How Much House Can You Afford?

Posted on March 30, 2008

Or maybe how large a car payment can I handle?

Every were you turn online calculators and salesman are always telling us the maximum we can spend on any given purchase.

It’s the wrong question!

So you can afford a $200,000 house that has the extra big yard that, but it is 50% of your take home pay. Or maybe you can afford the next size SUV that gets 15 - 18 miles per gallon for a mere $450 a month. What the salesman and free online calculator from a site that is is trying to lend you money forgot to mention is that we are being set up for financial failure. What there aren’t telling us is that the payment is probably more money than we can handle. What they forget to mention is what happens when the dual income family loses one of the incomes or some extra medical bills roll in.

It’s the wrong question, but what are the right questions?

» Filed Under Materialism, Psychology of Spending, Spending

Frugality Gone Wild : Home Contents Stolen In A Craigslist Hoax

Posted on March 26, 2008

I have seen people on Slick Deals do things that skirt the line of honesty and legality in order to get a great deal. I can even relate to getting caught up in the hype of certain deal or the possibility of free stuff. I have even contemplated doing something that I wouldn’t have regretted in the midst self created frugality hysteria. But when I read about a Craigslist hoax gone wrong, I couldn’t even believe it without reading the original article.

Robert Salisbury of Oregon came home one day to find 30 people rummaging through his house and filing there vehicles with his stuff. When he confronted the looters, they repeatedly dismissed him by referring to a printout of a Craigslist ad. Somehow a computer printout from a classified listing site gave people the right to take stuff that wasn’t theirs. By the time that the police arrived, many of his possessions were already gone. He was smart enough to grab some license plates, but the police will have to try and track down the rest and the person who initiated the hoax.

What started the whole outrageous situations was someone who made a craigslist post that said Mr. Salisbury had to leave town quickly and that he was giving away all his stuff for free.

Has anyone heard of anything so ridiculous in the name of saving a few bucks?

» Filed Under Frugality, Materialism

Forget About Buying Stuff, People Matter

Posted on March 20, 2008

Think back. What are your fondest memories in life? One of my best was a 9 day white water rafting, hiking, and outdoor adventure down the Grand Canyon with my mom. A few other that come to mind are building snow forts with my Mom and friends, a little-league no-hitter, and the craziness that was my Freshman year at college. Take a few seconds and think about yours best memories…

If you are like most people the things that came to mind had little to do with stuff and a lot to do with people and experiences. We often go through so much trouble to make money or rack up debt just to get stuff. Billions of dollars in spending are finance through credit cards and debt each year, usually just to get that nicer TV or a new car. Are you going to care about that stuff in a few years?

The lesson is.. don’t go into debt for stuff, but go into debt for vacations. We’ll remember those!

Ok, so I am kidding, but question still remains “why do we get distracted by stuff?”.

» Filed Under Living with Purpose, Materialism, Psychology of Spending

How The Happy Rock Went Bold

Posted on March 1, 2008

I talked about how success requires bold decisions, so I figured I should share the decisions that where bold and went against the grain to get me were I am at today. Where am I today, you ask? Well…awesome growing marriage, beautiful wife, two wonderful children, paid off 70,000 in debt, no debt except for a mortgage, 32% equity in a home, $12,000 emergency fund, and a net worth of about $150,000 at age 29 to list a few. I am ecstatic about my as it stands, I truly am, not one complaint.

The question remains, what decisions stand out as catalysts towards achieving my dreams:

Getting Married. I have little doubt that the majority of the positive things I have accomplished in life are directly related to my wonderful wife , our accountability, her inspiration, and our friendship.

Adopting Two Wonderful Adoptions. It is amazing how much children have furthered my desire to change and grow. They haven’t been the hinderance that DINKS and single people told me they would be, in fact they have been a catalyst to positive growth.

Jesus. Some may disagree, that’s fine, but I know first hand the difference that a personal relationship with Jesus Christ has made in my life. This one is a little unique since I feel that the decision found me during my teen years rather then being something I chose to further my life.

Giving Up Debt. Wiped away $70,000 in debt, and we haven’t looked back.

Paying $10,000 Cash For Our Wedding.

Choosing A Small House Very Affordable House. This took some major discipline and teamwork to stick to this wise plan, but our lives and finances have benefited immensely. The choice for a 5 minute commute helps too! Check out my post on delayed financial gratification to see an example of how much difference it can make.

Embarking on an MBA(Master’s in Business Administration). A wonderful 2 and a half year personal journey that has set the stage for the next phase of my career and financial dreams. I have just two classes lef until I am finished!

Driving a Beater Car. My car says a lot about me, and has barely cost me a dime in 5 years.

The key is the intentionality. We must be vigilant about figuring out our goals and dreams and making decisions that align and SPEED you towards those goals. Commit to the dreams.

» Filed Under About Me, Chasing Dreams, Favorites, Materialism

Things I Didn’t Think About As A Renter - Top 10 Hidden Home Ownership Costs

Posted on February 16, 2008

Our culture constantly bombards us with the message that home ownership is the pinnacle of financial maturity and success. The problem is that there are a lot of factors and costs that are hard to anticipate as a renter. Don’t get me wrong, there are numerous wonderful benefits to home ownership like tax breaks and the freedom to do whatever you want with the property, but it isn’t necessarily the obvious winner over renting.

Below are my top ten hidden costs that I experienced since making the transition from renting:

Property Taxes – They started at $190 a month and are now $278. A 46% increase in 4 years. This is for our 900 square foot condo in South New Jersey.
Association Fees - $100 a month when we started. $200 a month now. A 100% increase in four years.
Sewer Bills - $25 a month
Maintenance Costs – Since we bought a tiny 8 year old house we haven’t much, but things like new faucets and dryer vent cleaning do add up.
Hassle Factor – When the refrigerator breaks as a renter, you call the landlord and it should quickly be replaced at no cost. As an owner you must quickly rush to the store and buy a refrigerator yourself.
Utilities Formerly Covered By Rent – When I was renting we were shielded from the true costs of thing like water and gas, but these can run hundreds of dollars a month depending on the house.
Mortgage Interest and PMI – I know there is a tax write-off, but it is depressing to see 80% of you mortgage payment going to interest. Plus, to get a tax right off you have to give the bank thousands of dollars a year. Giving your money to a charity of choice gets you the same write-off, but your money goes to a good cause. For Private Mortgage Insurance we were paying $50-80 a month, because we didn’t put 20% down. Luckily our house appreciated fast and we were able to get rid of that cost.
Closing Costs – Renters rarely realize how big a check you need to write at closing, often thousands of dollars that isn’t part of your down payment.
Desire To Upgrade and Furnish – When you rent your desire to paint and buy decorations is usually tempered, because you know the place isn’t yours. Once we had our own place, we wanted to paint, decorate, upgrade, and furnish. Often more than once in the same room.
Stuck Factor – With renting you can up and leave at any time. With a house, you have to sell before you can do anything. If the market is down or prices drop, you may even be stuck in your house or have to shell out money at closing to sell it.

Owning a house brings a lot of joy and freedom, but there are definite benefits to renting that often get overlooked when you get enamored with wanting to own a home. I know I didn’t have a good sense of what owning a house entailed. I am glad that we learned these lessons with a small inexpensive house!

» Filed Under Materialism, Real Estate

Christmas, Debt, and Spending – Our Example

Posted on December 19, 2007

In the last post I asked some questions about the nature of Christmas spending and what we could do to change. I wanted to share some of the changes that my family has undergone in the last for years to fight the consumerism onslaught and then a few lessons learned.

The Happy Rockette’s Family

To set the stage, my wife is one a five sisters. Four of them are married, and we have 8 nieces and nephews(ages 1-6) between us. We do Christmas morning with at the Rockette’s parent’s house, and everyone was buying gifts for each other and the children. I remember walking into the gift room and not even being able to sit down, because of the huge collection of gifts. I think we spent well over a thousand dollars that year in gifts.

Things had to change. We started some conversations about doing a name exchange between the adults, and a year later we did it. There was a $50-75 range for each person, each person could get quality over quantity. The following year, the children still went home with a truckload of toys. This year, we also did a name exchange between the children with a $20 cap. We will see how it works out, but it is another step in the right direction.

The Happy Rock’s Family

For my side of the family, we also went through a similar progression. A few years back we moved from buying smaller gifts for everyone to a $50 name exchange. My Grandmother still buys for everyone, but I think that is just the way grandparent’s are! This year we are not actually giving gifts to one another, but we will pool our money together to buy an animal for a deserving family in need. Click here for the Hiefer Project catalog, if you want to learn more about what they do. I think it is a solid organization with a great philosophy.

In all, we have more than halved our Christmas expenses(and stress), and we feel more fulfilled.

Tips For Changing Christmas Spending.

Here are a couple of key observations that I gained while we changed our family traditions:

Changes, especially changes to deep rooted traditions take time. Focus on the direction of the ship more than the destination. Life is a journey.
Real people are involved. Sometimes relationships are messy. People can get frustrated, upset, and offended. We need to approach each other in love, courage, honesty, and patience. You may need to spill the beans about your debt struggles, or walk your family through the exact reasons you can’t do gifts. You may even need to reassure them that this doesn’t change how you feel about them. Those type of conversations will probably deepen the relationship more than gifts ever would.
People who naturally show love through gifts will be more affected than those like me who are on the cheap miser end of the spectrum and show love in other ways. This underscores again the need for patience and love.
Shifting your focus onto those that are more needy through donations of money or services can really help change perspectives. Activities like doing Angel Tree gifts as a family really bring people together.

That is how Christmas has been changing around here, what about you?

» Filed Under About Me, Giving, Holiday Wishes, Materialism

No Thanks In Thanksgiving But I Am Grateful

Posted on November 25, 2007

The unthankful heart… discovers no mercies;
but let the thankful heart sweep through the day and,
as the magnet finds the iron, so it will find, in every hour, some heavenly blessings!
-Henry Ward Beecher

As I drove home from the second of our family’s Thanksgiving meals, I was struck by the fact that I hadn’t given thanks for much of anything. WOW, on a day that the US is supposed to collectively express gratitude for everything in our lives, I hadn’t let the spirit of the Thanksgiving change me. I was so wrapped up in the business of the day that even the prayers of Thanksgiving before meals went in one ear and out of the other.

I would love to blame the whole thing on allowing myself to be too busy, but if I am honest with myself, I am not a grateful person. Not ungrateful to the point that I abuse the blessings I have been given, but ungrateful in a “I just don’t think about it” way. I can try to justify it with soft words, but ungrateful is ungrateful.

The frustrating part is that I have so so much to be thankful for: awesome wife, child, job, wealth, energy, passion, and freedom just to name a few.

It’s time to change the orientation of my heart. I don’t want to be that person anymore. It doesn’t align with who I want to be and where my life is going. My financial dream is to give money away, and that doesn’t happen unless I change my heart. Next Thanksgiving look different, but I am not going to wait that long to change my. Now is the time.

While researching the benefits of gratitude I came across a list of four things that anyone can start right now to start producing a grateful heart :

“Maintain a gratitude journal. Emmons’ research showed that people who keep gratitude journals on a weekly basis exercise more regularly, report fewer physical symptoms, feel better about their lives as a whole, and maintain greater optimism about the future.
Create a list of benefits in your life and ask yourself, “To what extent do I take these for granted?” Some people need such concrete visual reminders to maintain mindfulness of their gratitude, explains Emmons.
Talk to yourself in a creative, optimistic, and appreciate manner, suggests Sam Quick, PhD, of the University of Kentucky. This could entail simply reflecting on things for which you’re grateful or, if you’re facing a challenging situation, seeing how it can ultimately be beneficial. For instance, having to cope with particularly difficult people in your job or neighborhood can improve your patience and understanding.
Reframe a situation by looking at it with a different, more positive attitude, offers Quick. He provides this example: Rather than seeing his 6-year-old daughter as cranky, irritable, and troublesome, a father might reach the conclusion that the youngster is tired and needs rest.”*

I am going to start the process by doing a gratitude journal entry on Sunday mornings. I will start by speaking out loud and writing down the items that I am thankful for. I will start with this small concrete measurable task and see where the growth of gratitude takes me. I know it will change my life and my perspective, and I welcome the change! The first entry in the journal will be about how I am grateful for not being grateful on Thanksgiving and the spirit that awoke me to the notion! It’s going to change my life.

*Source : Boost Your Health With a Dose of Gratitude (WebMD)

» Filed Under About Me, Happiness, Materialism

How To Get Out Of Debt Faster - Big Shovel Edition

Posted on November 18, 2007

One of the best tips for digging out from under a mountain of debt is to get a bigger shovel. Outside of finding deep meaningful motivation for getting out of debt, increasing the amount of money you put towards debt each month will probably the next biggest catalyst for overcoming debt. Note that if you haven’t truly figured out your financial purpose, you may not have the motivation to finish the job. But if getting out of debt is truly important, why only use your current income to get you there? Here is a list of some ways to create more money to help bust your way out of debt.

Cut Costs – You should be tracking your weekly and monthly expenses, and testing them against your desire to get out of debt. Things like cable, eating out, and movies are all taking away from the amount of money that you can snowball towards your debt.

Ebay, Craigslist, and Garage Sales – Often our debt gets us a bunch of stuff that we don’t need. Look around your house and consider selling everything that isn’t a necessity. Use the extra cash to put towards your debt. This step also has the added benefit of helping break the pattern of materialism that runs counter to getting and staying out of debt.

Extra Job - Yes, I know you don’t have time or you don’t want too! But deliver some pizzas or packages, shovel some snow, or cut some lawns. Remember that this is a short term solution, to a huge problem. If you change you spending behavior in the process, you shouldn’t ever have to get a second job again. You will reap the benefits of putting forth the extra energy early in the process, and then you can quit your second job and be debt free!

Ask for a Raise – Consider asking for a raise, or taking on more responsibility at work. A positive outcome would have compounding benefits for not only ditching the debt, but also for the rest of your life.

Tap into your Savings – By savings I mean liquid accounts, not things like 401k. This one is usually mathematically logical, because the interest rate on our debt is worse than the rate on the savings. Even if it isn’t, I still argue that changing your financial behavior and dumping debt will radically change you perspective and life enough that you will overcome and surpass that lost savings in no time. This one comes with a caveat though. If you aren’t truly committed to staying out of debt and changing your financial behavior, keep the money in the bank. You will probably find yourself in debt again, but now you don’t have the money in the bank.

Now go out and kick those debt reduction plans into high gear!

» Filed Under Debt Elimination, Financial Succes, Materialism, Psychology of Debt

Payments And Credit Aren’t Leading Us Anywhere Good

Posted on October 27, 2007

Often, a huge part of getting out debt and achieving financial security is removing the option of purchasing with payments and credit from our brains. See, payments set you up to stay in debt and spend more then you can afford. We end up looking at purchases through a short term lens rather then thinking about the long term impact. Breaking things down into small conquerable pieces is a great strategy for achieving goals that seem too big, but when we do that with purchases we are remove ourselves to far from the real impact of the decision.

The drawbacks of credit purchases in our lives are quite numerous, but I wanted to highlight a few.

Payments give salesman more room to create profit for themselves. We become so focused on the monthly payment that we miss the fact the loan car note was extended to 6 years, or 9% interest. Salesman would rather deal with payment people, rather than cash people.
Payments often mask the fact that we can’t afford what we are buying. $20,000 or $380 a month, which one sounds more feasible?
The items purchased with credit often go down in value faster than the principal on the loan. Negative equity is an ugly road, that isn’t going anywhere but towards disaster.
With the exception of 0% loans, payments mean you are spending money on interest. To put this into perspective, consider that on a $25,000 car loan at 6% you will pay about $30,000 for the car over five years. A $200,000 30 year mortgage @ 6% will cost you $231,667 just in interest.
Payments add stress and rob you of freedom. There was a correlation between the number of payments I had and the amount of stress that my finances caused me. Also, things like moving, changing jobs, moving to a profession you love, and spending more time with your family all become harder and more complicated. Shackles!
You don’t actually own the item you have payments on.
Each new payment makes the next one easier. You want more, because you can spread the pain out over years. In reality you can only diffuse the pain until the house of cards crumbles, or you wake up at 50 only to realize you don’t own anything.
It is quite depressing to know that the money you are earning now isn’t yours, it MUST go to someone else. Cash flow is one amazing benefits of being debt free. Think about the things you could do if you actually controlled your money and not financing companies.

I really could go on, but that is quite a list already! So, next time your discipline is wavering and you want to use credit, come back to this list and use it to renew your strength.

What problems have payments caused you over the years that I missed?

» Filed Under Chasing Dreams, Debt Elimination, Materialism, Psychology of Debt, Psychology of Spending

Change Your Child’s Genetics By Giving Up The BMW

Posted on October 18, 2007

We recently talked about financially changing your family tree as financial motivation, but for those of us needed some more convincing here is evidence that our decisions about money go much deeper than just dollars and cents. Our choices are crucially importance to our children and this offers early stage evidence that our choices can cover over ‘bad’ genetics.

The researchers “studied 109 children who had been removed from their parents’ care due to reports of abuse or neglect and 87 control children with no reports of abuse or maltreatment.” The children also had two gene polymorphisms that put them at a greater risk for depression. The researchers also assessed each child’s support system and assigned each one a score for their support system quality .

I picked up three import things from the recap of the study. First, the effects of the depression amplifiers only held true for the children who were abused and neglected. Second, children with strong support systems almost completely escaped the effects of the ‘bad’ genes. Third, genes alone weren’t likely to make a child depressed, but maltreatment alone can.

Picture the ‘bad’ genes as little seeds. Give the seeds water polluted with mistreatment and lack of support and the ‘bad’ genes flourish. Nurture them with a safe supportive water and the children could likely overcome the ‘bad’ genes. At least in this small study the age old question of nature versus nurture is answered. Nurture wins .

To me, this is truly amazing! Think about the implications. Does it change how important we view sacrificing the BMW and huge backyard, so that we can have a stay at home spouse. Do you have to work 60 hours a week to support your current lifestyle? Is your debt stressing your relationship with your spouse and your children? Maybe we are sacrificing too much? Maybe we should be giving more time and money to support those willing to adopt and provide supportive homes for maltreated children? Hopefully studies like this help to illuminate which decisions are the truly important ones in life. What do you think?