Everybody Loves Your Money

Yet another story about someone that gets a windfall of $10,000.  There is no question that she’ll spend the money, the only question is on what.

Just once I’d love to hear someone answer the question, “What are you going to do with the money?” with “Oh, I’m going to invest it in an index mutual fund and sit on it for 30 years”.  I suppose I better not hold my breath……..

http://abcnews.go.com/US/wireStory?id=2377773

As you all know, my wife and I purchased an unfinished cabin last week.  As part of that purchase, we knew that my wife would have to go back to work for awhile.  We are able to cover the purchase cost and monthly costs of having it on my salary alone, but that wouldn’t leave much for the rest of the construction costs.  (We want to pay cash for the rest)

Well, I don’t mind telling you that I’m finding the thought of daycare to be a heart wrenching ordeal.  (and so is my wife but we are both coping).  We went and toured the daycare yesterday with our daughter.  I was pleased to see how secure the facility is and how many adults there are there.  (all of them certified).  We pretty much chose the “Mercedes” of daycares because we want to feel as confident as we can that our daughter is in a safe, positive environment where she’ll thrive.  I have to admit, I found myself feeling a little scared for my 3 year old daughter.  She’s going to learn a lot more independence than she has at home.  We’ve been good about making her do things at home, but she’ll be one of 7 other children that one adult is watching.  The expectations of her will be high.  I think that’s going to be positive in the long run but it will be a little stressful at first.  Since we are most likely only having one child, we want to be sure she doesn’t feel like she’s the center of the universe.  We smother her with love at home, but we also try not to make her the center of the family.  I’d say we are only marginally successful at that.  We think that being in the daycare with the other children will help her recognize that she is only one of many people.

So, as we toured the daycare I kept a close eye on how the other children watched the teacher.  They seemed to be comfortable with her and definitely didn’t feel afraid of her.  There are actually 4 teachers in the same area with the kids (there are 4 groups of kids, 7 in each group), so I think they probably keep an eye on each other as well.

While my wife and I have definitely talked about our nervousness, I think that we also feel like we made a good decision.  Our daughter is going to get lots more exposure to structured learning that we hope will help her thrive once she goes to school.  I’m sure she’ll also get lots more exposure to childhood illnesses, but I guess that’s good too, since it will build her immune system.  (Wow.  Talk about rationalizing…….)

Oh, and here’s a picture of what we have to complete (The cabin in the background is our family cabin):

Awhile back I decided to get a subscription to Money magazine.  I checked Ebay but was disappointed in the price for a subscription.  After going directly to the Money magazine website, I was surprised to see that they had the best deal.  At less than 85 cents per issue, I felt I was getting a pretty decent deal.

Well, I’ve browsed through the magazine and was rather disappointed to find that I’ve already read most of the articles online.  I was surprised to see how many of the articles are on the CNN/Money website.  Oh well, I did find a few tidbits in there that I hadn’t seen online.

Okay,

This one is a bit odd.  I think it highlights the fact that slow and steady saving, or in this case, slow and steady stealing, can really add up.  This woman stole over $2.3 million dollars to play the lottery.  I can only assume that she was hoping to hit a million dollar jackpot with all of this stolen money.  Had she just stolen the money and put it in the bank, she would have found herself a millionaire with no luck at all.  Granted, either way she’s an idiot, but what the heck.

Stealing Money to play the Lottery

I have to confess.  I really enjoy reading about other people’s finances and day to day dealings with money.  I wish that Oprah would have a weekly Debt Diet episode so that I can see more families who are either struggling with their finances, or are doing exceptionally well with them.  Honestly, I think I’d rather see a reality show about families that are doing well.  I’d watch with intense interest to see what kind of decisions they are making, and how they manage their money.

I do a little of this voyeurism in my own neighborhood.  It isn’t hard to see which families in our neighborhood are smart with their money, and which ones aren’t.  There are some neighbors that have MANY different toys.  Boats, motorcycles, new cars all the time, and many other fancy things.  Every now and then I pick up on a few words they mention that helps me paint a mental picture on where I think they are at.

In other cases, I just flat out talk about finances with my neighbors.  There is one neighbor that I’ve had many conversations with.  They are very much like I am, if not a bit smarter with their money.  They don’t drive brand new cars (strike one for me) and we’ve talked about how smart that is.  Needless to say, when I got my new truck earlier this year, I got lots of teasing from them.  In fact, they mentioned that they had considered buying a new version of the car they bought, but decided not to, because for one thing, they knew I’d tease them.  Well, they got the last laugh on that one.  I’ve also had some pretty good conversations with these neighbors on how they save their money.  They were smart to put money in college funds for their kids and also have made sure that they save enough for their retirement.  I get the sense that they are at the point where they’ve amassed enough assets that, no matter what happens, they’ll be in good shape.  Sometimes I wish I could just take a peak at their finances to see more specifically where they have made the best choices.  I think it’s unfortunate that such a critical part of our lives has to be so secret.

If only we could wear our net worth number on our sleeves instead of trying to drive our net worth, or live in our net worth, or wear our net worth.  So many people are so concerned with showing the material things they have, that it just helps reinforce our extremely materialistic society.  Maybe some day materialism will get the negative attention it deserves.  Now, if you’ll excuse me, I’ve got to go fill up the gas tank in my HUMMER.

I’m now the proud owner of a partially completed second home.  Okay, we are going to call it a cabin but it’s a 30X32 building.  The first floor is all one large garage.  The second floor is a two bedroom 1 bath apartment, I guess you’d call it.  When it’s done it will have hardwood floors and granite in the kitchen.  I’ve been looking around and granite really isn’t that expensive for a smaller kitchen.  My family will be helping us finish it.  We plan on doing all the wiring, plumbing, and most of the other finishing work.  I’ll probably sub out the insulation and drywall, but we’ll do the rest.

For those of you that are wondering if I’ve fallen off my rocker, I haven’t.  Basically I saw this as a great way to increase my net worth over time and also enjoy having a place out by the lake.  Because we got a great price on it from a friend, we walked in to a little instant equity.  About 30K to be exact.  Once the place is finished, we estimate our equity in it will be around 60K.  We don’t plan on selling it, but it’s good to know that it is one more asset that is appreciating in our portfolio.  While cash flow is going to take a bit of a hit for awhile, I think it’s going to be worth it.  My wife is going to go back to work, at least for awhile, so that we can pay cash for the rest of the construction.  The goal will be to own this free and clear as soon as possible.  The good news is that we will be writing off all the interest that we are paying for it, because we used some home equity to cover the purchase cost.  (Oh and believe me.  It was a fixed rate.  I don’t need any surprises)

I’ll post a picture of it once we get it roofed and sided.

Well, I finally did it.  I pulled up my skirt a little and bought a second place.  We’ve been wanting a summer home of our own at the lake that our family has a cabin near.  We bought a place from a friend of ours that isn’t finished.  Basically, another friend of ours is going to help us build the place and we’ll just keep it as a summer home.  The good news is that we got a great deal on it and it is relatively risk free.  Worst case scenario, we can sell it and make a little profit.

I’ve already got a friend of mine lined up to get it built up and closed in for the winter and we’ll chip away at the inside all winter long.

While this wasn’t perfect timing for us, we do think it was a good move.  I’ve been wanting to stick my neck out a little and this seemed like a low risk way to do it.  We built another place two years ago right across the street so we know what we are getting ourselves in to.  (family built it).  Permit is done, foundation is complete and we’ll get the framing done soon enough.

So, if you notice I’m not posting as much, it’s because I’m covered in sawdust.

Here’s an interesting article on the costs of keeping someone alive, and when it might not be worth it.  My personal opinion on this is that I would not sacrifice the rest of my family’s life and money to try to stay alive a little longer.

http://www.cnn.com/2006/HEALTH/08/15

What would you do if the doctor said, “You’ve got 3 months to live.  We might be able to extend that for an average of 4-5 months but the cost is $100,000 per month”, or some amount that would wipe your net worth right off the planet.

Some things seem like good ideas and some just don’t.  This falls under the “don’t” category. 

I’ve told my wife, “If I ever buy meat from a door to door salesman, please just shoot me on the spot”.

http://www.komotv.com/stories/44951.htm

I keep reading about all the people that are one step from doomsday.  Most of these people are dealing with adjustable rate mortgage increases.  Why did they get an adjustable rate mortgage in the last couple years?  From a purely financial perspective, it seemed like a riskier approach because interest rates were some of the lowest in 40 years.  I can appreciate that the low house payments were tempting, but I guess I’m just too risk averse.

At first I heard mostly about people with 1st mortgages that were adjusting up as the fed increased interest rates.  Now I seem to be reading more about people with adjustable rate home equity loans.  To me, that just seems tragic.  For the people that took large sums of equity out of their homes to purchase things, or increase their standard of living, it just doesn’t seem too rational.  They may have put their homes at risk because they didn’t have the self control to live within their means.  Now, obviously there are exceptions to this.  I’m sure there are people that had to take out some home equity to cover emergencies, health costs etc.  Certainly they did what they had to do.

What I find intriguing about these adjustable rate equity lines and mortgages is that I find it hard to believe that the mortgage companies didn’t know that they were setting these people up for a big fall.  I read an article in the paper today that said mortgage companies were trying to give more advanced notice to their customers when they were raising their rates.  Well, that’s nice.  “Okay Mr. Customer.  Hold on.  We are going to hit you with a doozie in 4 weeks.  No need to thank us for the warning.  We do it because we love you.  Oh, yeah, by the way, your rate is going up by 2% and you are probably going to lose your house.  Have a nice day.”

The lesson that I’ve learned is that I’m always going to plan for the long game.  I know that many people have used the rationale that they don’t plan on being in a house for more than 5 years so they get the lower adjustable rate mortgage for a lower payment and to pay less interest.  It’s a valid point of view.  If I had gotten an adjustable rate mortgage on my first house, I would have saved myself a few thousand dollars over the nearly 5 years we lived there.  Looking back, I don’t think I’d change anything though because I never knew for sure what the future held for me.  A million things could have happened that would have forced me to stay in that house.  Luckily they didn’t.  Now, we are in a house that we hope to live in for quite some time.  I’ve got a 30 year fixed interest rate and am grateful for a stable payment (with the exception of my property taxes raising my payment each year)