Looking Back On 2008

Posted on January 1, 2009
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Although 2008 was a pretty bad year for the economy as a whole, personally it was pretty good. Both my wife and I managed to stay employed, and we did OK financially in spite of some large and unexpected expenses. Here’s a recap:

The Good

I managed to avoid all (most at least) of the bad habits that got me into so much credit card debt culminating in late 2007. I rebuilt my wife’s trust in me (still an ongoing process). I set up online access to ALL of our accounts so she can check on me any time, not just once a month when the statements come. This also eliminates the problem of statements getting “lost.”

We were able to fully fund my wife’s Roth IRA and put $7,500 into savings. This in spite of over $5,000 in repairs to our (only 5 years old and well maintained) Subaru. I may never buy a new car again. I was also able to purchase (with my wife’s permission) a really nice model railroad locomotive and a Glock 23.

We have a good budget plan in place. Although both of us are still employed, the possibility that one or both of us will lose our jobs by next June is fairly high, and we have plans in place to deal with that eventuality as well.

The Bad

Our retirement accounts lost about 40% in value. I’m not really too worried about this. We are at least 14 years away from being able to access this money without tax penalties, and I look at it as a good time to be buying.

The Ugly

I invested about $2,500 and a lot of time trying to start a second job as a Realtor. Despite the money and time, I wasn’t able to close a single transaction. Actually, 2008 was my third year of trying to break into real estate, but this year I finally promised my wife that if I didn’t have anything to show for it by year’s end, I would give it up.

Although I wish I had some monetary return on the money I spent, I did learn some valuable lessons. First, people who don’t think that Realtors earn their pay are idiots. Second, it’s very difficult to spend the time necessary to build a real estate business while holding another full time job, maintaining a family, etc. Third, I should have realized point number two after the first or second year.

In Conclusion

I feel we made good progress in our financial situation, and I personally learned (finally!!!) some valuable lessons about trying to start a second job. We are also well positioned for the coming year, regardless of what happens with our current employment. All in all, 2008 was a very good year. I hope yours was as well. If it wasn’t, then I hope 2009 is better for you.

Cheers,

Ken

No New Year’s Resolutions for Me

Posted on January 1, 2009
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I’m not making any resolutions for 2009. I know from past experience that they are largely a waste of time. I used to come up with all sorts of grand plans which were forgotten or put aside by the end of January. I don’t think I am alone in this.

The problem with New Year’s resolutions is that many treat them as a “thing” that will somehow magically transform their lives. As one of the hookers in Forrest Gump put it, “Everyone gets to start over.” Real life doesn’t work that way though. Self improvement is an ongoing process, not a once a year event. Change occurs over time, not at the stroke of midnight. It’s easy to come up with a list of resolutions, but actual change requires work. As my pastor put it in last night’s New Year’s Eve sermon, you can resolve to change or you can actually change.

I do think the end of a year is a good time to reflect over the past and look towards the future. It’s kind of silly, though, to come up with a list of things you need to change in your life in the coming year. If the changes are really important, why wait until January 1st to start working on them?

Cheers – and Happy New Year,

Ken

Useful Article, but…

Posted on December 10, 2008
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I love reading Personal Finance blogs. Usually I find good information, but sometimes I read something that just doesn’t make sense. Earlier this month, Rich Credit Debt Loan had a pretty good article on getting out of the paycheck to paycheck cycle. Most of the information is solid. Then, out of nowhere, towards the end he talks about leveraging debt to create a passive stream of income. Now, I think leveraging debt can be a good way to generate income, but what he’s talking about (getting a low interest loan and putting the money into a high yield savings account) makes absolutely no sense.

Let’s do the math. The cheapest loan I could find advertised anywhere is a 3/1 ARM at 4.125%, while the highest yielding account I could find pays 6.01%. The 6.01% is not guaranteed (it could go down at any time) and the amount of deposit is limited to $25,000. So let’s borrow the $25,000. Let’s assume that we’ll be able to get our loan at the best possible rate, there won’t be any loan origination fees, and the interest we earn will never go below the initial 6.01%. Our net earnings will be 1.885%, so on a $25,000 deposit we’ll earn about $471 per year, or less than $40 per month. I’m not a big fan of taking equity out of one’s primary residence unless it’s for a very good reason – and to me, $40 per month doesn’t seem like a very good reason.

So, how could we do better? One easy way is to use a credit card that pays cash back. For example, my American Express card pays 3% on gas purchases, 2% on restaurants, and 1% on everything else. My partial budget looks something like this:

We buy most of our groceries at Costco, so we get an extra 1% back on those. By using my American Express card, I’m not doing too bad compared to borrowing money to put into a high yield savings account. In fact, by the time loan origination fees, etc are considered, I’m probably doing better.

There are other ways you can do better than $40 per month as well. Consulting. EBay. Freelancing. Writing. All of these can earn you more than $40 per week with just a few hours invested. To me, this is a much better return for your time and effort than borrowing money to get a very low net rate of return.

Cheers,

Ken

Why I’m Not Worrying About the Economy

Posted on December 9, 2008
Filed Under Biblical Principles | Leave a Comment

If you pay attention to the news, it’s difficult to avoid hearing negative viewpoints on the economy. No matter how bad the news gets, though, I’m not letting myself succumb to worry. Why not? Maybe I should… my wife works in the casino industry, which in Northern Nevada is being hit hard by the down economy. Many casinos in Reno have started laying off dealers, while others are cutting hours. My wife’s job hasn’t been affected yet, but there is no way of knowing how long she will be able to keep her hours. My own job with the state is not safe either, given that Nevada is facing a 30% budget cut for the next fiscal year, and I’m on a year to year contract.

Still, though, I’m not going to give in to worry. It’s a waste of time, it saps my energy, and it’s in contradiction with God’s will for our lives. Consider Luke 12:22-31:

22Then Jesus said to his disciples: “Therefore I tell you, do not worry about your life, what you will eat; or about your body, what you will wear. 23Life is more than food, and the body more than clothes. 24Consider the ravens: They do not sow or reap, they have no storeroom or barn; yet God feeds them. And how much more valuable you are than birds! 25Who of you by worrying can add a single hour to his life? 26Since you cannot do this very little thing, why do you worry about the rest?

27“Consider how the lilies grow. They do not labor or spin. Yet I tell you, not even Solomon in all his splendor was dressed like one of these. 28If that is how God clothes the grass of the field, which is here today, and tomorrow is thrown into the fire, how much more will he clothe you, O you of little faith! 29And do not set your heart on what you will eat or drink; do not worry about it. 30For the pagan world runs after all such things, and your Father knows that you need them. 31But seek his kingdom, and these things will be given to you as well.

Clearly, we are not to worry. Trust in God, and He will provide for our needs. I have found this to be true from personal experience. God provides for my needs – always, even when I don’t trust in Him as much as I should. I’ve found though, that the more I trust Him, the more He provides. For example, the more I worry about extra income streams, the less extra income I actually get. Some might say that my wife and I still have jobs, so it’s easy to say “don’t worry.” What if we lose our jobs? Will I be so optimistic then? The Bible also provides guidance on this, in Romans 8:

28And we know that in all things God works for the good of those who love him, who have been called according to his purpose.

Even if my wife and I both lose our jobs, we are to continue trusting in God, secure in the knowledge that God works out all things, including the bad things, for the good of those who love Him.

When I started this blog, I really wanted to write about Biblical principles of money manage. That’s what I started to write about with this post. While I was looking for a verse to base this post on, I stumbled across these 2 though, and decided to write about (not) worrying instead. If you are in bad financial straights, I hope you find this encouraging.

Cheers,

Ken

Selling Stuff on Ebay in Today’s Economy

Posted on December 8, 2008
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I’ve done pretty well on EBay over the last couple of years. I mostly sell items that have some collector value – models railroad items, vintage electronics, etc. In other words, stuff that probably wouldn’t sell if I was limiting my sales to a local market. The beauty of EBay, of course, is that you have a potential market of thousands, and it only takes a couple of them to decide they really want your item in order to get a good price. As recently as 6 weeks ago, I got $47 for a set of 5 magazines, $71 for a small model engine part, and $153 for a CDROM of obsolete computer software.

In the past month, though, I’ve started to notice a trend – less bidding and lower selling prices. I guess the econmomy is finally starting to affect sales on EBay. As a result, I’m changing the way I do business on EBay. Here is what I’m doing different:

  1. Setting higher starting prices. Previously, I would just set my starting price at $0.99, both for the lower insertion fee and to encourage earlier and more plentiful bidding. Buyers were prevalent, and the price would soon go up to “market value” or higher. Lately though, many items might only get 1 or 2 bids. Setting the minimum price to $0.99 could very well result in the item selling for that price. Now, I set my starting price to the minimum I am willing to sell the item for. I figure the higher insertion fee into my price. It may discourage bidding, but at least I don’t get low-balled.
  2. Maximize visibility. I’m not talking about the extra cost options that EBay offers, but making it easier for buyers to find and bid on my items. Previously, I did both 5 and 7 day listings, not worrying too much about what day the auction ended, or what time. Now, I list all my auction items for 7 days, and make sure they end on a Saturday or Sunday. This gives potential buyers more time to notice my items. I also make sure my auctions end between 1:00 and 5:00 pm. This makes it more likely buyers will have time to get in a last minute bid and not be busy doing something else.
  3. Being more consistent. EBay has always been sort of a haphazard affair for me. I’d need some extra money, I’d look through my stuff to find a couple things I didn’t want or need any more, and just like magic, I’d have an extra $200 or so. Since I can no longer depend on a few desirable items selling at a high price, I’m relying more on less expensive, “bread and butter” items. It takes more work to generate a certain level of revenue this way, but the upside is that I’m getting rid of a lot more stuff than I otherwise would. I try to consistently prepare 3 items per day to list. I photograph the items and write descriptions throughout the week, then list them on Saturday or Sunday.
  4. Pulling items with no bids. One thing I’ve noticed is that some items attract a lot of watchers but no bids. Before, I would just let the auction run its course, counting on late bidders to drive the price up. Now, it’s more likely that a single bidder will get the item for your starting bid. Even when following New Rule #1 above, sometimes I feel an item has better potential than my minimum acceptable price. In such instances, I will pull the auction early if I’m within 30 hours of ending time and the item has no bids. If the item does have a bid, you are ethically bound to sell, even if you’re not happy with the price.

I still think EBay is still a good way to make money, but the old ways of doing business don’t work as well any more. The changes I have made have helped me keep my income level consistent. If you sell stuff on EBay, I hope you find these suggestions useful.

Cheers,

Ken

Avoiding a Layoff

Posted on December 4, 2008
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I’m a state employee in a state that is facing a severe financial crisis. This fiscal year, we had to cut our budget 14%, and rumor has it we will have to cut up to 30% more for the next fiscal year. Naturally, administration is promising there won’t be any forced layoffs, but a “Staffing Consultant” has been hired. It got me thinking about ways I can help insure that I won’t be one of the people cut if (when) the cuts come. If you are in a similar situation, here are some helpful suggestions:

All of this might seem obvious, but if you’re worried about keeping your job it’s easy to lose perspective and forget about the basics. I hope this list of suggestions is useful.

Cheers,

Ken

Minding My Own Business

Posted on November 24, 2008
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Have you ever wanted to start your own business? It is something I have been thinking about for a long time. There is always something that holds me back though – mainly the need to support my family. Quitting a stable, well paying job to become self employed is a risk I won’t put my family through, especially with the economy the way it is right now.

However, for me it is a dream that just won’t die. I want the freedom and potential wealth that can come from being my own boss. I’m not going to quit my job (yet) to get it though. What I’ve decided to do is make my life my business – “Me, Inc.” Here is what I mean:

I’m redefining my life in business terms. For example, instead of working for my employer, I provide services under contract to a customer. The money I receive for doing my job isn’t a paycheck, it’s revenue I receive for providing services to my employer (who is now my customer). And so on down the line in each area of my life. Maybe it sounds kind of silly, but I think redefining life in these terms will be beneficial – not only now, but when I’m ready to have a real business of my own.

Cheers,

Ken

A $100 Hour – Cleaning Out Your Space

Posted on November 18, 2008
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Do you have a hobby? If so, chances are that you have accumulated lots of stuff related to your hobby over the years. How much stuff do you have? If you’re like me, maybe quite a lot. How much of it do you think you don’t need? If you’re like me, maybe you think you still need all of it. I’m a pack rat, and I hate getting rid of stuff I’ve accumulated. However, if you go through your hobby stuff, you may just find that you can in fact find some stuff you’d be willing to part with after all. As it turns out, parting with this stuff can bring in a good amount of cash – $100 or more is easy, depending on your hobby.

For example, one of my hobbies is model railroading. I tend to only buy things I like, so I only get rid of things if I can convince myself I’m never going to use them. Last week I found a brass locomotive part – we’re talking a small piece of cast brass about 1/2 x 3 inches – and managed to sell it on EBay for $71. I’ll admit I was shocked by how much it went for went for. A few other train items I sold the same week easily put me over $100 even after paying the EBay and Paypal fees.

I suppose it could be argued that this isn’t really income, because it doesn’t take into account what I spent on the stuff originally. I disagree. The money spent is money that is long gone, forgotten about, income from an earlier period in my life. The $100 or so in my bank account sure looks like extra income for the month.

What are your hobbies and interests? Look around and see what you have. You just might be surprised at how much stuff you can get rid of, and how much money it might bring in. I’m not talking about monetizing your hobby – that will be a topic for another post – just getting rid of hobby items you no longer have a use for.

Cheers,

Ken

A $100 Hour – Cleaning up on REO Properties

Posted on November 3, 2008
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I was driving around this weekend looking for a house, and I was surprised by the number of bank owned (REO) properties I was seeing. Well, I live in Nevada, and we currently have the highest foreclosure rate in the nation, but what surprised me was that it was an older neighborhood, one where you’d think most of the people had bought before the start of the bubble. Anyway…

Even in good times, a house needs to look good in order to sell, and most of the REO properties I saw looked like crap. Dead lawns, dead trees and shrubs, tall weeds all over the yards. Damaged fences. Dirty carpet, water stains on floors, shoddy looking paint. Lots and lots of junk left behind by the former owners. I’m thinking this could be an income opportunity.

Most of these houses would sell quicker and for a better price if they were just cleaned up a little and had some minimal landscaping done. Most banks probably wouldn’t be interested in spending money on their REO properties, but the Realtor who is handling the listing just might be. After all, if the house doesn’t sell they don’t get their commission. Why not call Realtors listing bank owned properties and offer to clean them up for a fee? You may get turned down a lot, but it’s a numbers game and with the huge number of REO properties, you’re bound to get some cleanup gigs.

Cheers,

Ken

Paying attention pays off

Posted on November 2, 2008
Filed Under Saving | Leave a Comment

Last month, I made 3 simple changes to our checking account:

  1. Exchanged our ATM card for a Visa debit card
  2. Signed up for E-Statements
  3. Used the debit card for 12 transactions that we normally would have used cash for

I’m not really a big fan of using debit cards for purchases, because like credit cards, they make it kind of easy to spend more money than maybe you intended. However, our credit union has a program in which, by meeting the above 3 requirements (you also need direct deposit, which we already had) , they pay 5% APR on checking account balances up to $50,000. I’d noticed this before, but it never occured to me how much difference this could make.

We just got our first E-Statement with the new interest rate, and we made a little over $11.00 in interest for October. Woo-hoo!!! This is compared to less than 60 cents per month that we used to get. It also happens to be a higher rate than we get on our Fidelity Money Market account, in fact it’s higher than most CD’s that are currently on the market. Plus, it’s completely liquid – no 4 year lock-in. The only down side is that the rate could drop, but we’ll take it while we can. Wish I had done this earlier. Oh well, live and learn. I’ll pay better attention next time.

Cheers,

Ken

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