Wednesday, July 26, 2017

The Landlord Files: A Financial Life of it's Own

As you might recall, my partner and I have a rental property in Portland, Oregon.  It's been almost three years since we "placed it into service" as a rental, and I have to say that this rental has been a really great financial move for us.  That being said, it could have been a real disaster in terms of financial organization.

In addition to your regular bills: mortgage/rent, utilities, etc., you'll find an entire additional set of expenses that need to be tracked.  Your rental property will likely have it's own mortgage (unless you bought it outright), taxes, insurance, maintenance, and certain utilities that you'll still be responsible for paying.  Sounds like a tracking nightmare, right?  Well, it doesn't have to be...

I have a completely separate account for the financial life of my rental property. That's right, your rental property has pretty much developed a life of it's own, so it really needs an account of it's own.  I opened a separate savings and checking at the same institution that holds the mortgage for my rental property.  I also set up online banking and a direct deposit into that account.

Every month, my property management company direct deposits my rental income into the rental
checking account. From there I set up an automatic transfers to the mortgage payment.  That way, no matter how crazy my world gets, I know the payment will occur on time.

The next thing I do to keep this all organized is to log in once each month.  First I check that the payment was made.  Then I transfer a portion of what remains into the savings account.  That savings account is for "Rental Emergency Fund/Maintenance Needs."  Just like your regular financial life has emergency needs and maintenance needs, so does your rental.

In many ways I've personified my rental property.  It's got a financial life of it's own, and I've done my best to set it up to be financially independent.  It earns it's own paycheck, has it's own direct deposit, has it's own emergency savings, and occasionally has it's own emergencies.  I personally, don't use any of the money from the house's account for my own world if I feel that it's savings account is underfunded.

Another area of "financial organization" that you need to be mindful of, is taxes.  Your tax professional will be able to help you with the specifics, but being organized from the start is key.  Every dollar that is spend with regards to the house is going to impact a certain part of your return.  So, I personally only pay for things involving the house out of the house account, or via my management company.  That way, at the end of the tax year, all of those expenses are easy to locate.  They are either on the house's bank statement, or the statement that the management company sends.

By keeping a completely separate account for your rental property, you will save yourself a lot of work organizing later!

For further reading with regards to rental properties, please check out the following:

The Landlord Files: Location is Key
The Landlord Files: How do I know if this house will get a good return?

Taking Care of Me

When I think about the last 12 months in our lives (mine and my partner's lives), I realize that I feel tired.  Accomplished, but tired.  I worked 6 days a week for the majority of the year.  My partner worked full time all year, prepared taxes during tax season, had a few side gigs, and completed half of her Master's Degree.  I know that she is tired too.

We had a huge checklist of items that we wished to accomplish by the end of June: a personal savings goal, a loan payoff goal, paid for a new roof, and saved for retirement.  We got all of these items checked off the list.  It was thrilling, but exhausting.

Now we have two months off.  Well, technically, she is taking a class this summer, but neither of us are reporting to work.  By the top of September, we will have established a new set of goals for the next 10-12 months.  Until then, my goals are a bit different from what you might expect.

I am spending two months taking care of myself. It's hard to be healthy in one part of your life, but not in others.  While I can compartmentalize a great many things, I don't really believe all things can be separated.  How can I keep my financial world in order, if my house isn't?  How can I be super caring about my financial health, but ignore the health of my body, mind, and spirit?  While I would say that I am well in all aspects of my life, I feel like it is really important to take a time-out and address some things that have been on the back-burner.

My space feels neglected, so we are doing a 30 Day De-Cluttering Challenge.  I didn't create it; I've just modified one I've seen online.  I'm not working extremely hard at it.  I'm just doing one task per day, and recycling, donating, throwing away, anything that seems to make sense.  As I see things come into order in my home, I notice that there is more clarity in my mind.  I am very aware the physical clutter, clutters my mind.  I don't tend to get rid of a ton of things at once, but I do like to  selectively pare down periodically.  Seeing a few things float out of my world makes me feel somehow lighter, just like eliminating my debt makes me feel lighter.

I have scheduled all of those appointments that I've neglected over the past nine months: doctor, dentist, DMV are all on my list.  The appointments are all made and I'm checking them off one-by-one.  I mean seriously, how can I rationalize being "on top of" every financial money move, but ignore my dental exam or the renewal of my license.  While I don't enjoy most of these things, I do feel like my stress levels reduce greatly after I've completed them.  Having things left hanging over my head causes me a lot of stress, and if I can cut that off at the pass, I will.

I am doing all of those "quiet things" that fill me up and make me feel good.  I watch marathons of movies and old tv reruns of things that make me happy or feel inspired.  I am sleeping in, meditating, exercising, cooking, getting a massage, and spending time outside.  I try to do these things all year long, with somewhat patchy results.

Lastly, I am planning vacation.  Sometimes, the anticipation of travel is part of enjoyable part of the experience.  I am always careful to get a good deal, and not to spend any money that I don't have, but travel is honestly important to me.  If I had credit card debt, I would not be going anywhere, but I haven't had credit card debt in a number of years.  The major trip that is on the horizon for us, is to Stockholm, Sweden with a stopover in Reykjavik, Iceland.  The idea of this vacation brings me so much joy.  I also know that part of the satisfaction (for me) comes from knowing that it's all paid for in advance (with the exception of paying as we go for food and attractions).  There are some smaller day trips and long weekends in the words as well.  I am aware that I could save more money or pay something off by skipping the vacation.  I'm not skipping it.  I purposely worked this into our financial plan for the year.

Those of us who consider ourselves to be personal finance warriors can go months upon months without buying new clothing, or going out to dinner.  We take great pleasure in seeing our financial worlds flourish.  That being said, we need to make sure we are looking at our lives holistically.   Don't be afraid to hit the reset button. My little "me break" isn't going to undo any of the great things I've accomplished.  In fact, it will likely give me the fuel I need to go even further in the next year.

Thursday, July 20, 2017

Is a penny saved really a penny earned?

"A penny saved is a penny earned," as the saying goes.  But what does that mean?  This proverb's intent is to highlight the value of saving by suggest that the value of saving money is equal in power to that of earning it. But is it really true?

Recently, I've been combing through our budget looking for places to save money without causing any added difficulty to our lives.  I just spend one hour of my life to get a $20 monthly savings on our cell phone bill.  Can we really say that this $20 savings is the same as earning $20?

If I spent one  hour working and earned $20, I would make $20 one time and one time only.  I've really done quite a bit better than that.  I spent one hour of my time, and now I am going to reap a $20 benefit every single month.  When comparing this savings to work (aka earning), there is really no comparison.  Let's follow this example through.  This one hour I spent working to get $20 off my cell phone bill is going to benefit me to the tune of $20 every single month. Over the course of the next year, I will have reaped a $240 benefit because of this one hour spent creating the savings.  If I also spent 1 hour today earning $20 in cash, in order to make that same $20 next month, I will have to work another hour.  Over the course of the year, I would have to work 12 hours to gain the same $240 benefit that I got through one hour of time spent finding a savings.

This doesn't even begin to consider the influence Uncle Sam has on the scenario.  While everyone's tax situation is different, I typically only take home 70% of what I've earned.  So, while my $20 monthly savings really is $20 a month, the earnings might look a little different.  In order for me to take home $20, I really have to earn $28.58.

This is quite the philosophical rabbit-hole we've explored; however, I think the point is entirely clear.  Never underestimate the power of savings, especially if you can create a reoccurring savings.  If you can spend might spend less time saving money then you would otherwise spend earning it!

6 Ways To Save On Your Cell Phone Bill

Lately, I've been feeling pretty eager to find some places to save money in our monthly budget.  The difficulty is that we don't really have any nonessential categories.  While we could both stand to spend a little time and money on things just for ourselves, the truth is that we don't really have a manicure budget, or a coffee out budget.  We really tend to avoid lifestyle inflation and the unnecessary categories that go with it.  That being said, we don't have any obvious categories that we can take a chainsaw to...

...except maybe our cell phone plan...

1.  Check for Updated & Less Expensive Plans
In order to remain competitive, cell phone carriers change their plans on a semi-regular basis.  New plan offerings could provide a savings compared to what you currently have.

2.  Check for Employee Discounts
Cell phone carriers offer deals to a lot of companies to entice their employees to utilize that particular carriers services.  They even have deals with small companies.  So, don't assume because you don't work for a huge corporation that there's no discount until you've asked.  Either your carrier or your HR department should be able to tell you if their is a discount available.

3.  Don't Upgrade Your Phone
If you still have the kind of plan that offers a free phone (or highly discounted one) once your contract is up, find out what happens if you don't order a new phone right away.  I was credited $15 per month that I didn't upgrade my phone.  That being said, I went an extra year without upgrading, and saved a ton!

4.  Share A Family Plan
Find a friend (or multiple people) that are responsible and share a plan.  Plenty of people save a lot of money by having a shared plan rather than one for only their household.

5.  Ask for a Discount
I literally just did this.  I put the pressure on them.  I told them that if I couldn't find a savings with their company, I would let another company buy out my contract so that I could find the savings I needed.  Needless to say, they found me a discount.  In fact, I think they might have just created one for me, but that's neither here nor there.

6.  Don't Be Afraid To Walk
If they can't or won't get your costs down, go somewhere that will.  Carriers offer to buy out contracts all the time. Either look for an offer that will do just that, or make your move when your contract is up.

What have you done to save money on your cell phone bill?


Wednesday, July 12, 2017

The Credit Union Difference

This is a topic I've been sitting on for a while.  While some personal finance articles are about products or services that you should consider, others are about strategies that you ought to be taking.  This one is a little more philosophical by nature. Today, I want to talk with you about where you are putting your money.  I am not referring to which investment is better than another. I am thinking much more basic than that.

In the personal finance world, we all love to talk about our investments, insurance, and passive income.  However, the real foundation of our financial lives lies in the most basic accounts that we use on a daily basis.  Where are you keeping your money?

According to a recent Washington Post article over 100 million Americans are now using credit unions for their checking and savings accounts.  Are you one of those Americans?  If not, you might be on the wrong side of things.

How does it work?

In extremely simple terms, a bank's goal is to make money from consumer accounts.  Once that money is made, it is able to pay out dividends to it's stockholders.  This might be great for you if you happen to be the stockholder, as the interest and fees paid by customers are lining your pocket.  If you happen to be the account holder, then you are on the absolute wrong side of the deal.  You are paying interest and fees in order to line someone else's pocket.

A credit union works differently.  While the accounts are the same (checking, savings, credit cards, etc.), the philosophical concept is very different.  When you open an account at a credit union, you are required to open a basic savings account, typically called a "shares" account.  In this basic savings, the credit union will require that you deposit a minimum amount (typically somewhere between $5 and $25) into that account.  That minimum amount is basically frozen until you close the account.  That dollar amount has bought you one share ownership of the credit union.  Yes, you read that right.  You will be a partial owner of the credit union.  When you close the account that small portion that was previously frozen, is given back to you, and you give up your one owner's share.

What does that one share buy you?  It buys you one vote at the annual meeting.  All members of the credit union are member-owners, and invited to attend the annual meeting where decisions are made regarding the credit union's board of directors, etc.  Has your bank ever asked you to help make decisions about how it was being run?  I thought not.

Speaking of the board of directors.  In a credit union, this is composed 100% of volunteers.  These volunteers are member-owners just like you, and they are not paid.  At some point, you might even serve on this board and be even further involved in helping make decisions for the credit union.  Again, is your bank going to ask you to serve on their board of directors?

Even if you never serve in his capacity, you still get to vote, and that's very important.

What about interest rates and fees?

Credit Unions still have fees just like banks do.  The difference is what they do with them. Remember, a bank's goal is to make it's stockholders happy.  In some respect, the stockholder is a little like the bank's boss.  A credit union's boss is you, it's member-owner.  In other words, the person that has the account.  So, when they make money, they sink it into better services, better rates, better fees,etc.  Remember, the people that have the accounts, also run the board of directors, and vote at the annual meeting.  Yes, there are still fees, but you are partly helping to decide what happens with that money, and you are directly benefiting from it.  That's not how it works in a bank.

Is my money safe?

YES.  Credit Unions are Federally Insured by the NCUA.  This is similar to the FDIC.  The FDIC is for banks.  The NCUA is for credit unions.  The insurance limits and levels are exactly the same, so you don't need to worry that your money is somehow in danger.  For further information on NCUA insurance levels, click here.

What are the possible drawbacks?

I spent almost ten years of my life working in the credit union world and I've hear it all.  One of the most common things that you might hear people complain about when it comes to credit unions is the number of branches.  You may hear "My credit union only has three branches."  This is different from the banking world where there are branches on every corner.  The credit union world has become very savvy in attending to this issue.  The credit unions have come up with a system called "Shared Branching."  Credit Unions all across the country have joined this network.  If your credit union is on this network, they also have branches that offer shared branching services to others.  What does this mean for you?  As long as you have your account number and ID, you can simply walk into ABC credit union at a branch that offers shared branching services, and they will access your account at XYZ credit union for you.  For more information on Shared Branching click here.

In short, I spent nearly a decade of my life working in the credit union world.  Although I am no longer employed by a credit union, I am still a huge advocate and believer that credit unions are the way to go.  In fact, my credit union is in Oregon.  I live in New York, and I have all the access that I need.  I use mobile deposit, online banking, direct deposit, and shared branching.  My access is phenomenal; the service I receive from my credit union is amazing.  I feel like a member of the family, not just a number.  That to me is the credit union difference.

Do you belong to a credit union?  If so, what do you like about it?  If not, why might you hesitate to join one?

Friday, July 7, 2017

Credit Report Self-Monitoring

I greatly dislike debt.  If you've been reading my work, you probably already know that.  In general, I am not in favor of taking on a loan.  That being said, there are a few situations in life where you may not be in a position to pay cash for something that you need: cars and houses come to mind.  While we can debate forever whether or not you should take a loan for these things, or whether you really need them or not, the truth is that you are going probably going to get a loan when you decide you want to purchase one of them.  That is, assuming someone will give you a loan...  There I said it.  Yes, it is possible that someone might not want to give you a loan, and if they do want to give you a loan, what kind of rate will they qualify you for?  Much of this depends on your credit report.

Your credit report is basically a report that tells a lender about your relationship with debt.  Although having no debt might be great, let's look at it from a lender's perspective.  Do you think they really want to lend money to someone that doesn't have a proven track record of paying back?  Lenders use your credit report to judge you and whether or not you are able to manage your debts responsibly.  Lenders DO want to lend you money, because that is how they make money.  Equally, lenders want to make sure you are responsible enough to pay them back.  So, if you think you might want to take a loan in the future, you need to take the first step.

You need to pull your own credit report.  Many people avoid doing this out of fear. I get it.  I still get a little nervous every time. That being said, you cannot correct any errors if you don't find them.  You also don't want to find errors in the moment you are applying for a loan.

There are three main credit reporting agencies:  Equifax, Transunion, and Experian.  You are entitled to getting a free credit report from each of them every year, but you have to request it.  You can do so by going to  As I said before, the report will be free. If you want know your credit rating (the number), you will be charged for it.  This is pretty much standard.

A lot of people get very credit concerned (understandably so), and want to sign up for credit monitoring services.  If you haven't ever had a problem, you could very easily skip the fees and monitor your credit on your own.  Each of the three agencies will give you one report per year for free.  No one says you have to order them all at once, even though most people do.  I generally order one at a time.  I order one just after the holidays and mark down the date, and which company on my calendar.  Four months later, I order another (from a different agency), and so forth.  As long as everything continues to look right, I can monitor my own in this way for free.

If you feel that you've been compromised in some way, there are steps that you can take as well.

For further reading:
So, your social security number may have been compromised....

Thursday, July 6, 2017

How we slayed the $8,000 credit card dragon!

When my partner and I first moved to New York City, I was the only one working.  Our situation remained this way for more than a year before she finally found part-time work, then eventually started a full-time teaching position as well.  During that span of time, things were really tight.  We had always been avoiding the trap of two incomes, but even so, moving had cost us a lot, and our newly established rental property had some unforeseen expenses.  At this point, we had acquired about $8,000 in credit card debt.  I know, a lot of people have started in much worse situations than that, but for me, this felt like the weight of the world hanging around my neck.

Despite our one income situation, I was determined to pay it off before the start of the next school year, and we did just that. Here is what we did, and how you can too:

Budget to Zero
We literally made a plan for every dollar.  Every dollar had a name and a job.  We didn't leave an extra fifty bucks sitting there because we know that when people do that, the money gets spent somewhere, and not usually in the most ideal place.  So, that means finding the starting point, and creating a budget. Once you've accounted for everything necessary, allocate everything else to the credit card debt!

Forget Dining Out
When you have eight grand in credit card debt, you have no business dining out!  You can't afford it!  I am sorry if that sounds harsh, but it's reality and probably time to face it.  We took great pleasure in ordering our cheap $10 pizza as a Friday night treat.  It was the cheapest pizza joint in the neighborhood, and we even used the coupons.  I'm not kidding.  Your dinner out will taste better when it's fully paid for, trust me, mine sure did!

Practice Saying "I can't afford that..."
I don't care how embarrassing it is; you get used to it.  It actually becomes relieving to be honest about your money.  No one cares about your credit card debt but you, and people will ask you to do things socially that you can't afford.  Either decline, or come up with a free or cheap alternative.  Until you are out of credit card debt, you can't afford the outing.

Throw ALL Bonuses at the Debt
This includes gifts, tax returns, bonuses, you name it.  The biggest bonus you will ever get is the bonus of zero credit card debt.

No Holiday Gifts
This one sounds crazy right?  During the holidays, we found a great pajama sale, and indulged in super cheap new pj's and some snacks for an at-home movie day.  It cost next to nothing, and is one of my favorite holidays yet.  I also avoided the holiday financial hang-over that many Americans face in January.  Nope, not me!

Scrap the Vacation
This one was rough as a teacher.  I had two months off, and friends going to Ghana, Brazil, Greece, South Korea, and a number of other amazing places.  It would have been really dishonest of me to do something like that with a giant visa bill staring at me.  I did need a vacation though, just to get out of town, so I went camping a couple of times...  Super cheap, and exactly what I needed.  I planned for the vacation I needed, not simply the one I wanted.

These strategies got me out of credit card debt about two years ago, and I've never looked back!  My partner and I threw every dollar possible at the credit card debt until we slayed that dragon once and for all.  Utilizing the strategies I mentioned above made us progress much faster than we might have otherwise, even on one income.

For further details on how to eliminate credit card debt, consider the following strategies:

Debt Snowball: Eliminating Credit Card Debt
Smallest Balance First Method:  Eliminating Credit Card Debt