What Can you do with $1,400 a Month?

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I don’t know about you, but for me, not much. But according to the Social Security Administration, that is approximately the average monthly benefits that retired seniors were receiving as of December of 2016. This highlights the importance of having limited reliance on Social Security income later in life. It is no longer enough to have something to supplement Social Security, but it is looking more and more like Social Security itself is the supplement rather than the main source of income. Currently, we spend a third of that amount in my household for food per month. It is imperative that we plan appropriately if we want to maintain a decent standard of living. We do not have to live lavish lifestyles, while that would be nice, but it would also be rather unfortunate if we worked for 40+ years and ended up living in squalor in our old age.

Although I am relatively young, I place great value in planning for retirement. After all, due to the effects of compounding, time is not only of the essence, time is our friend, so we must start early. The more time we have, the more opportunities there are both for growth and for recovery in the event of a downturn. The time is now to build that solid nest egg. Barring an accident or illness, I have at least another 30 years of work left in me, 31 to be exact. I have been actively saving for retirement since June 2007. That is 41 years of full time work where wise lifestyle choices and prudent investments will come together to ensure that I live the life that I earned throughout my working career. Note that I didn’t say the life that I wanted. Because when it comes to being retired, you don’t get the life you want, you get the life you deserve. As harsh as it sounds, it is our reality.

Different practices both as a result of changes in our political landscape and employers’ decreased willingness to contribute to their employees lifestyle, has drastically modified retirement outcomes. There are fewer and fewer pension options for people who dedicate their lives to serving the public or helping advance companies. Most of our futures now depend on market volatility. Even those with pensions are now beginning to supplement their defined benefits with additional investments in 401ks or 403bs.

I know there is an older segment of our population that reasonably had expectations for a pension since that was the practice at the time. Unfortunately, things started changing later in their careers and they did not have the time to save enough to bridge the unanticipated gap. There are also changing factors like longer life expectancy that plays a significant role in the “nasty surprise” our seniors face when they began to outlive their funds. For example my former roommate actually told me that her grandmother outlived her retirement funds by 14 years. While she may have planned, she didn’t necessary plan to live to be 90 because back when she was in the working world, that was unheard of.

So we’ve identified the problem, but what steps are we taking to make sure we don’t fall victim to a lack of planning? Here’s what I’m doing:

Traditional IRA: I rolled over my 401k into a traditional IRA from a previous job approximately 3 years ago and today I contribute to it monthly.

401k: Unfortunately, this new job no longer offers a match but I can still save pre-tax so I started out by contributing $25 a pay period and increased it gradually until it reached 10% of my income.

Pension: I am eligible for a pension at age 55 if I work at least 10 years and the amount I am eligible to receive increases every year I work past the 10 years. I will most likely work at least the 10 years to ensure that I become eligible.

Real Estate Sales (Today): Selling real estate is a way of boosting my Social Security Income because the Self-Employment Tax that I pay out of my real estate income contributes to my social security payments.

Real Estate Sales (Later): I also plan to continue doing part time real estate sales a few years after I retire from my regular job. This will supplement my retirement income for the first 5-7 years delaying any distributions I will have to take to allow my investments to grow further.

Rental Properties: They are the gift that keep on giving. They don’t require much effort. As I get older, I will probably spend more money to outsource some of the services so I will no longer have to deal with tenants, but by then, my mortgage will be gone and my rents will likely increase so I don’t anticipate a significant drop in my margins.

Reduce Expenses: I will be doing my best to avoid debt, I will consider downsizing to one car, and my living expenses should decrease significantly as the mortgage on our primary residence will be gone.

What are you doing?

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Screen, Screen, Screen: The Real Estate Professional’s Protection Against Scammers & Time Wasters

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Disclaimer: Any resemblance to actual luxury wives, persons living or dead, or actual events is purely coincidental.

Location, location, location? If you’re a buyer yes. If you’re a real estate agent, due diligence might be your mantra. There have been stories in the news for decades about real estate agents setting up their final appointments unbeknownst to them. There are some very sick and dangerous people out there. I’ve seen cold and/or vintage cases on Investigation Discovery just like I’ve seen modern cases play out in real time on the news. Fortunately, I find that agents are becoming more aware of the importance of not doing blind showings. Furthermore, access to technology has given us the resources required to separate our personal lives from our professional lives. We can use email to get acquainted (and leave a paper trail), have a google voice number, use a PO Box or use office sharing (for smaller operations) to avoid linking any of our activities to our primary residences. Some agents have even begun to arm themselves to various degrees (mace, guns, knives) and the team model is becoming more popular, giving us strength in numbers. But not every dishonest inquiry will lead to physical harm. How do we protect ourselves against scammers?

With real estate being an appointment-based business, it means that efficiency is the key to success. We cannot afford to waste time on buyers who are unrealistic about their purchasing power. Or worse, waste time on those with no purchasing power at all, but simply seek photo-ops for social media attention where likes feed their egos but not their empty lives. I’ve had my fair share of time wasted and I will tell you it is incredibly painful. You can’t help but think of all the serious clients you missed talking & spending time with those who did not buy anything or bought elsewhere. However it can also be a liability to both your overall livelihood and your short term income.

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I was recently made aware that our resident dollar store Kardashians were claiming to be renovating a recently acquired multimillion-dollar mansion that was at some point the residence of actor/comedian Katt Williams. Perhaps in a desperate attempt to discredit my previous post about their true socio-economic status as routinely evicted squatters, they reached an apex in the web of lies they spun aggressively and without much foresight. They posted pictures and videos of the property online, including showing children playing in the pool. This would normally be very convincing, because, how many people get to hang out by a pool on 10 acres of land near prime real estate if we don’t have access to the upper echelon? Except, the pictures combined with the knowledge that the home was the residence of a celebrity, only made it easier for people to track down. The issue is that the home in question is still for sale. It was for sale at the time this post was written and it was definitely for sale when the pictures were being shared online last week showing children in the pool, while they claimed that they were settling in and renovating.

A perturbed individual with some superb detective skills (not me) was able to unravel the entire story within 24 hours. It turned out that the husband has a real estate acquaintance who was able to give them access to the property and allowed them to get a little too comfortable in someone else’s home. It has yet to be determined whether or not the showing agent was another victim of their scamming ways or a wiling participant but he was certainly instrumental in the (attempted) trickery. But I will give him the benefit of the doubt for the sake of this post & show how his lack of screening may have opened him up to liability.

Listing Agent: Within reason, the listing agent is responsible for securing the property & protecting their client’s privacy. That is why many sellers demand accompanied showings for properties over a certain price point. A listing agreement is a contract with the seller. While your primary duty is to actively market & subsequently sell for the highest price, there is a certain expectation from the seller that you will do what you can to protect their most valuable asset when they hand you the keys. After all, the house has not yet been sold, which makes it still the property of the seller & often times, their homes. Many people still reside in houses that are on the market until 24-48 hours before closing. This stunt could have cost the agent the listing, which at over $3 million, would have been quite the payday. As a seller, there is no way that I would be comfortable with continuing a business relationship with someone who failed to protect my asset. What would have happened if they began squatting & had to be evicted?

Showing Agent: Within reason, a showing agent should take responsibility for the potential buyers they bring in. While you’re not responsible for an unruly child who bumps into an expensive lamp, I cannot imagine the lack of ethics & professionalism it takes to allow 2 children in a pool at a house that is actively being marketed for sale. While the showing agent cannot control where the footage subsequently ends up, it is a clear indication that at the very least, there were no boundaries established, and at worst, he might have been a willing participant. He runs the risk of being reprimanded by his managing broker or worse, be reported to the licensing board.

This had the potential of being a PR nightmare for both brokerage firms. Rogue showing agents giving known grifters access to high end properties & listing agents perceived as careless for not keeping an eye on the foot traffic. But, could this have been avoided? Absolutely. A little bit of screening could have prevented this egregious violation of  privacy.

First, interview your prospective buyers. An 30-minute long conversation might save you many hours of driving around people with no ability to buy or those whose tastes far exceed their financial capacity. Not to mention, lies are not very hard to detect. The more outrageous the story, the harder it is to keep it from unraveling. Ask questions and if you have any doubts, ask follow up questions.

Second, request documented proof. For anyone who will be financing their purchase, ask for a pre-qualification letter. Do not accept anything older than 3 months. The most important function is to make sure that you show them homes in their price range. If someone is qualified for up to $500k, there is no point in showing homes in the $650-700k range. The secondary purpose is to discourage any window shoppers or scammers for wasting your time. The people in question have been known to forge wedding dress receipts so this might not have deterred them, but the vast majority of con artists aren’t that committed to a scam and will likely move on to someone else who isn’t going to ask those questions. You can further protect yourself by requesting a letter with a phone number on it & the name of the loan officer who issued it. The possibility that you might call the financial institution to verify, should put forgers on ice.

Third, be ready for cash buyers. Not everyone finances a home purchase. Some really well-off people buy houses cash. Scammers might try and use that to try and circumvent the pre-qualification request. In that case, demand proof of funds. If it’s true, the seller will demand it anyway when they get an offer. If they aren’t comfortable enough to provide you with that information, perhaps, they should look to hire an agent they trust.

Fourth, sign a contract. In a previous post, I discussed my unwillingness to work for free & I presume you feel the same way. A buyer’s contract is your sole protection from someone making you do the leg work, picking your brain but buying from their cousin Deedee who’s efforts did not extend beyond completing the offer contract. That particular safeguard will not protect against scammers, but the hope is that all the other barriers will prevent you from getting to that point with a scammer anyway.

Finally, don’t be gullible. Discernment is a great asset and it is time we use it to its full capacity. You are a professional handling the most expensive transaction most people will ever make in their lives. You are not a follower of a fantasy social media account desperate for a fairy tale story. You are therefore held to a higher standard and it is unacceptable for you to see and yet ignore a multitude of red flags. Question the statements and behaviors you find suspicious.

It might seem difficult to implement these rules, especially when we are eager for business, but most clients will gladly provide the required information to ensure maximum efficiency. You just have to explain that it is for your protection as well as theirs. They are more likely to respect your professionalism & your time as you’ve demonstrated the value you place on your schedule.

 

 

Solar Update – April 2017

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My favorite time of year has come! The days are longer, the snow seems to be gone for good, and birds are chirping on my way to work. Spring is upon us. I’ve always loved spring and summer, but now I have even more reasons to embrace the seasons. No, not just because the kids are out of school and there will be less traffic. Because it’s sun season! As you know, we got some solar panels last summer and we enjoyed many months of free electricity. It was truly a sad day when I had to pay for my first electric bill in months after the start of a frigid winter. These things will spoil you…

But the sun always shine eventually and, boy is it shining! My March 2017 electric bill was $38. We are retiring the heating for the season and thus expecting a much lower utility usage, until late June when we have to kick on the AC. Even then, I’m thinking that the 12-13 hours of sunlight that summers in New England graces us with should be sufficient to offset the worse of the damage. I might have reached the electric bill break even point. If so, I am looking forward to negative balances (I don’t say that very often) for many months to come so I can run my heat for free in November.

Let’s raise our glasses to sunny days, tax credits, and free electricity.

No One Tells You How They Do It

They will only tell you that they did it.

We all have that secretive side. We grow up valuing privacy & learning not to tip our hand. We are also raised to be ashamed of our mistakes and failures. Letting them define us, damage our self esteem, and allowing people, who were too gutless to even try something new, to be our judges.

This usually means that by the time we hear of a leadership or entrepreneurial  story, it has achieved great success and the less glamorous early history of struggle, rejection, and bad decisions is swept under the rug. This unfortunately sets impossible expectations of instant easy success to observers, and by the time anyone notices, the misleading version  has been told for so long that no one knows the truth anymore. Either that, or the person behind the story likes the version being told and makes no real attempt at correction.

Everyone has a blog when they’re a millionaire or once they’ve retired at 30. No one brings you along for the journey so you can see the struggle of coupon clipping, fighting with your spouse about not buying those shoes or taking that trip. No one tells you about the uncertainty they faced taking on some risky ventures, buying a particular stock or quitting their job. They want to be in the public eye only after they’ve achieved enough success to continuously control the narrative & present the version that shows no set backs. The entrepreneurs only talk about the boost in sales after going viral on twitter. No mention of the sleepless nights because they couldn’t make ends meet. The weight loss journeys are of before and after pictures with no actual journey complete with plateaus and weight gain being documented.

No one wants to take money advice from a broke blogger just like you wouldn’t take advice on how to run a bank from the CEO of Wells Fargo. But there is a difference between telling a story of hope and taking a journey. A journey is a path. Not a destination. Don’t tell people about your sales only after you’ve reached a million. Show them the months you were in the red. Let them know some days no one bought anything from you. Tell them because those who come before you need to know that, overspending once isn’t going to completely derail their early retirement dreams. Tell them so they know that the slow start to their internet business is not an mandatory death sentence. Tell them before they start thinking Rome was built in a day.

Know what you don’t know

It takes a while to figure out the things you don’t know. If we’re lucky, we learn them by observing other people and go into our first experience well prepared. If we are not very lucky, we learn the hard way by making stupid costly mistakes. But those mistakes don’t need to be repeated. We just need to do better going forward and I bet that once your ignorance starts costing you some money, you’ll remember the rules just fine.

Here are somethings I didn’t know, wish I knew and now know:

1) When you’re allowed to deduct your mortgage interest from your taxes, that also includes any points and prepaid interests you paid for the year you bought the property. Not just your subsequent monthly payments.

2) You can negotiate everything with any vendor. Not just the local mom & pop’s.

3) YOu don’t need the extended warranty. The only thing that usually breaks is always the one thing they don’t cover.

4) Insurance preys on our worst frears. Be well insured but be insured to your financial capabilities. You will be grateful for insurance when things go wrong, and trust me they will. However, they go wrong rarely (unless you’re very unlucky), so f you have more than 6 months worth of living expenses, don’t pay more per month on a $300-500 deductible if the $1,000 deductible won’t put you in the poor house. You can afford the deductible and the extra payment to the insurance company can be put to better use.

5) If no one depends on you for their livelihood, don’t buy excessive life insurance. Have enough for your family to settle your estate. A single childless person whose parents are self-sufficient doesn’t need $1 million in coverage. Who are you leaving that money for?

6) Be consistent. It is the key to success. Nothing you will ever do in life will happen instantly. Be consistent and be patient. Results take time.

7) Pick your battles. Not every war is worth fight and some wars have repercussions that last for years. The world is a big place but in networking circles, it’s microscopic.

8) Nothing lasts forever. In good times, prepare for rainy days and in bad times know that it is only temporary. I’ve been through some really tough personal times but I pushed ahead because I knew things would get better. At the same time, I’ve spent all my years since college “stacking chips for rainy days”. While I can’t control everything that happens to me personally, I can control my financial situation through adequate insurance, increasing income, saving and planning ahead.

What wisdom have your years brought you?

Gentrification: If You can’t Beat ’em, Join ’em

As a woman of color who grew up in an unmistakable “hood” in Boston (one of the fast-becoming least affordable cities in this country), friends and family who live in the inner city are part of my circle of friends. As developers big and small start noticing under valued neighborhood due to rising costs and decreasing space in the more desirable parts of town, the vilification of gentrifyers on my Facebook timeline is becoming a weekly occurrence.

My friends and I who grew up in the types of neighborhoods people in college made fun of us for being from (“do you have a bulletproof vest? Haha”) are now watching bike-riding, latte-drinking, kale chips-eating, Lulu Lemon-wearing hipsters shun long commutes, downsize and seek culture in some of the few the places our moderate-income families could afford decades ago. In fact, what makes it more comical is knowing the history of Boston. It becomes laughable when we see these people flocking back to pay $650-700k for a 3-bedroom walk-up condo in the same area their parents fought so hard to get away from after schools were integrated. Many times, on their way out, families would sell at a loss just to get rid of a property in an “undesirable” area as soon as the demographic change became obvious. Today, these same children, who needed protection or a “better” environment, are back and paying $2,000 a month in rent for a 2-bedroom 1-bath on the same block. We are looking at white flight all over again. Except, this time, the flight is coming from the opposite direction.

On the surface it would make sense why people would be upset. Taxes are going up, your landlord is raising the rent and the local businesses are becoming less affordable as aging community pillars, who can’t convince their children to take over, are forced to sell to a new comer who opens a concept snack bar that only sells $10 smoothies and $5 avocado toast. But if we think about it critically we have to agree to share some of the blame.

I understand the reality of economic disparity and the ever increasing gap it creates. I know that poverty is a difficult cycle to break, as it requires more than hard work, because it is not simply a by-product of laziness. In an inherently biased system designed to favor the rich, malign the underprivileged and support segregation in all forms, the less fortunate must be multi-talented to succeed. They have to remain stoic in the face of discrimination and underestimation. They have to face people who think less of them on a regular basis and leave each interaction with their self-esteem intact. They have to learn to do things to get them ahead in life on their own, that they couldn’t learn from their parents (managing personal finances, learning to invest, navigating the tax laws to their advantage). I get it. I’ve been there. But there are enough ‘hood success stories to demonstrate that it is not entirely impossible to achieve greatness in the face of adversity. So I have a question. Not for those who struggle still and haven’t been able to do better, but for those who have. I guess my question to all you now successful former hood dwellers: why didn’t YOU revitalize your neighborhood?

I am guilty of the same thing you are. As soon as I had enough for 20% down I moved. Not just from the neighborhood. I left the city altogether for another city in the same metro area. I couldn’t get far away enough from my old neighborhood. The parking situation during snow emergencies was a nightmare. The cat-calling as I walked home from the train station was constant. It was a food desert and I had to drive 10-15 minutes to the nearest reasonable grocery store (compared my current town, where I have 3 grocery stores, including a Whole Foods, within 15 minutes of my house). Crime of all kinds and severity was rampant. There were no dating prospects. What did I do to improve the neighborhood? The same thing the rest of you did: nothing. I took my money, my tax base and my upwardly mobile status to another area that contributed nothing to my upbringing.

You were in the neighborhood before the hipsters arrived. You had the advantage of being a local guy/gal done good and having their trust, but you didn’t buy there. You declined the offer to take over grandma’s house, because it’s in the stigmatized part of town, and are dismayed when auntie sells it to a nerdy looking fast-talker in a cheap suit who renovates and sells for triple the price.

Gentrification is not overnight. It is slow moving and takes time. Did you pay attention to who is moving in, both in terms of residents and businesses? Did you watch how many homes are being converted? If you did, it wouldn’t have taken long to realize you were sitting on a gold mine. And while you may not have the same opportunities as Mr. Developper to buy out the whole block one home at a time, you could have held on to what you already had. You could have been a landlord to at least one of those kids whose parents thought they were too good to go to school with you. But you left. In part because you actually began to believe that doing well meant you too were becoming to good for the ‘hood.

I did too. So what gives me the right to get on a soap box? I’m buying back. I’m looking for my investment opportunities in the neighborhoods that are well on their way to being gentrified but not quite done. My search is taking me on the block of over-priced gleaming condos where people with messenger bags walk home from the train station after work, head buried in iPhones posting “#urbanarchitecture” on Instagram. But I’m hunting for the ones that haven’t been renovated yet and will be giving my business only to the locals. I’m formulating my plan, you should too. The suburbs aren’t dying but people don’t get married at 21 anymore, and they need a place to live until they get married and can no longer avoid yard work. There is time.

If you’re mad about gentrification, here’s some advice: buy back or shut up.

Marriage is a Business

“When a man loves a woman…”

Did I get your attention? Good. That’s kind of what I was going for. Now that you’re here, I can get something off my chest that I’ve been carrying around for a few weeks, maybe months.

Nothing makes my ass itch like when I see someone, usually on social media make a comment along the lines of: “marriage is just a pice of paper.” If you’re wondering why someone’s simple opinion (which they are entitled to) would bother me so much, allow me to explain. The issue isn’t their opinion, but the sheer ignorance that their opinion exposes.

Marriage does not define the quality of your relationship. Marriage does not validate your relationship. Marriage =/= together forever. Marriage =/= will never leave me. Marriage does not translate to loyalty or honesty. HOWEVER! If marriage is just a piece of paper, so is your social security card, your paycheck, your health insurance, etc. Yet, I see none of these same people giving up on these things in droves. If you do, please call me because I have a bank account and routing number they can deposit all those unwanted “useless pieces of paper” checks.

As a married woman, my personal relationship with my husband is not dependent on the piece of paper we picked up from city hall for $25 on a warm June afternoon. But you know what doe depend on that piece of paper? Him giving me health insurance, me giving him dental.

Me knowing that, although he can leave, he has a responsibility enforceable by courts all over the world, towards me and any children we might have.

The security and piece of mind that, knowing we are each other’s beneficiaries of death benefits brings. Because if one of us drops dead, the immediate loss of income will not leave the other one homeless.

The $25 “piece of paper” allows us to be each other’s surrogate, which is crucial in a family of 2 working adults. He can legally speak on my behalf and I can do the same for him. That way, if I have a work obligation and can’t be present for something important, his word becomes as good as mine. Not because our relationship is superior to anyone else’s. But because our obligations became as intertwined as our interests.

So is marriage just a piece of paper? Of course. As long as you keep ignoring the financial, social, health, and legal benefits it affords us.