Sunday, March 15, 2009

March Net Worth: Down $28k

Sheesh! It's no wonder I've been putting off this post. I'm a week late posting this and as a result, our financial picture is slightly better because of the delay. The 3-day rally on Wall Street helped to recover some of the killer losses in our investment portfolio.

Real Estate Values are More Accurate
In terms of valuing our real estate, I've abandoned Zillow altogether in favor of a more localized calculation based on neighborhood comps sold in the last couple of months. I'll outline my methods in the next post. I adjusted last month's RE values to align with my current valuation approach.

Chipping Away at Debt
On the bright side (something we CAN control), we've reduced our debt by nearly a thousand dollars in the last month. Gotta keep that Smackdown focus! I'm hopeful that we can step up our intensity in this area in the next 60 days. Kinda depends on my sales performance, since my income is 100% commission. Last month sales sucked. Partially due to the economy, but mostly it's a post-holiday seasonal thing. Looking back over the last few years, my sales in January and February have never been on par with other months.

Monday, March 9, 2009

Las Vegas is Calling Begging

We've planned our 2nd annual trek to Las Vegas for early April. This is a good time of year for us to travel to Vegas. We're nearly suicidal from all the gray Northwest days, it's warm enough in Sin City to take advantage of the hotel pools, and last but most important, there are shoulder-season deals to be had.

Last year three couples joined in the fun. But this year only four of us are able to make the trip. One of the people who was unable to make it this year finally had to opt out because she's a corporate controller and just couldn't get away from all the tax prep hubbub.

Her delayed decision not to go this year was a total blessing in disguise. We were prepared to pay $400 each for airfare and three nights in a mid-priced hotel on the strip (New York, New York). To our amazement, this tab dropped to $275 the day we made our reservations! Holy cow....the cost dropped 30%! We budget a fixed amount every year for vacations. It's not an extravagant vacation budget so I'm thrilled at this turn of events.

Hotels Have Slashed Rates
When I investigated the drop in costs I discovered that airfares haven't significantly changed but Vegas hotels have drastically dropped their rates in concert. Here's a sampling of mid-week room rates:

  • Bellagio: $146 per night
  • Mirage: $108 per night
  • Monte Carlo: $160 per night
  • Flamingo: $50 per night
  • Excalibur: $43 per night
  • Luxor: $60 per night
  • Mandalay Bay: $110 per night
  • The M: $54 per night
  • New York, New York: $75 per night

Some casinos have reported gambling revenues down by as much as 25% so it's no surprise they're all but giving hotel rooms away.

Budget-Friendly Vacation
If you're looking for a quick getaway on the cheap, check out flight/hotel packages to Las Vegas. The crazy economy is affecting us all to some degree. You might as well put the recession to work in your favor.
Photo by mandj98

Sunday, March 8, 2009

Personalize Your Blogger Header

I added a little personal touch to Bankruptcy to Boom this week.

How do you like my fantastic new header? It took me a couple hours of trial & error to add it. Despite the outcome, I've learned a little more about digging into blog editing and making wider use of Photoshop. Seems I've been on a precipitously steep learning curve since starting this blog in January. So many things to learn....only so much time!

For those of you who use Blogger and are inclined to pimp your blog a bit, here's a rundown of how I customized my header:

  • First I found a photo in my pictures file that, when properly cropped, would lend itself to a wide, short format. This is a shot I took recently from our deck:

  • Next, I opened the "Layout" tab and clicked "Edit" on "Page Elements".

This opened a new window, "Configure Header"

  • Then I went to my photo editing program and fiddled with the crop, through trial and error until I found the correct photo size to fit the Blogger header exactly. In my case, the correct dimensions were 1262 pixels wide x 150 pixels high.

  • Finally I uploaded this newly cropped image and saved the change. Note my selection of placement "Behind title and description. This kept my blog title and tagline intact:

There you have it. A brand new look. If you're using the Blogger platform, give this a try and infuse your blog with a little more of your personality.

Thursday, February 26, 2009

Can a Car Purchase Fund Double as an Emergency Fund?

Buying a replacement car is one of our goals in the coming months. Specifically, buying a used, vintage 2003 or 2004 red Solara convertible for under $12,000 is our goal.

This is my first mention of it and I haven't added it to this blog's goal list yet because I want to focus on getting rid of our debt first.

I'm prompted to write this post now for two reasons. The first is my budding case of Spring Fever. Here in the Pacific Northwest (some fondly call it the "Pacific NorthWET"), we anxiously await any sign of drizzly, cold winters yielding to the spring. Once spring is here we know our short but glorious summer is right around the corner. Summer = convertibles. Simple.

I had every reason to believe spring was making her way to Washington State when I awoke to this scene in our back yard this morning:

Bleh! OK, so my first reason really isn't that compelling anyway.

Paying Debt vs. Beefing Up the Emergency Fund
My second reason for posting this is a really terrific article I read today on Frugal Dad's blog. If you haven't read his blog yet, I would highly recommend it. He takes a thoughtful, conservative approach to personal finance and money management issues. AND he offers up some great topics. Which brings me back to his aforementioned post, Recession-Proof Your Debt Snowball.

I have been tempted to slow down our debt repayment in favor of beefing up our emergency fund. Currently, it's $1,000. This makes me a little nervous because $1,000 won't go far during a major emergency such as an extended absence from work or, worse, a layoff.

Managing the Risk

On the other hand I have to consider the recession-resistance of our income. We're certainly not unaffected by economic conditions. But we're both in positions that would likely not be cut in the healthy companies that employ us. Additionally, daughter #1 has just received her final college tuition & expenses check from us this week. She graduates at the end of this quarter. This frees up a substantial amount of monthly cash flow in our budget.

So, for me it boils down to a risk management decision. We expect to have our debt smackdown! all wrapped up by mid-summer. At that point our only debt obligations will be first mortgages on our residence and a single-family rental property. The rental property mortgage is covered by rents received. And we could pay that mortgage from our incomes if it came to that. Bottom line? Are we willing to rely on a $1,000 emergency fund for the next four months or so? The answer is "Yes".

Car or Extra Hefty Emergency Fund?
Next on our goal list is to grow our emergency fund to three months' expenses. Easy enough. But after that, our plan is to focus on saving for a replacement car for wife. She's currently driving a 1999 Chrysler Sebring with over 100K miles. Normally, I would consider this car yet "young" with lots of usable life left. But the darn thing is already beginning to nickel & dime us with repairs. From the forum posts I've read, this is not a reliable vehicle when it gets some miles under the hood.

OK, enough justification. Back to the plan. With all the focus we've mustered to pay off debt we will amass $12,000 for the shiny red convertible purchase. But until it's spent, this fund will double as a back-up emergency fund. In essence, until the $12k is spent, we will have saved enough to sustain our expenses for nearly six months. Once the car is purchased we'll be down to our three month emergency fund, poised to immediately get it back up to six months' of expenses.

What Would You Do If You Were in My Shoes?
I am very interested in your take on my plan. Given our situation, do you think this strategy is sound? Is Spring Fever clouding my brain? Please weigh in with your opinion.

Tuesday, February 24, 2009

Property Taxes Up 54%!

Oh, man! I knew this day was coming. The day when I would open my real estate property tax statement for our rental property and suck the air out of the room.

And suck I did. The property taxes on this rental increased 54% from 2008 to 2009, from $998 to $1,537.

In all honesty I can't say that the dollar increase in our county property tax was a total shock. But it's one thing to have a sense of what's to come and quite another to see it printed on a statement.

Assessment Methods Differ
The reason for my tempered expectations lies in the way our county assesses property quadriannually...a fancy word for "every four years". The assessor's office divides the entire county into quadrants and reassesses property in each quadrant only every four years. In Washington State's 39 counties, 18 assess annually, 1 biannually, 1 triannually and 19 counties assess real estate property quadriannually.

On the positive side, property owners can expect some consistency in their tax bill....for four years, anyway.

Dodging the Tax Bullet...Temporarily
But this assessment method creates some interesting scenarios in quickly fluctuating markets. Take the current real estate market for example: after several years of strong growth, home prices have slumped. (Interestingly, the lower end of the market in this area - around $200k - has held values much better than homes in higher price ranges.) According to Zillow, my property has increased 41% in the last five years. While I was basking in the glow of healthy appreciation, my property taxes remained essentially at 2004 levels. I've been getting a free ride for four years. Sweet!

But wait! Back to Zillow valuation changes. According to them my property value has dropped 1.5% (-18% annualized) in the last 30 days. What if property prices continue to decline over the next four years? Not only will my gravy train have moved on to another station, but I'll be paying taxes on an "inflated" value until 2013. Sucks!

If an owner holds a property long term, this whiplash effect evens out. But this assessment method is killing those homeowners who recently bought property and leveraged themselves to the hilt. A 50%+ increase in property taxes could be the proverbial straw for them.

Tuesday, February 17, 2009

Canon Customer Service Rocks!

This post is off topic. It has nothing to do with debt reduction, real estate or personal finances. However I can't resist a great customer service tale, especially when I'm the beneficiary. Besides, this sort of ties in with my recent post. Read on:

A year ago my beloved Canon Powershot A70 began doing funny things. The LCD viewer was getting grainy and often faded to black.

A friend informed me that this was a commonly recurring problem with Canon digital cameras and that the company would probably repair it for free.

Encouraged, it off and did nothing for a year. But I got my buns in gear this month and decided to get the camera fixed. I was pleasantly surprised....shocked the incredibly responsive customer service I received from the folks at Canon.

Judge for yourself. Here's the timeline of my repair experience:
  • Sunday, Feb. 1st - I searched for repair info on the internet and fired off an email to Canon USA
  • Sunday, Feb 1st - 2 minutes later, Canon responded with an automated acknowledgment
  • Sunday, Feb 1st - 10 minutes after my first contact, I was contacted via email by a customer service tech who acknowledged my problem and asked me to run a simple troubleshooting routine to isolate the problem.
  • Sunday, Feb 1st - I ran the test and responded in about 15 minutes to the tech's request.
  • Sunday, Feb 1st - 34 minutes after my initial contact, I received another email from the tech explaining that I would be receiving a prepaid UPS return label and a return authorization form from Canon USA.
  • Tuesday, Feb 3rd - I received, via email, the return label, an online link to track my shipment, shipping instructions and a list of the UPS free drop off points nearest to my house.
  • Wednesday, Feb 4th - I dropped the prepaid package containing my camera into the UPS stream and received a short email survey, asking about my tech support experience.
  • Wednesday, Feb 11th - Canon USA notified me that they received the camera for repair.
  • Friday, Feb 13th - I received an email that repairs were now complete and the camera had been shipped back to me.
  • Monday, Feb 16 - I received my newly repaired camera, shipped 2-day delivery!
This afternoon, I was happily snapping photos of my photogenic wife. Here's a summary of one terrific customer experience:

  • Costs incurred by me: $0
  • Number of times I was contacted by Canon USA: 7
  • Number of years my camera was out of warranty: At least 2
  • Number of days from my first inquiry to taking receipt of my repaired camera: 15
We read and hear so many stories about bad customer service, rude company representatives, and lackadaisical attitudes toward the consumer. I'm heartened by companies who care enough about their business and their customers to put remarkable service systems in place as Canon USA has done. They got it right.

Small businesses have gotten it right for years. This experience gives me great hope for the future of large business in this country.

Sunday, February 15, 2009

Debt Smackdown! Update

Time for an update on our debt reduction progress. It's been a month since I heralded our goal to pay $20,815 in debt.

We're a little over 1/8th of the way to achieving our goal. Extrapolating our progress into future months would put us smack dab into *debt free status by mid-September, 2009. Ever the optimist, I'm predicting we'll beat that handily.

By publishing this information I'm finding I think about being debt-free more than ever. Socrates was on to something when he said:
The unexamined life is not worth living.
Consequently, I've come to the conclusion that blogging changes behaviors. In my case, I'm grateful because I very much like the new and improved, financially astute Boomer.

Here's the detail of our progress from the original January post:

medical debt (orthodontist) Paid in full
2) $6,887 $4,676 credit card debt
3) $13,567 2nd mortgage on the SFR rental.

*debt free, that is, except for first mortgages
Photo by w00kie

Saturday, February 14, 2009

Secret Service: Hidden Systems That Deliver Unforgettable Customer Service

I just cracked Secret Service: Hidden Systems That Deliver Unforgettable Customer Service, by John R. DiJulius a couple of days ago.

I'm in the B2B sales field so I'm always looking for methods to get a leg up on my competition. Besides, who doesn't want to be part of amazing customer service, whether we're providing it or receiving it?

I've read several interesting rants relating crappy customer service lately. Some of the experiences are doozies (great word....highly underutilized, no?). While reading those customer service horror stories fill us with righteous indignation, I'm more interested in how I can contribute to the culture of amazing customer service in our economy.

I'll let you know my judgments on this book when I finish it. Until then, I'm interested in hearing your experiences of great customer service. Has a business gone out of it's way lately to make you feel valued? Do tell!

Wednesday, February 11, 2009

Bailout Haiku

oh dear granddaughter
we're a little short this month
float us a trillion?

Saturday, February 7, 2009

February Net Worth (-$19,815.90)

We had a mixed bag of results last month. Our investment and RE holdings took a substantial hit to the tune of about 2.25%. OUCH!

I've read several discussions about how to properly value RE in the context of calculating net worth, but for my purposes, I'm most interested in the comparative values from month to month. We don't anticipate selling either property anytime soon. So for all its shortcomings, I've chosen to use Zillow. I think the site offers accurate trends within a given market.

Still, it's interesting to compare Zillow with other RE valuation sites and see the sometimes vast disparity in values. I'll write about that topic in a future entry.

What's most heartening is the nearly $2,000 of our medical and credit card debt paid off over the last month. Our debt smackdown is on!

Monday, February 2, 2009

Home Sales Are Normal

Insightful article in the January 2009 issue of Financial Focus. The piece, written by Greg Sweeney, CFA , delves into historical home sales data in the last 20-year and 40-year periods and how they compare to the most recent annual home sales report. Read it here.

Put into historical perspective home sales in the most recent period are normal. He writes:
"Going back to data for home sales from 1969 through today, readers may find it interesting that annual existing home sales averaged 3.54 million units per year. Bringing the data more current, from 1989 through today, average existing home sales were 4.28 million units a year. Strip out the time period from 2003 to 2007, which featured excessive sales, and the previous 20 years’ home sales averaged 3.86 million units. The latest annual home sales report shows 4.02 million home sales, consistent with both 40-year and 20-year averages."
What he doesn't mention in the article is the period for which the latest annual figures are reported. I'm assuming it's 2008.

Keep in mind, these stats cover existing home sales, excluding new construction. As any home builder is painfully aware, we have a glut of new home inventory in America today. Still, SOMEONE is buying existing homes.....a lot of them.

To my way of thinking, the long view provides us with some much needed perspective. Those of us with perspective find some sense of peace in the cyclical nature of the world around us.

"Every generalization is dangerous, especially this one. "
-Mark Twain

-Photo by lazlo-photo

Saturday, January 31, 2009

WaMu's Fate Sealed 10 Years Ago

What were you up to in 1999? Hopefully not setting the course of your own destruction, as was the case with Washington Mutual. Once known as "Friend of the Family" and purveyor of hilarious ad spots, WaMu's failure left a gaping hole in Seattle's economic fabric.

Kirsten Grind wrote a terrific piece for The Puget Sound Business Journal about the demise of WaMu. If you want clear insight into the bank's slow slide into self-destruction, read her article, "Why WaMu?, Insiders detail reasons for WaMu's failure". Read it here.

The writer is dead-on with her assessment. How do I know this? Wife worked in a management capacity at WaMu for 15 years. Fortunately, she left the bank in 2007. Her comment after reading the article? "I KNEW something changed in 1999!"

Her assessment of the tipping point? When Craig Davis was appointed to run the mortgage banking division. To put it her way, "His incompetence was exceeded only by his hubris."

As is the case with any post-game analysis it's much easier to see the big picture in hindsight. Question is, what can you and I learn from the downfall of the largest thrift in America?

Thursday, January 29, 2009

Frugal is Cool: The Pendulum Swings

How easy is it to get so wrapped up in the apocalyptical financial headlines that we lose perspective?

Where's the good news in this financial crisis, anyway? I believe the best that will become of this historic time will be the renewed appreciation for thrift, conservation, and delayed gratification.

Our collective national psyche has been rocked to the core. Which is a good thing.

Meghan Busch from Bigger Pockets wrote a piece a few days ago, "Getting Back to Basics", which is well worth the read. Pure gold.

J.D. from Get Rich Slowly posted a piece in recognition of National Thrift Week. His article personifies this pendulum swing by comparing corporate titans' lifestyles: : "Which America? The Possibilities of American Thrift". Also well worth the read.

J.Money of Budgets Are Sexy fame posted a piece today, "Does the Financial Crisis Have a Silver Lining? (Q&A)". By the way, if you haven't subscribed to J. Money's blog yet, check it out. He manages to present thoughtful, poignant PF info in such a fun, irreverent way that he'll have you cracking up as you achieve PF enlightenment. Great blog!

What's your take on this shift? Do you feel it? What have you changed in your life in response? Do you see it as a change for the better?
Photo by Sonneteer.

Wednesday, January 28, 2009

Commissioned Sales Are Where It's At

As I mentioned in a previous entry, my income is derived from working for straight commission. I've been earning a living this way for ages, so I'm used to the ups and downs from month to month.

Still, I love the occasional upside surprises. I just discovered I had underestimated my income this month (from December sales) by $1,500!


Photo by kiskisbreeze

Wednesday, January 21, 2009

Financial Goal #2: Foundation Building

I've been thinking about my financial state of mind lately and an old, fuzzy memory bubbled up from when I was about 6-years old.

My parents made my sister and I attend Sunday school. This activity fell under the category of "Do as I say, not as I do".

A rickety old church bus would come by to pick us up. I would go to great lengths to avoid getting into that thing. Once aboard, I knew my Sunday morning would be spent in a tortuous, stuffy room being subjected to a lot of metaphors and parables that my young mind just couldn't grasp.

Sometimes, on Saturday nights, Mom and Dad stayed out a little late partying with their friends (cue Dean Martin music), thus having a tendency to sleep later that normal Sunday mornings. So, often my best strategy was to not make a peep in the house until the yellow monster roared past our house without our young souls aboard. Do you know how difficult it is for a 6-year old boy to lie in bed, motionless, for what seems an eternity? OK, you get the picture.....

When I wasn't able to dodge the bus and was hauled off to that church basement classroom, there were certain activities that were always part of the fare. One in particular was a song we sang about two men building their houses on rock and sand respectively. It was one of those hand gesturing songs. Being a kinesthetic learner, I'm sure all the corresponding hand-gesturing-while-singing burned the experience into my little, cartoon addled memory. Fist on fist represented the wise man building his house on a foundation of rock; wiggly fingers in a downward arc depicted the fool's house being washed away with the sandy foundation. (Guess there were no strict building codes in the Biblical times.)

Some lessons in life need to percolate for a while before their significance comes to bear; sometimes it takes nearly a half century. Of course I get the theological lesson our dear Sunday school teacher was trying to impart. But like many principles in life, this one is coming home to roost financially in 2009.

Wife and I have never been ones to build a large emergency fund. We were always too impatient to go through the process (there's stuff out there to buy you know!) and we'd always figured that if an emergency did arise, we'd tap into one of our generous lines of credit. The folly in that line of thinking, of course, is that we'd be post-emergency with a huge debt hanging over our heads. And perhaps the nature of the emergency would be such that it could have far-reaching effects such as an injury or long job interruption.

This recession has shaken me out of my foolish reverie and forced me to take a hard look at the tenuousness of our financial situation. We look good, and smell good but we're 60 days from potential financial disaster. The lessons are all around us.

So, this year our second financial goal behind debt reduction is to put 3 months of expenses into savings. This is only a start for our emergency fund. (By the way, we currently have $1,000 squirreled away for small emergencies.) After we accomplish Goal #3, to be discussed in a later post, we'll add to our emergency fund and bring it up to the equivalent of 6 months expenses.

Like a rock, Baby!

Thursday, January 15, 2009

Financial Goal #1: Debt Smackdown!

We began budgeting last fall so we have a great handle on our expenses and monthly cashflow. Wife is salaried but I'm straight commission; makes it a little tough to budget but my income has been commission-based for years and I'm used to the roller coaster. The numbers have been crunched and now it's time to apply focus and discipline to the process.

Our #1 goal this year is to eliminate $20,815 of debt.

1) $384 medical debt (orthodontist)
2) $6,887 credit card debt (just plain dumb)
3) $13,544 2nd mortgage on the SFR rental.

The strategy is quite simple. Every available extra dollar will go toward debt reduction until we've ground that bugger's face right into the sweat-stained mat. I'll get one of those bar graph doo-dads up as soon as I figure out how to get it done. Stay tuned....
Photo by RJL20

Saturday, January 10, 2009

Net Worth: Finding the Benchmark

Before I get into my somewhat checkered financial history, I feel it's appropriate to set our financial benchmark for the beginning of the year. I have set goals for 2009 and beyond, which I'll detail in a later post, but it's critical to know where we stand now.

Anyone share our trepidation about opening investment account statements? The bulk of our investment portfolio is my wife's (we were married at my financial nadir....apparently she saw some potential here.). She didn't have the heart to see the carnage wrought by 2008 financial markets. But I forged ahead and gathered all of our financial records, recording them in Yodlee Money Center. Thanks to My Money Blog for the tip.

Most heartening to me is our SFR rental property. We have quite a bit of equity residing there and are fortunate to have the property generating a positive cashflow. Rental properties in our area are in high demand. As I mentioned in my last post, we just completed an extensive remodel on the property, so we can now reap the harvest of our 5-1/2 months of hard work.

Review of "Fix em Up Rent em Out" by Terry Sprouse

I recently ran across this book after reading Terry's blog. In fact, I just finished reading it today over my morning coffee.

I recommend this book for any aspiring (or greenhorn) real estate investor. Having just completed my first fix up, I learned much from Terry's methods but I especially related to his philosophical approach to life in the world of real estate investing. In fact, one might subtitle this tome, "Zen and the Art of Rehabbing".

Blended with this extremely practical and useful guide to finding, fixing and successfully renting properties are the intangibles of rehabbing and landlording. Terry waxes about the pride he feels from taking on and completing a repair job and the confidence that builds for tackling more complicated tasks.

Two parts of this book alone make it worth adding to your REI library:

Chapter 9, "Let the Tax Law Help You Make Money" was invaluable to me. As I mentioned before, my wife and I just completed an extensive remodel in our SFR rental. Along with my sense of pride for completing this daunting project, I have several thousand dollars of receipts stuffed in a file folder. He clearly laid out the difference between repairs and improvements how the IRS treats each category. Thank you Terry!

The reference sections in the appendices are as complete as they are varied. Especially helpful to me was the list of books the author consulted to write this book.

I encourage you to add this book to your REI library. It's a keeper.

Thursday, January 8, 2009

Welcome, Dear Reader!

I've been toying with the idea of blogging this year. Since I purchased my first share of Pfizer stock in high school I have been fascinated with all things financial. You'd think I would have built my profession around this passion. In retrospect, I'm glad I've made it my avocation instead. Nearly 40 years later, my fascination has remained steadfast.

What do I hope to accomplish here? Here's my short list:

  • Give some insight into how I got into financial trouble nearly ten years ago
  • Share some shreds of wisdom I've learned over the years
  • Chronicle my progress toward financial freedom
  • Garner ideas and strategies from those of you generous enough to comment
There are hundreds of personal finance blogs out there. I hope you find this one engaging enough to add to your blog-reading library.