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Resolutions That Don’t Suck

I’m not a huge fan of New Year’s resolutions. Generally speaking, if you don’t have the willpower to do something any other time of the year, you probably won’t grow that willpower just because the last number on the calendar changed.

Seriously, if you’ve got something worth changing, change it right away, don’t wait for a special day.

That said, this is the time of the year that many people choose to try to improve…something. Some people try to lose weight, other people quit shooting meth into their eyeballs, yet others(the ones I’m going to talk about) decide it’s time to get out of debt.

Now most people are going to throw out some huge and worthless goals like:

I need to lose some weight.
I need to save more.
I need to be a better person.
I need to shoot less meth into my eyeball.

The problem with goals like that is the definitions. What is “some”, “more”, “better”, or “less”? How do you know when you’ve won.

It’s better to take on smaller goals that have real definitions.

Try these:

I’m going to lose 20 pounds.
I’m going to save $1200.
I need to stop locking my children in the closet when I go to the movies.
I am never ever going to shoot meth into my eyeball again.

But Jason, I hear you saying, where am I going to find $1000 to save? Well, Dear Reader, I’m glad you asked. Next time though, could you ask in a way that others can hear so my wife doesn’t feel the need to call the nice men in the white coats again?

Let’s break that goal down even further.

Instead of saving $1200, let’s call it $100 per month. That’s a bite-sized goal. Some people don’t even have that to spare, so what can they do?

Let’s make that resolution something like “I’m going to have frozen pizza instead of my regular weekly delivery.” If your house is anything like mine, that brings a $60 pizza bill down to $15 for some good frozen pizza for a savings of $45. If you order pizza once a week, that’s $180 saved each month, double your goal. That’s a win with very little suffering.

Now, you can take that extra $80 that you hadn’t even planned for and throw it at your credit cards. That’s a free payment every month. Before you know it, you’ll have your cards paid off and a decent savings account.

Then you can thank me because I made it all possible.

Net Worth Update – January 2014

Misc

This may be the most boring type of post I write, but it’s important to me to track my net worth so I can see my progress. We are sliding smoothly from debt payoff mode to wealth building mode.

Our highlights right now are nothing to speak of. We did let our credit card grow a little bit over the last couple of months, but paid it off completely at the end of December. It grew mostly as a matter of not paying attention while we were doing our holiday shopping and dealing with some car repairs.

That’s it. We haven’t remodeled our bathrooms yet, but we have the money sitting in a savings account, waiting for the contractor. We haven’t bought a pony yet, but we did decide that a hobby farm wouldn’t be the right move for us. We’ll be boarding the pony instead of moving, at least for the foreseeable future.

Our net worth is up $13,000 since September. Our savings are up and our retirement accounts are down because there are two inherited IRAs that we need to slowly cash out and convert to regular IRAs.

Refinancing Your Existing Loan to Purchase An Investment Property

Finance

Many people are looking at the housing market slump right now as an investment opportunity. Here are a few of the things that you need to know before getting a new home loan or refinancing your existing loan in order to make that happen.

Amount You Want to Borrow

A lot of borrowers go shopping for real estate and have exactly no idea how much money they can borrow. One of the first questions that you need to ask before going real estate hunting is how much can I borrow. You can ask a bank, lender, or financial institution to give you a ballpark figure of the amount of loan that you would qualify for. This will make it easier for you to narrow down exactly what type of property you can afford and what areas you can concentrate on.

Amount of Interest You Will Pay

Too many people are overly concerned with the purchase price of the home that they are buying. They fail to find out how much interest they will have to pay back to the bank in order to make their home ownership dreams come true. This is where a home loan calculator can be really useful. You can find out exactly how much interest you will repay over a 10, 20, or 30 year loan time period. You can also change the interest rate and down payment amount on those calculators to see if you can secure a lower monthly payment.

Credit Score Needed to Qualify

It doesn’t matter if you are buying a home for the first time or refinancing an existing loan. Your credit score matters. You need to start doing some research now if you want to secure a loan with a really low interest rate. This involves taking the time to see what credit scores traditional lenders are looking for and doing the work necessary to qualify for this loan. Your credit score will make a big difference in determining if an investment property purchase is a profitable endeavor or one that winds up costing you money. It will depend heavily on what kind of loan your credit score allowed you to negotiate.

Make the Choice

Once you know how much you will need and exactly how much you will be paying out over the life of another mortgage, you can decide whether you want to refinance your current home loan to get another one. Adding on another huge debt to an existing one is a big risk. Make sure to think it through fully before jumping in.

How We Handled The Windfall

Finance

Landlord (Photo credit: FletchtheMonkey)

Three years ago, my mother-in-law died. She didn’t have a will, but that’s a story for another day.

My wife, being an only child, inherited everything. All of the assets, and all of the problems.

She inherited the house, which was completely paid off. That was nice.

My mother-in-law was a hoarder who didn’t buy into the idea of maintaining your property. That was not nice.

Between the life insurance policies and the ready cash, she inherited about $60,000. Also nice.

It’s all gone. Not so nice.

Now, I know you’re asking where it went. Lucky for you, that’s what this post is about.

We paid off the last $10,000 of our credit card debt, and haven’t accumulated a balance since. Now our cards are paid off in full every month.

We put $5,000 down on the Chevy Tahoe we bought in 2012 and paid off in full 9 months later.

Every last cent of the rest went into the house we inherited.

Huh? 45 fricking grand to get the house ready to rent?

Yep.

$3000 to clear out the brush and landscape the yard
A few hundred to have the hardwood floors sanded, stained, sealed, and buffed
An intense carpet-cleaning
Painting every single room
3 large dumpsters to handle the garbage we pulled out of the house
New refrigerator
New washing machine
New boiler
New stove
New patio door
New locks for the doors and windows
Security lights
Food for all of our helpers whom we can never thank enough
Finishing the basement

All of that pretty, pretty money, gone in less than a year.

What did we get out of it? A rentable asset that is bringing in $1200 every month, with minimal work.

We could have chosen to sell the place, but we would have had to do nearly all of that work, anyway, so it wouldn’t have saved anything.

I like having the new stream of income, even though it will take several years to turn a profit. That house isn’t going anywhere, and since it’s only 3 miles from Minneapolis and 5 miles from downtown Minneapolis, it will always be an in-demand area for renters.

It was just a lot of work turning it into a useful property instead of a year-long drain on time, patience, and money.

The Lord Will Provide

Finance, Life

Debtors like to make excuses.

When I used to work collections, I’d try to work out a payment plan to get people out of debt, and I often heard “The Lord will provide” as their only excuse for not paying the money they owed.

That’s crap. It’s not a financial plan. It’s not a life plan.

It’s a crappy excuse to make you feel better about why your life sucks, has always sucked, and will–most likely–continue to suck.

Over the weekend, I got to spend quite a bit of time with family, including some that we don’t get to see often. One couple in particular really stands out. Neither of them are employed. She’s got some medical problems and has several major surgeries recently. I’d give her a pass for that, but she was unemployed for many years prior to that. He used to have a job, but lost it a couple of years ago, and is now milking welfare with his wife and daughter. They recently lost their house and had to move in with his mother.

Neither one is looking for work. Between the two of them, they smoke 4-5 packs of cigarettes a day. They want to buy a house soon, or rent an apartment, or something. They aren’t very clear in their planning because, “It’s in God’s hands.”

No plan, no ambition, no goals. I don’t understand how anybody can go through life with no intention of improving it. How can you try to hide behind platitudes instead of making things better?

Here’s the bumper sticker that can actually improve your life: “Good things come to those who bust their asses and make good decisions.”

It’s not the easy path, but in the long run, it’s a better path and one of the few paths that doesn’t lead to royal life-suckitude.

Twinkies: A Failure of Unionization

News

Box of Twinkies (Photo credit: Wikipedia)

Twinkies may survive nuclear warfare, but the iconic sweet treat ultimately couldn’t withstand the might of the unionized workforce. Faced with mounting losses and overwhelming debt, due in no small part to the relentless demands of the various unions representing the nearly 19,000 employees, Hostess Brands filed bankruptcy for the second time in January 2012 and ultimately requested permission to liquidate it’s assets in November of last year when a buyer failed to materialize. While many factors played a part in the demise of the maker of such all-American snacks as Ding Dongs and Ring Dings, as well as childhood favorite Wonderbread, there is no denying the fact that costs imposed by union contracts were a major factor in the shuttering of this once-beloved company.

While there is certainly plenty of blame to go around, the simple fact is that nearly 97 percent of the company’s unsecured claims were from employee pension funds, according to the Chapter 11 filing. How did those claims arise? Simply put, the skyrocketing pension expenses were caused by the unions continuing to push for overly generous retirement rewards despite overwhelming evidence that the company could never sustain those costs. True, the unions did agree to considerable concessions prior to and even following the first bankruptcy filing in 2004. However, that was only after union officials had pushed wages and other benefits into the stratosphere, even though Hostess has been struggling for years to remain competitive.

Certainly America’s changing eating habits, increased competition from such companies as McKee Foods, makers of Little Debbie snack cakes, and rising commodity costs all contributed to the ultimate demise of Twinkies. There is no doubt, though, that union contracts inhibited the company’s ability to adapt and make the necessary changes to remain profitable. Not only were employee costs out of control, ridiculous union rules made it nearly impossible for the company to make money. These are just a few of the rules that hampered Hostess’ management:

Twinkies and Wonder Bread could not be delivered on the same truck.
Drivers could only deliver one product, even if they did not have a load and a load of another product was waiting to go out.
Drivers could only drive. They had to wait for loaders to fill their trucks.
Likewise, loaders could only handle one product. Their contract prohibited a Twinkie loader from helping out if the Wonder Bread loaders were shorthanded.

Yes, management agreed to these terms, but often they were forced to do so in order to prevent a costly strike. In fact, it was a labor strike that lead to the decision to liquidate.

Unions are meant to protect workers from dangerous working conditions, overbearing management and unfair labor practices. Ensuring a living wage and decent benefits is another of their responsibilities. However, it is evident that in this case, the unions became as much an enemy of the Hostess employees as of the company’s management. As a result of their unwillingness to compromise and make wage and benefit concessions, almost 20,000 people no longer have a job that needs to be protected. In the end, the unions drove not only the company but themselves out of business.

Not to fear, however. Two private equity firms acquired Hostess’ assets last fall and are beginning to turn the company around. Production of Twinkies began again in June, and the gooey sponge cakes returned to store shelves on July 15. The workforce has been dramatically reduced and will not be unionized. In the end, probably the only winner in this battle is America’s sweet tooth.

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