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I’m the Bad Guy

My wife and daughters are active in a saddle club, even though we don’t own any horses. We’ve been borrowing them for shows when my girls compete.

My wife’s cousin has been trying to sell one of her horses for a few months. Because this horse has alpha-male problems, it has to be kept in a stall. Stall boarding runs $450 per month as opposed to $200 in a group paddock.

Since my girls love this horse, Cousin continually tries to convince my wife to buy it.

My wife’s response is “Jason won’t let me buy a horse, yet.” Then all of her friends get to complain about how I’m not supportive.

Uhhh, no.

We are $10,000 away from paying off truck. We’re $23,000 away from being mortgage-free. After that, we’re planning to rent out the house we’re in and buy a hobby farm.

Yes, Mr. Unsupportive is planning to uproot everything and move to the country so my wife and daughters can have horses on site.

Shame on me. I’m such a jerk.

In a couple of years, I want to buy a $450,000 spread on about a dozen acres and let my wife’s dreams come true.

Or, we could buy a couple of horses now and never have the money for a down payment.

Or, we could buy the farm now, buy the horses now, spend every last cent of our savings on a down payment, spend more than half of our income on our mortgage payment, never get ahead, and end up losing everything.

Such a jerk.

This is a case where we have to do everything in the right order, or it will all come tumbling down on our heads in a few years. If I have to be the bad guy to avoid screwing ourselves later, so be it.

Healthcare.gov: Is this failure a warning of what’s to come?

Politicians

The official launch of online registration for government healthcare has been rife with disastrous glitches from the very beginning. This cataclysmic failure has spurred severe service outages across the country, and this chronically dysfunctional interface serves as foreshadowing for an epidemic of systematic organizational deficiencies. Healthcare.gov is only the first in a series of planned bureaucratic catastrophes.

Luckily, this informative overview exists to demystify the overly complex world of the medical legislation informally known as Obamacare. Being armed with the facts provided below can protect anyone during these times of economic uncertainty in which the destabilizing influence of expensive health treatments can suddenly arise.

The Internet Errors

The requirement of preemptive registration resulted in a complete system crash. The ability to input health data was also starkly limited. Security issues also seemed evident as certificates failed to show updated validations, and there was no indication of where confidential information would be stored.

Lack of Foresight and Oversight

The decision to mandate initial registration was a hastily made last-minute change that failed to consider the magnitude of public interest. This unfortunately coincided with a government shutdown, which left limited federal resources available to respond to claims of malfunctioning servers. The biggest mistake made by the Department of Health and Human Services was underestimating the massive influx of uninsured applicants.

To further complicate woes, a chief contractor behind the layout of healthcare.gov is expected to testify that additional time and money could not have salvaged the doomed enlistment effort. His official testimony will shed light on administrative laziness, and the legislative committee is expected to issue serious reprimands, but nothing will recompense the thousands of individuals deprived access to healthcare registration on the date promised to them years in advance. These problems were completely avoidable, but the team in place refused to promptly pay attention.

Proposed Solutions

The Obama Administration has conveniently remained mum on the topic of minor adjustments to the healthcare law, but Congressional Democrats have proposed implementing small delays to the overall roll-out. The dates for enforcing the individual mandate have become a focal point of discussions to modify Obamacare. Because citizens were not given feasible access to the online enrollment system, it would be unconstitutional to levy fines for their lack of registration.

The Foreboding Warning

If politicians cannot even tackle basic website programming, then they should not be trusted to manage the well-being of millions of Americans. Partisan divisions have made two factions that are fully noncoalescent, which means all future fixes will be the result of an incomplete compromise between two warring parties. Real health concerns have been forgotten by the incessant squabbling of politicians in their ivory towers. This means that every new initiative will only cause further societal strife and struggle. Members of Congress have expanded the breadth of their authority without grasping the technological realm. As a consequence, these politicians will continue overextending the limits of their power, and the public will be left to pick up the pieces.

Rental Property Update

Business

As I’ve mentioned before, we are fixing up the house we inherited in April to rent it out.

We already have renters lined up starting in February. My wife has known the couple for several years, so we’re not worried about strangers wrecking the place. We will be doing a lease, because skipping that is dumb, even if you know the tenants. They will be paying $1200 per month, plus electric, water, and garbage. We’ll be covering gas and–of course–property taxes. We’re paying the gas bill because we’re going to have most of the appliances on the repair plan through the gas company so we won’t have to worry about appliances breaking.

Those expenses will run about $325 per month, leaving $875 as profit. We’ll probably save another $200 of that to cover future vacancies and for property issues that I’m not foreseeing, leaving $675 to save and invest.

Over the summer, we have spent quite a bit of money fixing the place up.

Dumpsters x3, $1200. Did I mention my mother-in-law was a hoarder?
New boiler, $4500.
Electrical repair, including running power to the garage, $1400.
Plumbing & gas repair, $900.
New stove & refrigerator, $1000.
Landscaping, $2500.
Other repairs, $8000.

So far, we have spent about $19,500 fixing this place up. There is still a bit of work left to do.

Are we done?

Crap, no.

We have two rooms of stuff that we need to research and price individually before we sell. This includes some old cameras, typewriters, and collectibles.
We need to buff and polish the hardwood floors that are in surprisingly good shape.
We have to scrub the entire house. Cobwebs and mouse crap show up in interesting places when 90% of your house is buried for most of 30 years.
We have to clean the last of the debris out of the basement. This, and some other stuff, will mean yet another dumpster.
We have to paint walls and ceilings all over the house and the basement floor.

The to-do list will come with a price tag somewhere between $1000 and $1500.

That comes out to about $21,000 spent to make $675 per month. In just 3 years, the property will be turning a profit, then it becomes an actual profit center for us, hopefully forever. The expenses are all tax deductible, but only as depreciation, which means the cost has to get deducted a bit at a time over the course of the next 5 to 30 years.

On the other hand, we could probably sell the place for $200,000. It’s going to take 25 years of renting to make up that difference.

Experiences v. Stuff

Finance, Life

: Image by hunterseakerhk via Flickr

On Friday, I went to see Evil Dead: The Musical with some friends. The play obviously isn’t a good match for everyone, but we are all horror movie fans, I’m a Bruce Campbell fan, and all of us had seen and enjoyed at least Army of Darkness. It was a good fit for us.

The play, followed by a late dinner and drinks with people I care about, was easily the most money my wife and I have spent on a night out in years. That’s including an overnight trip for my cousin’s wedding.

Now, several days later, I keep thinking about that night, but not with regret about the price. I keep thinking about the fun I had with my wife and some of our closest friends. We saw a great play that had us in stitches. We had a few hours of good conversation. We had a good time. I would happily do it all over again. In fact, I would happily reorganize our budget to make something similar happen every month.

I don’t remember the last time I spent 3 or 4 days happily thinking about something I bought.

I look around my house at the years of accumulated crap we own and I see a big rock tied around my neck. Even after a major purge this spring, we’ve got more stuff than we can effectively store, let alone use. When something new comes in the house, we spend days discussing whether we really need it or if it should get returned. When we plan a big purchase, we debate it, sometimes for weeks.

Getting stuff is all about stress.

My wife and I are both familiar with the addictive endorphin rush that comes with some forms of shopping. I wish the rational recognition of a shopping addiction was enough to make it go away. Buying stuff makes us feel good for a few minutes, while high-quality experiences make us feel good for days or weeks, and gives us things to talk about for years to come.

It’s really not a fair competition between experiences and stuff. Experiences are the hands-down winner for where we should be spending our money.

Why then, does stuff always seem to come out ahead when it comes to where our money actually goes?

Winning the Mortgage Game

Finance

There’s a game that’s often mistakenly called “The American Dream”. This game is expensive to play and fraught with risk. It single-handedly ties up more resources for most people than anything else they ever do.

Conway's Game of Life — Image via Wikipedia

The game is called Home Ownership.

At some point, most people consider buying a house. On the traditional, idealized life-path, this step comes somewhere between marriage and kids. That’s usually the easiest way to organize it. If you have kids first, you’re much less likely to buy a home. This is a game with handicaps.

Once you get to the point where you are emotionally ready to invest in the 30-year commitment that is a house, your first impulse tends to be to rush to the bank to find out how much money you can borrow.

That’s a mistake. If you take as much as the bank will qualify you for, you’re most likely to overextend yourself and end up losing your house. That’s the quick way to lose the home ownership game.

The best thing you could do is figure out how much you can afford before you visit a bank. Conventional wisdom says that your mortgage payment should be no more than 28% of your gross income, but that’s absurd. Who builds their budget on their gross income? I like 28%, but only of your net income. To make the numbers easier to remember, I’d round it to 30%. If you take home $3000 per month, your mortgage payment should be no more than $900 per month.

From there, it pretty easy to figure out how much house you can afford. Using this e mortgage calculator, you’d be able to afford a mortgage of $175,000 if we assume an interest rate of 4.5%. Throughout most of the United States, that will buy you a reasonably sized home, though certainly nothing ostentatious. Clydesdale Bank also has an excellent loan calculator.

Some people like to start out with an interest-only loan. That same emortgage calculator shows that an income of $3000 per month would be able to afford a $240,000 with almost the same payment. That seems like a good plan, but eventually, you’ll have to pay more than just the interest. Taking out a loan that will one day be more than you can afford on the assumption that you’ll be making more money by then is not sound financial planning. That’s the same logic that helped me bury myself in debt.

When you buy a house, make sure to base your payments and your mortgage on what you can realistically afford. Anything else, and you’ll only end up poorer and less happy than when you started.

Search Results for: three-alternatives-to-a-budget/subscribe-by-email/budget-lesson-part-3/money-problems-day-1-setting-goals/budget-lesson-part-5/budget4/budget-lesson-part-1/consumer-action-handbook/questions-from-a-reader/5-steps-to-save

The Internet Errors

Lack of Foresight and Oversight

Proposed Solutions

The Foreboding Warning