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.