Income: +$5,860.06
Net Expenses: -$6,200.97

=    -$340.91 monthly shortfall!!!! (help us)

Here is our household balance sheet:

Assets: $221,000

• Home $99k
• IRA $29k
• Rental Home $27k
• 401k $20k
• Collectibles/Physical Investments $12k
• Stocks $9k
• Emergency Fund $9k
• Car $7k
• Rental House Emergency Fund $6k
• Bank Account $3k

Liabilities: $185,000

• Home Mortgage Debt $74k
• Student Loan Debt $69k
• Rental Home Mortgage $23k
• Credit Card Debt $19k

Net Worth: $36,000

What are the current financial issues you're facing (saving, paying off debt, etc.)?

We are facing several financial challenges:

#1.  We are overwhelmed with debt - student loans, mortgages, and credit cards.  This is making it difficult to just simply survive.  I feel like we have little room in our budget to make cuts, but I'm looking forward to reader feedback for suggestions.

#2.  My annual raises have averaged 2% per year with my last raise being only 1.0%.  After Medicare taxes going up 2% and increases in health insurance, I actually have less income in 2013 than I did in 2012.  Throw in the rampant inflation (see Shadowstats.com) we have today despite the government telling us otherwise, I feel very discouraged especially considering I'm supposed to be on an upward path in my career...which leads me to believe that maybe it's time to change employers, but that brings up problem #3...

#3.  We live in a "Rust Belt" mid-western town (like a mini-Detroit) where white collar jobs are few and far in between.  If I'm to find another job, it will either require a 2-3 hour daily commute round trip (plus we'll have to buy another car and pay all the associated expenses with it) or we might need to sell the house (in a down market) and move...but the problem with moving will be a loss of my wife's income (and she would have to restart on the timeline to get tenure) which will be very difficult to replace considering how many applicants apply to become public school teachers.  The town we live in also has a low cost of living index, so anywhere we move will mean higher expenses across the board.  Then there's also the whole problem of figuring out what to do with the rental house that is in the same town we live in...sell it or try and manage it from afar?

#4.  My wife has no retirement fund whatsoever, we have little to no money in the budget to save for retirement, and I'm only putting in the minimum into my 401k to take advantage of my employer match (first 3% is match dollar for dollar and then the next 2% is matched at 50 cents on the dollar).

To help deal with these challenges, my wife and I are thinking about both taking on second jobs, but we also feel like we have no energy at the end of the day after our first job.  I'm at my current employer 50-60 hours/week.  We also don't like the prospect of taking a second job working retail for $8/hour.  My wife has tried selling Scentsy on the side, but we're losing more money than we make.

What are your plans for the future (retire early, build your career, etc.)?

My wife's ultimate goal is to have children, but I told her we simply cannot afford the additional expense while we're dealing with such high debt service payments.  I think it really bothers her and adds stress to our marriage. 

My ultimate goal is to live debt free and be financially independent enough to take several mini-retirements throughout my life to travel and experience the world and still have enough left over to live comfortably.

I would like to stop being dependent on an employer for my income and be my own boss, but I'm having trouble coming up with business ideas that would work for a financial analyst like myself.

What's your best piece(s) of financial advice and/or your general philosophy on personal finances?

If you want something, ask.  If you don't ask, they will never know you want it and you just might get it!  This strategy always seems to help me get discounts on things when you otherwise would have never though you could negotiate a discount.

P.S.  Please leave me some constructive feedback in the comments because my wife and I would really appreciate your suggestions!

Star Money Articles for the Week of Aug 5

Just a reminder that Wealth Lion has posts on Mondays, Wednesdays, and Fridays. If interested, you can subscribe to Wealth Lion and get all the updates first-hand. I will not be posting weekly summaries here for much longer, so consider yourself warned if you miss out on the great stuff there. :)

Here are the latest posts:

• Millionaire Interviews 1 - My first interview with a millionaire ($2.4 million net worth). More to come. Be sure you read the comments on this one as there's more detail (good stuff!) there.
• Seven Steps to Get Out of Debt - Want to get out of debt? here's how to do it.
• Six Times It’s Easy to Ask for a Discount - One of the best ways to save money is to ask for a discount. But some people are reluctant to do so. Here are six times when you shouldn't have any misgivings about asking for a lower price.

And here are a few other posts I found interesting:

• CNN Money has stories about people who made $1 million.
• MSN Money details the benefits of a stay-at-home parent.
• Financial Ramblings asks how much money it takes to become wealthy.
• Jemstep lists advice you'd give a 20-year-old you.

Enjoy!

Win a Box of Books (#27)!

Here's a chance for you to win a (small) box of personal finance books. The books included are the following:

• Smart Is the New Rich: If You Can't Afford It, Put It Down
• The Warren Buffetts Next Door: The World's Greatest Investors You've Never Heard Of and What You Can Learn From Them
• The New Job Security, Revised: The 5 Best Strategies for Taking Control of Your Career
• The Sound Mind Investing Handbook - A Step-By-Step Guide To Managing Your Money From A Biblical Perspective 5th Ed

Here's how it will work:

1. All you need to do to enter is to leave any comment on this post. Be sure to leave your email address (no one else will be able to see it) when you leave the comment.

2. In a week or so, I'll select the winner at random and announce the winner on this post.

3. I will email the winner, get their contact information, and arrange for them to receive their prize.

As always, the standard rules apply.

Good luck! Post a comment below for your chance to win!

Reader Profile: Joseph

The following is the latest post in my "Reader Profiles" series. Each post in this series details the financial situation and challenges of an FMF reader. The purpose of this series is to help us all identify with people like us (in similar situations -- not all will be, of course, but eventually I'm sure you will find someone like you here), get to know the frequent commenters on the site, and hear some financial wisdom/challenges from people other than me.

If you're interested in contributing to this series, then drop me an email. The series seems to be very popular with readers and I need a steady stream of new ones to keep it going.

Also, please leave constructive comments, questions, and so forth. Simply telling someone what a mess they have, how they have made poor decisions, and so forth is not helpful. There is a way to say, "That was a mistake, but here's what you can do to correct it" that both acknowledges the problem and offers a solution. It's this sort of feedback that this series is intended to solicit.

Next in the series is FMF reader Joseph. He answered my questions (in red below) as follows:

Please tell us a bit about yourself.

My name is Joseph, I'm 35 years old, and I live in Montreal, Quebec, Canada. I am single and been single for the past 1.5 years. Before that, I was in a relationship for almost 4 years which ended badly. I live in a 1 bedroom condo that I purchase in 2008 and I've been an on-and-off reader of FMF since 2010. 

Describe your financial situation (who works in your family, how your income is (general), how your expenses are, etc.).

Since I live alone, I am the only breadwinner. :-) I work full-time as an ERP business analyst for a retail company. I’ve been there since April 2013. Previously, I was an ERP Consultant working on my own. And since the demand for my services declined dramatically over the past 2 years, I was forced to get a full time job instead of focusing on my consulting career.

Monthly Income

• Salary - Approx. $4000
• Total - Approx. $4000

Monthly Expenses

• Car - $280
• Car Insurance - $115
• Condo Mortgage - $1000
• Condo Insurance - $40
• Condo Fees - $240
• Property Taxes - $230
• Life Insurance – $20
• Electricity – $50
• Gasoline – $160
• Groceries – $300
• Internet (ADSL) – $45
• Housekeeping – $90
• Visa - $50
• MBNA - $500
• Line of Credit - $150
• Capital One - $150
• Savings - $580
• Total Expenses = 3420

What are the current financial issues you're facing (saving, paying off debt, etc.)?

My main issue is obviously debt. I have too much of it. I made a lot of mistakes growing up and I’m paying the price for it today. I was spending too much, not saving at all! Living the high life! Happy hours, going on trips, eating out every day, buying designer shirts, and the list goes on and on. I was making a terrible mistake and I was too young, immature and ignorant to realize it.

I discovered Dave Ramsey’s teachings a few years ago and I’ve been following his plan. It’s not always easy but I try to stick to it as much as possible.

I’m currently on Baby Step #2, the debt snowball. I recently completed my Emergency Fund of $2000. In my opinion $1000 is not enough when you have a mortgage.

My total amount of debt is about $25000 (without my mortgage). My mortgage is about $170,000 at 5.75%.

What are your plans for the future (retire early, build your career, etc.)?

My plan is focus is clearing up my debt. It causing a lot of stress and anxiety and I cant wait to get rid of it!

What's your best piece(s) of financial advice and/or your general philosophy on personal finances?

I really like Dave Ramsey’s teachings and ideas. I don’t always agree with him but I do agree that finance is 20% head knowledge and 80% behavior. God knows, i had a bad behavior. And i’m definitely not in a position to give anybody some financial advice. But If I had to say one thing to say, say out of debt! No matter what it is, credit car, car loan, line of credit, etc! whatever it is. Get rid of it asap!

Thank You and Follow-up

The following is an excerpt from the book Cut the Crap, Get a Job! a New Job Search Process for a New Era. It's the last one I will be running in this series.

Many people forget the post-interview work that needs to be done during a job search. They assume the interview happens, they either get the job or don't get it, and it's over. But in many cases, the interview is not the end and specific and strategic follow-up can make the difference in getting hired. This excerpt covers the post-interview actions we need to consider to maximize our chances of getting a job offer.

The weakest part of the job search process is the deplorable state of follow-up. It’s so much more than thank you notes, but those aren’t even being sent. Job seekers, thank you and follow-up communications are not optional; they are required.

Here are the benefits of great follow-up, all of which can put you ahead of another candidate:

1. Shows persistence.
2. Allows you to expand, reinforce, or clarify something discussed in the interview.
3. Good manners are always valued.
4. Prevents them from forgetting about you.
5. Reinforces that you want the job.

Here are the downsides of NOT following up:

• A portion of hiring managers will dismiss an applicant who does not send a post-interview thank you note, saying it indicates poor follow-through and a lack of interest in the position.
• Other candidates will follow up, so you lost an opportunity to compete for that job.

If you mastered Chapter 17, then your follow-up began in the interview when you asked, “What is the next step?” or, “When do you plan to make a decision?” With that knowledge, you can time your follow-up post-interview.

Solution

World-class follow-up looks like:

• Sending a note within 24-48 hours while it’s still fresh in your mind—and the company’s.
• Addressing a note to each individual person you met with.
• Spelling everyone’s name correctly, including the company’s.

Sample flow of a thank you note:

• Start by thanking them for the opportunity to meet and acknowledge that they took time out of their day to do so.
• Next, note why you think you’d be a good fit for the role. No more than 3 reasons. Bullet points are optimal as well. This is an opportunity to elaborate on why you are a great fit, in writing, beyond your initial cover letter and interview.
• In close, hit 3 points: 1.) Express your interest; 2.) Commit to following up with them again within a specified timeframe; and 3.) Thank them, again, for their time and consideration.

Sample ideas of follow-up after the thank you note:

• Begin with a pleasantry, followed by a sentence explaining where you left off during your last communication. “You had indicated to me that you’d be making your final decision during the week of <date >, and I just wanted to follow up to see where you are in that decision.”
• Include something of value in your follow-up instead of being perceived as nagging. Perhaps you just completed some training, closed a big deal, or finished a major project. If you are volunteering or taking outside courses while unemployed, talk about that.
• Close with the next follow-up you will initiate. Don’t ask them to call you back. Instead, let them know that “I’ll follow up again within a few days, but in case you need to reach me, here is the best contact number: xxx-xxx-xxxx.”

Tricks

1 Always appear gracious, positive, patient, and interested. Speak in a very respectful manner if you’re leaving a voicemail message, acknowledging that “I know you are very busy, but I wanted to follow up on the email I sent you and that I’m still very interested in the position.”

2 When following up with an email, always attach the prior email you are referring to. If there was an attachment to the prior email, reattach it, as appropriate.

3 Match the communication medium the interviewer has been using, i.e. returning emails with emails, phone calls with phone calls.

Mistakes

Mistake #1: Scathing follow up emails from job seekers who think they’re out of the running.

Mistake #2: Rudeness or impatience. If the hiring manager gave you a specific date or timeframe, give them some room. Hiring processes take time and you don’t want to seem overly anxious.

Mistake #3: One-line emails: “Can you call me back?”

Mistake #4: Group thank you notes—implies a little laziness and is not personal.

Mistake #5: In a personal thank you note, your copy and paste didn’t work so it was addressed “Dear Sally” and at the end it said “Thank you, again, Bob.”

Mistake #6: Misspellings, grammar, punctuation errors. This is another writing sample for the employer!

Mistake #7: Gimmicks. Do not send flowers, a gift, nothing.

Mistake #8: Do not have a friend “swing by” the hiring manager’s office and ask, “How is Bob doing for your position hiring. Isn’t he great?”

Excuses

Excuse #1: “I knocked the interview out of the park, so no need to send anything since I’ll get the job.” Well, aside from being too confident (cocky), which could have hurt you in the interview, there is no excuse for not being polite. And what if you were good in the interview, but not great, and the next candidate did send a compelling note?

Excuse #2: “I don’t have their email address.” Lesson learned. Ask for all email addresses while you are interviewing. However, if you forgot, contact the recruiter, HR manager, or anybody who might be able to give it to you. Simply say, “I would like to send them a thank you note,” so your intention is clear.

Excuse #3: “Thank you notes seem so phony. I’m not the thank you note type.” First, they should be sincere. Sheer appreciation for their time and for considering you as a candidate should be reason enough to take 5 minutes to review your notes from that meeting and craft a thank you note. Second, if you are not the “thank you note type,” then learn to be one now!

Excuse #4: “They told me I will not be the final choice for the position, so no need to thank them.” Wrong. You want to add your interviewers to your network and you may want to contact them again. In addition, what if that company has another position that opens up? Take the high road and always, always send a thank you note and stay in touch after that. In your thank you note, you may say, “If another position opens up within your organization, I am interested in being considered.”

Homework Assignment

#1: Write a template thank you note and follow-up note based on the above guidance and by collecting many samples available online. Save them in your well-organized file for this job search effort (see Chapter 5).

#2: Review your samples with at least one person and get their feedback.

#3: In your Cut the Crap (CTC) Job Tracker from Chapter 5, be sure you note every time you need to send a thank you note and place that reminder in your Outlook Calendar or other calendar technology.