Little House in the Valley

It never fails, I take a few days off and I fall WAY behind! The work that was brushed off during my 3-day excursion to Arizona will most likely take me a full week to make up. This is a down fall of owning your own business or working for yourself: Work is in a stand still mode and NO PAID VACATION!

My extended family can’t really understand this, and feel a little irked that my husband and I can’t spend more time with them when we visit. They have full time jobs at companies that offer up to 4-weeks off of vacation time a year. For example, my husband’s sister has been working for a grocery company for 15 years. She gets at least 4-weeks paid vacation a year (if not more) and doesn’t worry about the missed worked when she isn’t in the office. Someone else will pick up the slack for her, or it can wait until she returns. Not that what she does isn’t important, it’s just that in a corporate setting, there is usually another person who functions in the same capacity and can handle the few weeks when she is on vacation.

Working for yourself means that it’s just you and perhaps your spouse, that handle all the client questions, concerns, new projects, etc. Even a hired employee really can’t make up for the time spent away, the client needs answers and decisions made. All you can do is hope your clients are understanding and are waiting for you when you return. Even if that means being bombarded with multiple projects and short deadlines.

Working for yourself also means that when you do finally take some time off, it’s time UNPAID. Your clients aren’t paying you to take a vacation. They pay you to finish their projects. If we do decide to take a few days off, we have to make sure we aren’t committing financial suicide: No Pay + Paying for a vacation or short trip =  less funds in the bank. In an ideal world when we have a break in work, we’d have copious amounts of cash floating around, enough for us to take a vacation. But this isn’t an ideal world. Usually, when times are slow, we stress out hoping to make all our bills for the month. Then, when times are hectic and the money is flowing, we don’t have time to take a break. Such a conundrum!

At the beginning of the year, I revised my budget based on our Quickbooks reports. Hopefully that budget will help us put extra money away during the good times to prepare for the slow ones. Eventually, if we can continue building our business, someday we’ll be able to take a stress-free vacation!

Every 6 months or so, we travel to Arizona to visit my husband’s family. We’ve gotten accostomed to making that 6 hour drive over the years. However, lately my husband really hasn’t been able to sit in the car for longer than 4 hours due to a bad back. We weighed our options for flying, and driving still was the less expensive option. So this time, we had to make arrangments to stay overnight at a motel.

Let me just say that our options off the 10 interstate are very few. The mid-point between our house and my in-law’s house is a truck stop called Blythe. If you’ve ever driven through that town, you’ll know that it’s not quaint, nice, or interesting. It’s actually pretty slummy. My husband had a frightening experience the last time he stayed overnight in Blythe driving to Arizona, so we decided to skip that town this trip. *Think chainsaw, dark parking lot, boarded up front door of his motel room.

Instead, we stopped at the next truck stop town; Ehrenberg, AZ, just on the other side of the Arizona border. Since we would just be staying the night, then leaving for Phoenix the next day, we were fine with the fact that the motel is literally centered in the parking lot of a truck stop. When I was researching our motel options in Blythe and Ehrenberg, there was a difference in price of about $10 after tax, with Ehrenberg being cheaper. It helped that Arizona’s sales tax is about 3 percentage points lower than California’s. For under $65, we were able to rest overnight, get cleaned up the next morning, and hit the road.

Of course there were cheaper options, like spending the night in our car (which is completely do-able). However, we felt that since we were saving money on air travel and a rental car, we could splurge this once on a cheap motel. Our drive back will be the entire 6-hours straight through. Driving home always seems to go quicker since we don’t have to fight the LA traffic going into LA. (Strange but true.) I would definitely stay overnight again if we had to.

Here are some of the things I researched when making my selection for a cheap, yet safe, motel:

• Location: Not far from the freeway and enough traffic to make the place seem safe. Also, mid-way or more from our destination.
• Price: A few motels in Blythe were over $100 a night, that seemed much too high for such a location. Our motel was under $65 just outside the California border.
• Reviews: I checked Trip Advisor for reviews of a few motels I was looking into. The Best Western we stayed in had over 4 stars, most people said it was clean and safe. It even had a refridgerator and microwave. The one negative review had to do with its continental breakfast, and I have to agree, it was really meager.

What experiences have you had, good or bad, with cheap motels?

I use Quickbooks (QB) religiously; I enter all of my debits, credit card charges and payments, invoices, payments towards invoices, purchase orders from vendors, etc. I don’t even own a paper checkbook register any more, I ditched it years ago and only use my QB register. I also love the income and expense pie charts and bar graphs it creates based on my income and expense categories I’ve set up. It’s all color coded to easily reflect where my money if going.

However, I realized at the end of last year, that my charts and graphs weren’t quite accurate. They were counting income that I hadn’t yet received. For instance, if I had an outstanding invoice in the month of November that was paid the following month, it would reflect that income in November, not when we received it in December. I was much more interested in the cash we had actually received for the month, not the cash we were supposed to receive. This also got a little hairy last year when I had a client pay 3 months late on an invoice. My charts were showing the income received in July, but I really didn’t get that income until October! I knew that there was a way to tell QB to show the amount when we received it, I just couldn’t figure out how.

After some digging around in my QB program, I realized that I could change it in my Preference settings. Changing the reports and graphs to ‘Summary Reports Based on Cash’ instead of accrual now accurately reflects our income. Prior to changing this setting, my January report was showing that we had received over $7,000 worth of income. However, most of our invoices hadn’t been paid yet (and I’m still waiting on payment!). After changing my setting, my graph accurately reflects that we had received almost $5,000 in income (I’m short this month!) This correction will help me refine my budget and look for monthly payment trends, such as January is a slow month, but March and April are usually great months.

Here is a screen shot of how I changed my reporting status: (Edit – Preferences)

Quickbooks Preferences

Do you use Quicken or Quickbooks? Do you utilize their graphs and charts to help refine your budget? What are the pros and cons to choosing ‘cash’ versus ‘accrual’?

Hi – this is Mr Credit Card from www.askmrcreditcard.com. Little House has written about credit on this blog and I’d thought I’d share some thoughts on how the cheap credit that became in the 2000s has led to our current financial situation. If you are looking a for credit card, please check out my best credit cards list.

Little House mentioned in her post about life before credit, how credit became more available to folks after the eighties. I would like to take this opportunity to expand on this phenomenon, especially after 2000, when the real estate market seems to have taken off. And how this easy cheap money has nearly ruined us. At the end of the day, I think there are lessons to be learned when things are cheap and come too easy for us. It almost always ends in tears.

The 90s was a decade best remembered for President Bill Clinton actually balancing the budget and having a budget surplus. It was also a decade of boom in the stock market as low commodity prices allowed big blue chip stocks to outperform earlier in the decade. It was also a decade where then Federal Reserve Chairperson Alan Greenspan made reputation for himself for having the Midas Touch. In reality (and on hindsight), what Greenspan did was simply to lower interest rates and print money wherever the first sign of economic trouble was in sight.

In 1998, after the Asian crisis and the Russian Default, Mr Greenspan lowered interest rates on fear that the US economy will slow down. Well, it slowed down a little, but the effect of low rates was a bubble created in the internet stocks and NASDAQ in particular. He then raised rates when the economy was overheating, and when 9/11 happened, Greenspan slashed rates to unprecedented levels. Rates stayed so low for so long that access to credit became really easy. There were some unintended consequences.

Firstly, it was the beginning of a housing boom that would devastate us years later. Cheap money and easy credit meant even that folks who should never have bought a home could get a mortgage. Everyone knows now that this was really the root cause of today’s financial crisis. But even folks like General Motors began their famous 0% financing. “Buy America” was deemed to be patriotic. That was also the beginning of 0% balance transfer credit cards. “Transfer your balances over because we want to make money of your interest!” – was what the credit card companies were saying. Even college students could get multiple student credit cards even with no income! Even if you had bad credit, there were cards available. Want to buy a furniture but have not saved up, there is always 0% no interest payment for 24 months financing! So rather than saving money, consumers were “encouraged to take credit”. (Note: Thank goodness Little House had very little access to credit!)

Proliferation of real estate related jobs!

One of the most damaging aspects of the easy credit of the 2000s was that the real estate boom led to all sorts of job creation, but in the wrong sectors. We had obviously a proliferation of real estate brokers, mortgage brokers, contractors, construction workers. Do not get me wrong, there is nothing wrong with job creation. But the jobs created by these “easy and cheap money” did not create products. These folks were mere middlemen whose earnings were really a tax on transactions. They did not really add value to the economy.

Next came the proliferation of real estate investment books and seminars, get rich quick schemes. All of a sudden, every one became a real estate “investor”. Everyone wanted to get a “second property” as an investment! As credit became easy, I know folks who took out second mortgages and tried to be like the big boys and invested in “commercial property”.

But almost all the jobs that were created by easy credit conditions were not manufacturing sector. In fact, we are steadily losing our manufacturing capacity to other “cheaper lower cost countries”. Therein lies the problem. We have a trade deficit (we export less than we import). We have a federal budget deficit (and Obama is proposing a budget that has a one trillion deficit this year). Listen again : ONE TRILLION DEFICIT. Can you imagine if you propose a budget to your spouse with a deficit! Put in this context, the jobs that we have created amount to nothing more than “internal wealth transfer” and did not make us richer as a nation.

I think there is a lesson here to be learned. And that is when something comes too easy, there are always unintended consequences. And if you do not understand the root causes, you will get into trouble. Let’s use a few examples.

1. Easy Money In Your Job – Many folks who got to be mortgage brokers or brokers got lucky during boom times and made lots of money. The problem when you “by chance” entered an industry that is booming is that you run the risk thinking that the good times will last forever. I know folks in Silicon Valley that made good six figures in the late 90s and have not been able to find a job that pays anywhere near since!

2. Your kids get good grades too easily – I’ve seen this a few times. Young kid does very well in math in elementary school. It comes easy for the kid. So he never learns to work hard because he or she does not have to. But there comes a time in middle and high school when the subject gets tougher and all of a sudden, they cannot cope because they never to fight through adversity in studies.

3. Large home equity line of credit and credit cards in your wallet – Many folks have gotten into this trap. Back a couple of years ago, getting a home equity line of credit and credit cards came super easy. Hence, many folks assumed that that they could be used for silly purposes without saving money – like renovating their kitchen, taking vacations!

5. Kids who excel in sports early in life – Ever seen a kid who is eight years old and you think will become the next baseball star only to see him fade away. When things come too easy, the kid forgets that to get ahead, you always have to keep improving.

Is your job merely involve a transfer of wealth in the economy?

Perhaps the biggest question we are all asking ourselves if how safe is our jobs. One good insight is to find out if the job you have adds value to the economy or are you simply a toll taker like a real estate agent. Because we as a nation had debt up to our eyeballs, it is very unlikely that consumer spending will recover anytime soon. I think you have to ask yourself if you are working for someone with a unique product that people around the world would want. For example, if you work for Microsoft or Apple or an equipment company that sells products worldwide, then at least you know that you are helping to contribute to the wealth accumulation of this nation. But if you are in any sector that depends on “consumer spending”, I think tough times lie ahead.

If you have been laid off, or are considering a career switch, kindly consider what I have said. Don’t be fooled by easy “network marketing” or any other “easy money makers”. There is no such thing as easy money. If there is, the good times never last. And we should all have learned that by now.

In another life, I will become an architect. I absolutely adore researching residential house plans, both exterior and interior. There’s so much history associated with the how and why of design. For instance, early saltbox style farm homes were mostly vertical in design from the exterior, with chopped up small rooms in the interior. My guess is that with the common-place large families of the past, each person needed their own space within the house leading to smaller rooms. This floor plan would also be easier and less expensive to heat in the winter, you wouldn’t have to heat the whole house, only one small room that the family could crowd into.

Over time with a decrease in family size, the floor plans began opening up. There wasn’t a need for so many rooms because there weren’t as many people living in the house. All of a sudden the same square footage seemed much more usable because there were fewer people utilizing the same amount of space.

Another factor influencing home design was region. The northeast is known for it’s row-style homes and cape cod architecture. Victorian also had a strong influence on architecture on the eastern seaboard.  Many of their homes include large, screened porches to keep the gnats out. With all the humidity, it’s no wonder the screens are so popular.

The mid-west homes have evolved from saltbox style farm homes to one-level ranch style. This movement, I’m sure, was due to the influence of Frank Lloyd Wright. His idea of incorporating the outside with the inside had a huge impact on homes built in the 1950’s west of the Mississippi. I especially love the homes of some of the more modern architects of his time, like Joseph Eichler and Gilbert Leong. These homes were built with the same concept, lots of windows and light, an open floor plan, and a great utilization of a central space.

Here are a few sites that have some great floor plans, no matter what style you prefer:

• Cool House Plans: They have a lot to choose from, including some small backyard projects. They also offer narrow lot floor plans.
• The House Designers: Wonderful tiny house plans to choose from. I really like the Maple Street Plan. It’s adorable! Oh, and the Rosabella. It’s a beautiful Mediterranean house plan.
• Cusato Cottages: These are the Katrina Kit homes offered by Lowes. However, I’ve never seen this site before, and it actually goes more into detail with the plans.
• Clayton Homes: They offer a lot of different manufactured plans, but I really love their i House. It reminds me of the modern architecture of the 1950’s. I’m a SoCal girl, what can I say.
• The Bungalow Company: I also love craftsman homes! See, I should really be an architect. I can’t even decide which is my favorite!

I’ve noticed that some of these sites don’t list build prices. This always leads me to believe that they may be more expensive than the sites that do list square footage price or kit home price. However, they are a great place to start looking at least! (Or dreaming in my case.)

Today Mrs. Accountability from Out of Debt Again and I are exchanging question and answer posts. Mrs. Accountability shares some personal finance choices.

After you read her answers here, go over to her site and read my answers. And while you’re at her site, take a look around and subscribe to her blog!

How many pairs of shoes do you own?

Up until one month ago I could only wear one type of shoe. A certain very comfortable, cushion-y but unfortunately very ugly men’s casual wear shoe. However, in December I embarked on a way of eating which eliminates specific foods and I am so pleased that my feet have stopped hurting! This means I can now wear my brown wedge heeled Aerosoles and my black low heeled Aerosoles, and my favorite black Route 98 sandals. So I guess that makes four pairs for me. Little House and I aren’t much for shoes, are we?

Do you use coupons?

I really don’t use coupons very often, unless I am going to Joann’s and sometimes I still end up buying nothing at all. I used to use coupons faithfully about a decade ago.

If you had $1000 to spend right now, and you could not put it toward debt or save it, you HAD to spend it, what would you buy yourself?

I would invest in a new computer. The one I have now is several years old. I recently dusted it (what a mess!) and I think one of the fans is going out on this one, so I am having my son check it for me so that I can extend its life since I don’t any money to spend on a computer right now.

How many checking accounts do you have?

Two business checking accounts (for Mr. A’s businesses), one personal checking at a credit union, and two personal checking accounts at a big name bank. The personal checking at the credit union and the second personal checking account at the big name bank don’t get used very often.

Name one of your financial goals for 2010 (that you want to complete by the end of the year).

Continue to pay down on our debt. As has been the trend, Mr. A’s businesses have been slow the past couple of months. The first couple weeks of January were also slow but in the third week it finally started picking up with several calls from repeat customers. I am very happy that we have not gone any further into debt, even with the slowdown.

Any thoughts on the state of our (United States of America’s) economy?

I try not to pay too much attention myself but I am happy that Mr. A has an interest. That way at least one of us is aware of what’s going on. I personally find it scary to see what is happening, not to mention I feel guilty that my own family is in debt, and it is frustrating to see that our country is going deeper and deeper into debt and there seems to be no way to help ourselves out of the spiral we are in.

Do you drink Starbucks or regular coffee? Or do you not drink coffee at all?

I am not a coffee drinker. I used to drink coffee very occasionally as a pick me up, but I have not had any coffee since December.

Thank you, Mrs. Accountability! Now go on over to Mrs. Accountability’s, read my answers to the same questions and take a look around!

Just the other day, Get Rich Slowly wrote a terrific post about renting versus buying property. I’ve been meaning to write my own post about this, especially since purchasing property has been on my mind now for over a year. It is also one of my goals I hope to accomplish by the end of this year or the middle of next year. However, I’m still not ready to take the plunge for a few reasons:

• Down payment: I don’t have the down payment saved up. I’d like to have at least 10% saved, which would be about $30,000 on a $300,000 home. I am really far from this goal.
• House prices: Decent homes in good neighborhoods are still selling for around $300,000. We live in a suburb of Los Angeles, so our prices are a little inflated compared to the rest of the nation.
• Fluctuating income: My husband owns his own business and it’s currently a little slow (normal for January). I work as a substitute teacher so I’m not ever guaranteed work. This will also make it a little difficult to qualify for a traditional 30-year mortgage at a decent APR.
• Indecisiveness: Lately, there are a few things about LA that are really getting on my husband’s nerves. He’s been complaining about everything: from the traffic to the grocery store clientele, to our neighbors. I’m not so sure he’ll be happy in LA in a couple of years if the city doesn’t begin to offer better services, smoother roads, or less traffic! Also, there is little hope for me obtaining a teaching job within the next couple of years with the school district I work for. They are one of the largest districts, and can’t find the money to continue paying it’s teachers. I live smack-dab in the middle of that district.

This brings me to rethink our idea of purchasing property. I know that we will eventually be property owners, I just don’t know if it’s going to be as soon as I had hoped. I have been really struggling with this new train of thought. That is until I read J.D.’s post. Basically it boiled down to what it really means to own property and is it a good investment?

Deep down I know that owning property is a good thing. If by the time of retirement, the home we purchase is either paid off or is worth more than we purchased  it for, it could be used to help us retire or move. It could function as an added security later in life. However, if we move only 5 years after we purchased our property and the market hasn’t improved, we would be breaking even if we’re lucky. In that event, we would be better off renting.

I found a great, free calculator from Yahoo.com that puts renting and owning in perspective. (I tried the NY Times link on GRS, but you have to be a subscriber to use it). Here is what the calculator figured out based on my numbers:

Rent vs. Buy Calculator

You’ll notice that based on these figures, it would be better if I continued to rent. The only thing this really doesn’t calculate is the profit earned by selling the property. I’m not quite sure how that works, but I would think that if you purchased a property for $300,000 and decided to sell 20 years later, the property would be worth more than what you paid for it. This is in sharp contrast to renting for the same period of time, there’s no profit in that scenario at all.

Again, I do intend to be a property owner myself in the near future. At least now I don’t feel as rushed or guilty if I don’t own my own little house in the valley by mid-next year.

What are your thoughts? Does this calculator factor in everything? Or is it missing the resale value somehow?

Looking to save money on groceries, I’ve been clipping coupons and purchasing items on sale. Last night, I ran to the grocery store to catch up on my weekly shopping. My local grocery store is currently under construction, so many of their items are deeply discounted to encourage shoppers to remain loyal during their rearranging of aisles. I purchased a total of 60 grocery items for an average of $1.15 per item, and it wasn’t just packets of Kool-Aid!

I started out with coupons totaling $17.00 in savings;  I  had a pile of Gatorade coupons, a dollar off Jennie-O ground turkey coupon, and a dollar off any cereal coupon. I also had a $10 off grocery store coupon if I spent more than $25.00 (more incentives to keep shopping during their construction phase). Because I made a point to only purchase items that were on sale, many of the items I purchased were reduced in price by 30% or more. My grocery list is always pretty consistent:

• cereal
• oranges
• Gatorade
• bread
• Jennie-O ground turkey
• Easy Mac
• applesauce
• Pepperidge Farms Goldfish crackers
• beer
• canned spaghetti-o’s and ravioli
• chili
• pudding cups
• diet soda

Okay, so I’m not a model for healthy eating, but these items aren’t too bad if you don’t count the carbs! During checkout, I noticed my bill shrinking dollar by dollar. Reviewing my receipt showed I saved a total of $62.00, that’s almost the amount I ended up spending. My grocery items cover a week of breakfast, lunches, and a few dinners using the ground turkey.

My coupon organizer has also been helpful during shopping. As I check off my grocery list, I quickly look through my categories to see if  I have a coupon for a similar item. If I do, I move it to the front of the pouch so I don’t forget to give it to the cashier during the checkout process. This has helped me use those soon to expire coupons. I find I’m not throwing away expired coupons as often. If I can continue saving money on groceries, I will find more money for savings! Now if only I could save money on my utilities I’d be golden.

This may seem like a strange topic..When to Give Advice, especially considering I just finished a credit eBook that gives advice on improving credit scores. However, because I have learned many things about how credit works along the way to my own financial freedom, I’ve been asked to give advice to a friend or two recently.

Just yesterday, an older woman who I’ve helped over the years, asked me what she should do about her credit card debt. Now granted, this particular case is unusual and interesting, so my answer wasn’t complete because there are so many variables affecting her life of debt. Some background on this woman to put things in perspective:  She is nearing 65 years of age and has accumulated $120,000 of credit card debt over the years. Her excuses for this behavior are plenty: her mom died (10 years ago), her husband left her (12 years ago), her dad died (4 years ago). Her excuses go on and on. Her income is generated from her family’s businesses and her ex-husband’s social security and residual income, it comes out to about $80,000 annually. On top of this income, she also has investment accounts that her parent’s left her. Basically, she hasn’t really had to earn much of her income over the past 25 years, it just sort of accumulated from relatives. Her grasp on finances has dwindled due to this and other factors.

She asked my advice about calling and asking a credit card company to increase her credit limit or reduce her APR. The reason being was that Chase reduced her credit limits on two of her cards. She has stellar payment history, but her credit to debt ratio is well over 30%. I explained this to her, as it was one of reasons listed on the Chase letter she had received. She didn’t understand why they were looking at her overall debt including all of her credit cards. Once I explained that they see her as a risk because she is using much more than her 30%, she sort of understood, but felt it was unfair. My advice to her was to call Chase and ask them to either reinstate her original credit limit or reduce her APR. My thought on this was that it doesn’t hurt to ask, the worst they can say is no. Obviously the better option is to reduce the APR.

She then asked if she should pay more towards that card, thinking it might act as an incentive to change their minds. My advice to her was that she needed to figure out what the goal was: Was she thinking she wanted to pay off the card quicker? Her answer was no. Was she thinking of paying a large portion of debt off this year due to some additional income coming her way? Her answer was she wasn’t sure. I then explained to her that if she receives this additional income she is expecting, she might want to put a large portion of it towards her debt. However, by the end of the conversation it was clear she just wanted to reinstate her original credit limit of the card.

After I hung up with her, my husband who had overheard the entire conversation chimed in that she really needs to speak to a financial consultant. She did that two years ago, but didn’t like their answers: 1) Pay off the entire debt and save up to $20,000 a year on finance charges, or 2) file for bankruptcy. But I realized what the underlying problem is that’s causing her to be indecisive: She doesn’t realize that by paying off her debt, she will be saving the money she spends on finance charges.

There are some great calculators out there, like CreditKarma’s Debt Repayment calculator. I think my next strategy with her will be to show her how long it will take her to pay off her debt with the online calculator. Maybe then she’ll realize the sooner she pays it off, the better!

What are your thoughts? Obviously, this is an unusual scenario. She makes plenty of money, but just can’t seem to see the big picture. How would my credit eBook helped someone like this 25 years ago?

Okay, so I finished my credit eBook and am now looking for constructive criticism. My pamphlet is based on personal experience as well as sound advice that I have learned over the past few years. I’m trying to decide if I should offer my eBook for free, offer it for a nominal fee, or throw it in the recycle bin! All comments are welcome. Just remember that I am a sensitive human being.

P.S. I am temporarily hosting it on the adobe site for now. Once I receive feedback and figure out how I want to offer it, I will have a downloadable link from my site to my eBook.