Year: 2011

I recently read this article in the St Petersburg Times about Showhomes, a national home-staging company. Showhomes has a pretty cool sounding business model. They match high-end vacant, for sale homes with people who have great furnishings and need temporary housing. This temporary tenant (Showhomes calls them a Home Manager) gets a huge break on rent in exchange for keeping the home show ready.

The seller wins because the house shows well with the manager’s furniture and there are no worries about the common vacant home problems.

The Home Manager wins because they get to stay in a very nice place for cut-rate rent.

Just take a look at some of the before & after photos showing vacant vs. furnished and staged. If a potential buyer saw them on the internet, which do you think attract more showings?

In this difficult real estate market, you need to do everything you can to help your chances to sell.

Maybe the vacant property you have on the market isn’t high end – could you do something like this yourself or with the help of your realtor?

First, get the house ready for sale

This includes deep de cluttering and cleaning. Do any minor repairs and paint if necessary. Get others to walk through the house to point out the flaws; grimy switch plates, torn screens and stained carpets all must be fixed. Spotless is the description we want.

Next Stage it

You can hire a professional stager or you can study up what works and try it yourself. Sparse but tasteful furnishings and brightly lit spaces with just touch of decorative interest is the look we are after. Tour some high-end model homes to get an idea.

Get Perfect Photos

90% of Buyers look on the internet first. The photos your realtor uses need to be perfect. Can the room look better? If so, fix it and re-shoot. Take a lot of photos (or if you can afford it, hire a pro) and make them really good.

Pick the right realtor

Choosing the right realtor is hard. Let me help you determine who it is not. It is not someone you know from church that has been in the business for six months. It is not someone who has sold 25 condominiums this year if it is a single-family house you are trying to sell. And, it is not someone from out of town.

You need a local, experienced, realistic realtor with a track record of success both long term AND in this tough market.

Interview at least three and please do not automatically choose the one that suggests the highest sales price.

Pick the right price

It is critical that you do your homework here. Price it too high and nobody even looks. Languishing on the market for months and months while repeatedly dropping the price is not our goal.

Use comparables not just for current listings but also for recent sales. Ask each agent you interview to give you their estimate of the market price and how they arrived at it.

Be realistic.

Selling a house today in many markets is very hard but some homes are selling. Like all other ventures hard work, perseverance, and preparation will pay off.

Commitment

In the world of personal finance, commitment is not something you can do once and be done. You can’t stand up and promise to live within your means and then never think about again. There are forces, very strong dark forces working against your plan to live intentionally.

If you do not control the influence the media has on you, you will be bombarded by images and narrative that screams you must buy more stuff; you deserve finer things; NOW is all that matters. In addition to the advertising media, you are also subject to the opinions of others. Living on less than you make is not normal; you will find that most of your friends and neighbors will not understand or appreciate what you are trying to do. You may also be faced with family members that try to insist you buy a better car, take better vacations, and invest with them in the next great thing. What is a newbie frugal person to do?

Re-Commit

Often! In the beginning, you may need to re-commit hourly.  Small actions help solidify that commitment.

Two things that helped me were my watch and my shirts. When we committed to get of debt, we knew we wanted to make our home mortgage part of the commitment. That meant we were facing a $220,000 mountain. There was no one big thing we did to eliminate that debt. We cut expense and lifestyle , in every way we could find. Some of the cuts we made had a significant impact on our debt. Others may not have affected our debt in a big way but they did force us to re-commit. Often!

Ironing my own work shirts saved me maybe $10 a week in real money but I’m sure the re-commitment it forced, multiplied those saving by a bunch. I spent an hour most every Sunday ironing my shirts for the upcoming workweek for those two years. During that hour, I was forced to face the fact that I needed to do things I might not want to do in order to achieve our goal. What do you think were the chances of me ironing those shirts for $10 on Sunday just to go out to lunch on Monday and give it all back? I can tell you pretty close to none. By the time that determination was slacking, it was Sunday again and time for a refresher course.

I wear an Eddie Bauer watch that I brought for $99 about 12 years ago. Near the start of our debt free journey the band broke. I could not find an off the shelf band to fit. Jim (no Mr. Fix-it) managed to put it back together. It broke again, and again out came the pliers. After many episodes like this, Jim took it to a cheap jeweler, $5 fixed it for a while longer but the bracelet still came undone easily.

Here I was making really good money, wearing crisply pressed shirts, suits and heels and this battered old watch. Sometimes that stupid bracelet would open and there would go that watch skipping across the floor. That would make me think of a cool Tag Heuer and how good it would look and how much I deserved one and how everyone making that kind of money wears a good watch. And then, I would remember most of those people were broke!

We did eventually find a good jeweler who fixed that watch right and I still wear it.  Every time I look at it I’m reminded it’s not the outward signs of wealth that matter, it’s the peace and security you can have by living intentionally.

Fault and responsibility are not the same thing.

It is counter-productive to try to find fault for a person’s financial situation. With my clients, I definitely have a “No Shame – No Blame” policy.

However, if there is going to be change it is essential that we take responsibility for where we are. If we look around at people from similar circumstances, we will find some have failed and some have succeeded. Our responsibility is to analyze both and choose our actions with intentions.

Most of us get into financial trouble not because we made terrible choices, but because we failed to make good choices over and over again.  Overspending by a little bit here and there, failing to save or having no plan eventually catches up with us.

The early symptoms of “death by a thousand cuts” are:

• Carrying balances on credit cards that you used to pay off every month

• Credit cards or Equity line balances that are creeping up

• An inability to name what you spent the money on

• NSF Charges or paying bills late

• Failing to contribute to retirement

• Having no emergency fund or failing to rebuild a fund after an emergency

Will our good decisions always lead to success? No, unfortunately they will not.

This presents a challenge to our irrational thinking. Once we start trying to make intelligent choices with our money, we want to believe that financial hardship is behind us, that only people making “dumb” decisions incur financial pain. Conversely, we want to believe that all financial successes come from smart choices.  Neither is true and when you stop and think, you know it.

Bad things happen to people who are doing the right thing. They lose their jobs, their parents get ill, and their retirement funds lose value in a down market. And, occasionally, people engaging in very risky (day trading, zero down house flipping) financial behavior win.

Overall, consistent, informed, intentional decision-making will greatly improve our chances at financial success. In addition to improving our day-to-day lives, this pattern of intention will soften the blows of the inevitable hardships that we will encounter.

Not too long ago I had a bad toothache. At first, I thought it was just sensitivity. I’ve had that in the past and using special toothpaste for several months took care of it. When cold drinks no longer caused that little shock, I pronounced myself cured and switched back to whatever was on sale. Now it seemed it was back. I purchased some of the special toothpaste but over the course of several days, the problem worsened. Now it was not just cold or hot that brought on that flash of pain, it was just about anything including breathing. The little shocks had become a constant throb accompanied by feelings of an occasional high voltage electrocution.

The dentist wrote me a pain and penicillin scripts and referred me to the endodontist. That was Thursday and the earliest the specialist could see me was Tuesday. The pain pills made me sick and after spending most of Friday laid out I decided I could tough it out on Advil.

It was in that condition that I googled “toothache cures”. If you ever have the feeling that your life sucks, read some of the posts to the forums for toothache home remedies. I knew all I had to do was make it from Friday to Tuesday and the Advil was doing a good job of making my pain tolerable.  Many of these poor people were suffering with toothache pain with no end in sight. The difference between them and me was that I had the $2400 set aside to handle this.

We guard our emergency fund vigorously. We have built up sinking funds to cover most expected expenses that used to be emergencies for us. Things like home or car repair, taxes, insurance and medical expenses. We tend to be very careful and conservative with what we spend from these funds but when you or someone you love is in pain it’s really easy to write that check.

We could easily spend $200 a month more eating out, or eating in for that matter. It would not take me long to run through $200 at the sporting goods store or the bike shop or Target. By NOT doing those things for a year, we were able to save the $2400 necessary to fix my tooth.

I never want to be the one typing this at 2 in the morning:

I’ve had a toothache for a while, I have a gap between my molars with a black hole right at the root. I haven’t been able to get any sleep and have tried about everything. Here’s some things I did that helped though damped a wash cloth, microwaved in 30 seconds and put it in a ziplock baggy and rested it against my face, the hotness seemed to help soothe the pain, it didn’t get rid of it but helped a little. I took one Benadryl before bed and it seemed to lessen the pain. I gargled antiseptic mouthwash for about 30 seconds. My eyes also hurt along with my tooth.

and I’m willing to make some small sacrifices now to ensure that I never will. Are you?

We recently examined how much you should spend on groceries and found that there is a large variation in what the same size families spend in a month.  The USDA tracks food cost by family size on four different plans; Thrifty, Low Cost, Moderate and Liberal. Their current estimate for the thrifty plan for a 19-50 year old male is low 176.00 a month. So how did Andrew Hyde eat on $36 a month while attending college?

Andrew gives us his how to in How to Live (Comfortably) on $36 A Month for Food.  Here are some of his meal tips:

Breakfasts: Oats with raisins or a banana works out to be about $.12 a serving.  Milk or soy brings it up to about $.20.  Lipton tea bags cost $.02 a piece.  If you are on the run the oatmeal packets (the flavored ones) run around $.15 a piece.  Eggs can run as low as .09, so a 3 egg omelet with peppers and cheese goes for $.38.   I used to see English muffins go for $1 a pack of 8 on Sundays.

Lunch: Sandwiches are the cheapest route.  PB+J can be priced at $.25, so doing two plus a banana ($.10) makes a pretty filling lunch for $.60.  Leftovers from dinner are also an option.  Rice cakes and cheese was a favorite.  Bagels, fruit and salads are staples.  Lunch was always my wild card.  Leftovers were the norm.

Dinner: Rice and beans extravaganza is my favorite meal (still to this day I make it once a week).  Rice can be found in 10lb bags for $5 at a specialty store.  You can soak your own beans, add ground beef (a pound of 85% can be as low as $1.25) cheese and an avocado.  You can make 3 dinners for around $.44 a serving.  A big pot of soup can be ultra cheap (chicken broth, veggies, spices) with bread.  Homemade bread can be time consuming, but can bring costs down to around $.80 a loaf.

Salads are cheap, buy from the bins and bag your own.  Spaghetti can cost out to $1.50 with enough for three meals.   Repeating meals saves money because you can share ingredients.   Also, if you are really hurting to make due, ask your friends to cook for you.  Bring what you can and help clean up.

So maybe you have no desire to eat that cheap, but what if you could save $200 a month on groceries while still being happy with you food choices? How much sooner could you reach your financial goals?

Follow these three rules to control your food spending:

Rule #1 Make a Plan

Trying to decide what’s for dinner at 6:30 when everyone is tired and hungry is a sure prescription for wreaking the budget. If your family is like mine, you are going to end up bringing in a pizza or going out to fast or quick service restaurant or getting something from the deli. There are two ways to do this:

1. Make a Weekly Menu plan every week (or cheat like we do and get one from E-Mealz). E-Mealz is a very inexpensive service (1.25 a week) that provides a store specific meal plan for the week. You can choose from family plans or low-fat or vegetarian. You get a meal plan using mostly on-sale items for that store for the week and a shopping list.
2. Do a Meal Rotation –This is a simple way to know what’s for dinner. I would not recommend it long term but it works especially if you have a houseful of kids or picky eaters. When I was young, we did a meal rotation for several months. My dad had moved to another state for a new job, my mom was finishing her degree and had to stay put until her graduation. Alone with school demands and four kids to care for, meal planning got very simple. Spaghetti on Wednesday, pizza on Friday – as kids we loved it.

Rule #2 Make it at Home

Generally the more processed and prepared a food item is, the more it costs. If you don’t cook – learn how. Go to the library or try one of these simple cookbooks How to Cook Everything or Better Homes and Garden New Cookbook (get the ring bound edition). If you don’t have time to cook, get a crock-pot. You can pick one up at a Garage Sale or Thrift Shop if your budget is tight. We frequently use recipes from Fix-It and Forget-It Recipes for Entertaining: Slow Cooker Favorites for All the Year Round when we have company. Use your grocery budget on staples, not processed food.

Rule #3 Treat Eating Out as a treat

When we started cutting our expenses, eating out for convenience was the first big change we made. Now we eat out only when we will really enjoy it. I get better meals at home than I do at most casual restaurants for a lot less money, fewer calories and without the hassle. We have not given up our social life; we simply have friends over instead of going out.

How do you control your food budget?

Housing, Transportation and Food are the biggest budget items for most families.  The good news is if you need to cut costs either to pay off debt or to increase your savings you can make big gains by carefully examining your behavior in these areas.

J.D Roth at Get Rich Slowly recently asked his readers how much they spent on food. 326 of his readers commented and their responses were very interesting. This of course was not a scientific survey, the respondents are readers (who comment) of a blog about personal finance – not a random sample of families. I’m sure some included non food items they purchase at the grocery store (cleaning and paper supplies, beer and wine, pet food) while others did not. Some live in expensive urban areas, some overseas, some have gardens that help.

This is a graph of those responses. Of interest is the huge variation within a family size. Families of two reported spending from $200 to over $1000 a month while families of four spent between $400 and $900. One family of five reported a monthly grocery budget of $250!

The USDA tracks monthly food costs across four plans; thrifty, low-cost, moderate and liberal for American families. That data is plotted for comparison purposes for families of 2 and 4 members using the June 2011 report.

The take away here is that food budgets are very elastic. If you make a concentrated effort to control yours, you may  find a nice little stack of cash to throw at that debt snowball or your savings.

I often talk about trying to be intentional with my money; but how do you really do that?

Unintentional

Most people I talk to think that if they pretty much do the right thing everything will work out. If they are in school, the thought is stay out of trouble; go to class, do really well in the classes you care about and ok in the rest and you will be fine. In the work force, many trust that showing up on time and doing a good job will lead them up a ladder of promotions. This same mindset carries over to sports, relationships, and money. This “just let it happen” attitude often leads to mediocre outcomes. If you want an ok education, a so-so job, average relationships and normal finances just try to do what is expected of you; there is a good chance you will succeed. If you are lucky enough to have an extraordinary talent, you may even get exceptional results with this thinking, but you will not be as successful as you could have been.

Being unintentional with your money is “normal”. It is exactly what the average American family does. Almost universally, we want to be out of debt, we want to have savings; we want to help our kids pay for college. But, we don’t make decisions that lead to these goals. We go to work, get paid and then pay our bills. If there is money left at the end of the month, we might go out to eat or buy a new TV or maybe even put some in our saving account, but we do it all without a clear plan.

When we buy a new car with credit, we may be actively deciding we want that particular new car but that decision is not likely to be in line with our goals and dreams. We are just letting the “normal” American life happen.

Intentional

Carefully choosing what to do and what not to do in alignment with our overall dreams and goals is at the core of being intentional. To make these choices you must have a clue of both where you are and where you want to end up.

Are you intentional with your money? If you are, you probably know the answers to these questions.

• What is your total household take home pay?
• What debt do you have?
• What are your total monthly expenses?
• How much do you save each month?
• What is your net worth now and what do you predict it will be 5 years from now?

On a small scale, being intentional with your money means:

• Always have an active financial goal – consider using the baby steps.
• Make a written schedule to help you focus on actually accomplishing each step.
• Actively choose not to be de-railed by friends, family, or old habits.

On a larger scale, being intentional with your money might mean:

• Skipping the nights out, turning up the ac, not buying new clothes and cutting back in  a 100 other little ways in order to get out of debt so that your family can have more security or
• Choosing a state school and working through college to avoid student loan debt so that you can be comfortable on a teacher’s salary or
• Working a job you don’t really love in order to stack up cash so you can quit and travel

Being perfectly intentional requires that you ask yourself with every purchase or financial choice: Will this lead me closer to my goals? Of course, we’re not perfect but the more we practice the better we get.

I recently read a blog post where the author was a bit smug about all the smart financial things he was doing and how these intelligent decisions had protected him and his family through this recession.  I am glad to hear it; smart financial choices do protect us through a downturn. Having some savings and avoiding unnecessary risks can make us look smart but sometimes the truth is we just got lucky.

Here in Florida, lots of people did some really risky real estate deals before the crash. Many everyday working families decided that they could be successful real estate speculators. When reading the definition of speculator, they missed the risk part; higher-than-average risk in return for a higher-than-average profit potential. Most of those that you thought made a “bundle” during the boom really didn’t. They may have made out on some deals, but most of them were still “in” when the market fell. The ones who found a chair when the music stopped were for the most part, no smarter or better informed then the rest; they just got lucky.

That’s the thing with risk; sometimes you are going to win, sometimes you are going to lose. You have to be sure that you can afford to take the loss before you play.

There is an implied inference that those that really got hurt had it coming. While this kind of thinking may make you feel less vulnerable, it’s simply untrue. Many who were leading conservative financial lives have been greatly affected, through no fault of their own, by the drastic change in the real estate market.  Others, who were normally conservative people, did act outside their normal comfort zone. They were seduced by the tales of their neighbors and friends turning huge profits.

Overgeneralization is an irrational thought process that we must guard against. Whenever we observe a few people winning at something (like flipping houses), we find it easy to conclude that everyone is making a fortune and we better rush to get ours. There are two major flaws in this thinking. The first flaw is our observation is incomplete. We hear the success stories but not the failures because that is what our friends want to talk about: the times they hit it big. Secondly, we without sufficient investigation, conclude that if their deal made money, then our deal will also. Yikes, even in a boom market, profit is not guaranteed.

I was not speculating through the boom or bust but I am not so smug as to say it was because I was so smart. I know it could have very easily been me.

What has you stuck? Too much house? A job you hate? Smothering debt that is very slowly and painfully suffocating you?

The worst part of being stuck is the soul-sucking hopelessness. The feeling that no matter what you do it will always be this way. Every escape plan you try to make fails before you start. You can’t sell the house, its underwater, you can’t quit the job, you have bills to pay, you can’t make any headway on the debt because it takes every penny you make to keep things current.

I am here to tell you, you can get unstuck; there is cause for hope.

Surrender

Accept the reality of where you are. When we are in a bad place our natural tendency is to put our heads down and watch our feet shuffle. We are afraid to measure the true depth and width of the swamp. Quit fighting the feelings and accept that you are afraid, worried and overwhelmed. Measure the swamp. Calmly and clearly, state the problem.

Fly

Get the 1000’ view. The ability to seeing the big picture is vital. If you could imagine it’s someone else’s problem, what would it look like?  Find someone who has made it through the same swamp, how did they do it? Reach out.

Be Bold

Be willing to accept pain to get unstuck. Go back and review the things you “can’t” do. Chances are it is one of those things that you will need to do to be free.

When the solution is a three-year plan, we irrationally avoid starting because it seems so hard. Yet, in our avoidance, we endure three more years of pain without progress.

Start

The good news is as soon as you start working a plan, the hopelessness turns to hope and that makes all the difference in the world.