Everybody Loves Your Money

I can’t begin to tell you how lucky I feel to have avoided buying a home at the peak of the real estate market. I was fortunate that my age and place in life had me purchase a home almost 6.5 years ago. Since that time, I’ve watched the value of my house go from $280K to $460K and back to $350K. Obviously it can still go further but I don’t expect it to fall far enough that I’ll owe more on it than it’s worth. The ugliest scenario that I can figure is that the value will fall all the way back to my original purchase price. If that’s the case, it means that smaller, older houses will be much cheaper than that and may create an opportunity for me to buy a rental. So, I’m not really sweating a further decrease in the value.

There are a number of people around me that haven’t fared so well and I truly feel badly for them. They didn’t make bad decisions to buy their houses but their life circumstances had them buying homes right near the peak of the market. It could have just as easily been me.

In some cases I have friends that have lost $150,000 or more on the value of their houses and they now find themselves stuck in a house that is worth much less than they owe on it with no relief in sight. Entire neighborhoods that were built and sold right near the peak are drowning in negative equity. So far we’ve only seen a few desperate “quick” sales in our neighborhood. I think this is mostly due to the fact that there haven’t been a ton of sales in our neighborhood over the last few years. Unfortunately, one of the sales that did happen was right across the street from me. My neighbor lost his job a few months ago but luckily has a large stash of cash in the bank from his previous home sale. When he bought his house across the street he hadn’t sold his old one and instead decided to rent it out for awhile. I don’t know the exact details but I believe he financed a large part of the new house. The only good news is that he has $150K+ in the bank from the proceeds of his old house that he finally sold last year. He was originally planning on putting a new roof on his new house (his needs one just like ours did), but now he has decided he’d rather not throw another $15,000 towards a house that he owes far more on than it’s worth. He hasn’t come right out and said it but I think he’s considering walking away from it at some point if the market doesn’t turn around. I can’t say I really blame him.

I’ve often wondered what kind of conversations people are having in homes in the neighborhoods where all of the houses are easily worth 30% less than the people paid for them when they were new. Are many of the people sitting at their dinner tables wringing their hands or are most people just trying to ignore the decrease in equity and resigning themselves to the fact that they just won’t move for a very long time……..

Have you ever stopped by a car dealership to test drive a car you know you aren’t going to buy? I’m really considering doing just that.

This all stems from my long term lust of the BMW M3. Since the new version came out in 2001, I’ve found myself lying in bed more than once thinking about how amazing it would be to own one. 333 horsepower. Beautiful design. German engineering. It’s enough to bring tears to my eyes. (Okay maybe I’m slightly exaggerating).

There is absolutely no way I would EVER buy an M3 brand new. Even with no debt and a pretty decent income level, it makes absolutely no sense for me to shell out $60K plus for a car. I must say that the new M3 is even nicer than the 2001 through 2007 but it’s completely out of my price range.

Over the last few years I’ve watched the prices on used ones slowly drop. With no trouble at all, I could find M3’s for $35K that were only 2-3 years old. Fast forward to today and there are 2003 M3’s going for around $20K. Uh oh. I can afford that. Even though it’s well within my price range, I’m not going to buy one. We have too many other priorities to be spending that kind of money on a car that I’d drive less than 5000 miles a year.

Just because I’m not going to buy one doesn’t mean I shouldn’t at least finally drive my dream car around the block a few times. Who knows, maybe I’ll drive it and be so disappointed in how it handles that I’ll completely block it out of my mind. The only risk to this idea is that I’ll be so totally blown away with it that I’ll throw all reason out the window. I’d like to think I’m stronger than that……

Not Personal Finance related but still very interesting:

Who says electric cars are boring. I wonder what it costs for batteries and an electric motor that will run that fast:

As someone who actually likes personal finance stuff, it’s a safe bet that I keep a pretty close eye on all my accounts. I watch my checking and savings accounts very closely but I also keep a sharp eye on my 401K, Roth and 529 accounts as well. By doing this, I ensure that I have a good grasp of where I’m at financially but most importantly, I make sure that I’m not being hit with any fees or fraud.

I do have one blind spot with our finances. It’s my wife’s 401k at her work. The only glimpses that I’ve been getting of her account are through the normal quarterly statements that show up in the mailbox. In today’s Internet age, I really don’t have much of an excuse other than to say I just haven’t prioritized getting her acct info so that I can track it. I now realize I need to bump it up in our priorities.

What really brought this back to my attention was a letter we received from my wife’s company. It said, “In an internal review of retirement account contributions, we discovered that you are due additional employer contributions under the XX employee 401k plan.” Yikes. I’m grateful that her company happened to discover this but I’m not too excited that I didn’t find it myself. Due to this error, they added an additional $875 to her account including what they estimate the maximum gains she would have had on those funds if they had been invested correctly. (I’m glad I wasn’t the Financial Analyst that had to calculate that).

So, you can bet that I’ll be getting her account info and will be tying that in to the rest of our account balances from here on out. The other important reason for doing this is because I haven’t really been involved in her investment elections. I vaguely recall recommending two funds for her to select but I don’t know if she did. (Yes, she’s a very capable person but she readily confesses that she has no idea what to do with her investment choices and has traditionally left that up to me.)

Last night my 6 year old daughter decided she wanted to have a lemonade stand after dinner. My wife helped her make a pitcher of lemonade and they spent about 20 minutes making signs with markers.

They talked about how much they should charge for each cup of lemonade and, while my daughter thought maybe they could charge $1.50 per glass, my wife ended up recommending $1 and also suggested that they tell people that it was a suggested donation but they could pay what they wanted.

My daughter (and later her friend) sat out at the curb for about an hour and somehow managed to amass $14 from about 8 glasses of lemonade. The interesting phenomenon was that people always seemed to pay more when you just put a sign up that says “donation”.

This wasn’t a total surprise to me because of my experience with some fundraisers out at the lake. We have held a number of fundraisers out there to build a new playground for the kids. In the beginning we charged $2 for a hot dog and $1 for a soda. While we made a decent amount of money using that model, we later found that not putting a price on the items and simply putting a sign up that says, “Donation for new playground” yielded over double the total amount of money from the previous times that we set hard prices.

Anyway, it was fun to have my daughter out there making money for herself. She was very excited as customers (neighbors) showed up and as the money started to build up, she got even more excited. I thanked each of the neighbors that came by to buy some lemonade and joked that the money they paid for the lemonade was the final bit that we needed to make our house payment this month.

More American Workers Outsourcing Own Jobs Overseas

It’s Monday and we just got back from a week long vacation at our lake house near Hood Canal. We considered this a staycation even though we didn’t really stay home at our regular home.

Originally we had considered taking a trip somewhere with a budget of around $1500. Due to our inability to actually dedicate the time to plan a trip and the underlying concern about spending too much money these days, we decided to just take advantage of the hard work we put in to the lake house and spend the week there.

When it was all said and done, we spent about $500 for the week. About half that was spent on hardware to finish a couple projects so it really wasn’t all spent on “vacation” items.

While the weather didn’t cooperate, we did have a good time. The temperature was about 70 each day so we spent lots of time doing yard work and going for walks around the lake. It was really nice to disconnect from thinking about work and just focus on my wife and daughter.

Unfortunately, the rest of the money we spent on vacation was for food. I think I gained about two pounds over the course of the week but we ate really well. All the great meals were capped off with a bbq at a friend’s house down on the lake. We had steak, tons of fresh crab, potatoes, vegetables, bread and of course a few cocktails. It was a nice way to wind the vacation to a close.

Now it’s back to the grind where we’ll be working hard on saving as much money as we can over the next few months. We have some expenses coming up that are pretty much unavoidable but nothing like the expense of putting a new roof on the place. Both of our 9 year old cars need tune ups and my Toyota Tacoma needs a new timing belt which will probably set us back a couple thousand dollars. We also really need to think long and hard about buying a new refrigerator. My wife has tolerated missing shelves and broken rails in the fridge for a long time and is really starting to get antsy about buying a replacement. We’ll try to find one that is energy efficient to offset the cost over time.

While I was on vacation I read a number of articles about the economy. There seems to be about 50% thinking that the worst is over and another 50% that think we are heading back down further. It’s really hard to tell where we are headed but with the high unemployment levels, record deficits and massive consumer debt (along with ridiculous amounts of home foreclosures), I’m sitting on the side that thinks we still have a lot of hard days ahead for a lot of people.

Oh, and speaking of the economy: Even the wealthy are having to squeak by on only $300,000 per year. Oh the horror.