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Timing Our Next Investment Property

Mr. BFS and I paid off our first home in early 2013.  It has become a nice rental property.  Now we are considering when to buy another one…

Getting Pre-Approved for Another Home Loan

Our first step in this process was to look around at home loan requirements since the whole idea would have been moot if we couldn’t secure a mortgage.  I used search engines to find options, like being able to compare a range of home loans online at NPBS.  When it was obvious that the interest rates are doable for us and that we had 20% for a down payment, I applied for an investment property home loan.  We were pre-approved within a couple of days.

Keep in mind that being pre-approved for a home loan is way easier than actually getting a home loan, BUT it is an important step.

Finding Our Next Investment Property

Our next property will need to fit a very specific set of requirements.  We are looking for something within a half hour of our current home.  It also needs to be at least 1600 square feet and have at least 3 bedrooms and 2 bathrooms.  Easy parking is also a must.  Lastly, we are looking for something built somewhat recently – no earlier than 2000-2001.

In our area, a home like that can cost $75,000 or $200,000 depending on the neighborhood, condition, and a billion other conditions.  We are looking for something in the $80,000-$125,000 range that is located in a neighborhood that rents for $1100 or more per month.

Our mortgage will be around $500 a month, property taxes will be another $300 a month, and home owner’s insurance will be around another $100 a month.  That will leave us with a $900 bill per month, so the home needs to be able to rent out for at least $200 more per month so it can afford its own maintenance.

Saving More

We’re self-employed, so we are going to take a few more months to save as much cash as we can before we jump into the buying pool.  I would like us to be able to afford the 20% down payment without using the majority of our emergency savings and padding.  You never know what you will be making the following month when your main business is blog-related.  Having padding is what keeps us sane.

All in all, we won’t be closing on another rental property until at least 2015.  But I do like our current circumstances.  It’s nice to take our time to look around.  It’s nicer knowing that we can make low offers and have the time to wait until one is accepted.  We’ve always felt rushed when buying a home before.

Do you have an investment property?  How did you pounce on it?

Three Cheers for Savings!!!

Money Tree

How to Pick Your First Stock

Stock Ticker

Money

If you’re new to investing, you might be forgiven for thinking that, in order to get started as an investor, you need to start buying stock in individual companies. In fact, picking individual stocks in which to invest is a complex task that’s not for the beginning investor. It’s not easy to evaluate a company’s investment potential; in fact, it’s so complicated that most professional stock brokers have at least a Master’s degree in finance. Even then, a mere 6 percent of those who attempt to become professional traders actually succeed.

Investing in stocks is risky, too — that’s why many investors avoid it altogether and put their money in mutual funds, index funds, ETFs, real estate, and other less risky investment vehicles. But if you already have a well-chosen, diversified portfolio of ETFs, mutual funds, and other more secure investments, picking some individual stocks in which to invest is a good way to maximize your returns. While there are plenty of investing philosophies out there, you can start by learning how to evaluate a company’s financial health and growth potential. The better you’re able to do that, the better your stock picks will be — as long as you can avoid common pitfalls along the way.

Choose a Strong Company

When you pick stocks to invest in, it’s important to remember that what you’re actually buying is a piece of a company. If the company you choose does well, grows, and turns a profit, your stock will do well too and you’ll enjoy healthy returns. But if the company you choose does poorly, you’ll lose money.

So when it comes to picking a stock, pick a company that’s doing well. You can start by checking the stock market news today to look for the 52-week highs list. This list consists of the market’s highest-performing stocks, based on each company’s prospects. Not all of these companies will continue to prosper in the months or years ahead, but most will, so it’s a good place to start. You can track a few stocks over the next few weeks or months to see if their performance trends continue upward. You should also check recent news reports about the company before you invest; a buyout or other big change could spell trouble for investors.

Know What You’re Investing In

Just as you have a reason for buying certain products from certain manufacturers, you should have a reason for buying stock in the companies you choose to invest in. Ideally, that reason should be because you understand the company’s business model, know how it plans to make money, and believe that it can do so. Many people also choose to buy stock in the companies that produce their favorite products, because they believe in those companies’ potential to do well.

Investigate the Company’s Finances

You don’t want to put money into a failing company, so it’s important to look closely at a company’s finances before you invest in it. You can find quarterly and annual financial reports on the company’s website, or filed with the SEC. Look for more than just a good year or a good quarter. Look for consistency in growth and profitability over the history of the company.

Stock Ticker

Your stock will increase in value as the company makes more money, so look for long-term revenue growth, but also look for increasing profit margins. Find out if a company is carrying too much debt by comparing the amount of debt it has to that of its competitors. Look at the history of dividends paid to investors — if dividend payments steadily go up over time, that’s a good sign of robust financial health.

Avoid Common Investing Mistakes

You’ll ultimately do much better investing in individual stocks if you can avoid some common stock-picking mistakes. Start by taking expert stock recommendations with a grain of salt. Analysts are often biased, especially when it comes to their advice about which stocks to sell. Don’t let the price of a stock be the principal deciding factor in whether you buy it; a cheap stock may be cheap because the company is foundering.

When you buy individual stocks, you can expect some pretty wild swings in their prices over the course of a year; that’s often a shock to investors whose only prior experience is with funds. Look at the stock’s yearly highs and lows to see what kinds of price fluctuations to expect. Finally, just as you have a carefully-thought-out approach to buying stock, you should also have a plan for when to sell. Some people decide to sell when the price reaches a certain point, or when the company slashes dividends, for example. You’ll want to sell at a time that helps you maximize your returns. Try not to sell because you’re panicking about a market downturn.

Picking individual stocks to buy is a complicated business. Since investing in individual stocks is risky, you’ll want to put most of your savings into mutual funds or other more secure investment holdings. But, once you get the hang of it, buying and selling stocks can be fun — and a great way to earn some extra money.

Hidden Benefit of Financial Security

Money Tree

The following is a staff writer post from MikeS.  He is a married father of 2.  So, with the cat, he ranks number 5 in the house.  He loves numbers and helping people. Please leave any questions or comments below for either Mike or Crystal.

Living in the Northeast, as I do, heating my home is a significant annual expense.  Since, I have been living on my own, I have used the three main types energy, gas, electric and oil.  It has been difficult to compare the costs between the different types as the sizes of my homes or apartments have varied.  The cheapest by far was when the heat was included in the rent, but I can’t seem to get my mortgage company to cover that now.  I bring this up because it’s time to renew my oil contract for the winter.  I have several options that I can choose from and I am actually making a change from last year.  In case you have to go through a similar exercise, I’ll take you through my thought process.

The Plans

The first option is simply to have the oil company automatically deliver and charge whatever the spot price of oil is for that day.  I went this route my first winter in the house.  Having never had oil heat before, I was unsure of what to expect.  The biggest downside to this program is the spot price.  When you need the heating oil the most is when the price will be the highest, supply and demand. 

The second option available to me was a contract where there is a price ceiling.  This contract would allow the price to drop if the market rate dropped, but came with a $100 fee.  When I calculated costs, I figured the price would never drop low enough, long enough for me to recapture the $100 fee.  Again, the likelihood of the price dropping in the winter when demand is high is pretty low.  I have never used this option. 

The third option is a straight fixed price with a $50 fee.  Essentially, I reserve a set amount of gallons at a fixed price and pay when it is delivered.  This is the option that I have used for the past couple of years.  The benefits are twofold; first I know that my price is locked in, so that no matter how cold the winter is, my price doesn’t change.  The second benefit is there isn’t a large upfront cost, as I pay as the oil is delivered.  The last option available to me is similar to the fixed price, but with a few main differences.  The first is there is no fee, the second is you pay upfront and the third is the cost per gallon is $0.10 per gallon lower.

My Choice

As you might have guessed, I am going with the last option.  Reserving and paying for my oil ahead of time.  I’m buying 800 gallons, at $3.699 per gallon, which is my historical average usage over the winter.  By going with this plan, I will be saving about $130 over the plan that I used last year.  The money isn’t substantial savings, but it is certainly more than I would be earning in interest.  At best, I might be earning about $20 in interest.  A couple of years ago, I couldn’t even make this choice.  I didn’t have enough money in savings to cover that amount.  Now, I can use the money I have to save money.

Flexibility

The savings has allowed me to choose the best financial option.  It’s also what I do with my auto insurance.  I pay that in full every year to take advantage of a lower price.  Rather than pay a fee ranging between $2 and $5 a payment, I pay it all off in one shot.  As my financial position becomes more secure, I keep finding benefits that I never contemplated before.

How to Make Cash from Selling Unused Gift Cards

CC

Gift cards are a popular option for Christmas, graduations and birthdays. Sometimes they are to stores you don’t shop at. If there is no one to trade with, just sell the gift card and use the cash or store card for a place you do frequent. Keep in mind that you won’t get the value of the gift card when you sell it, but you will get about 80-percent of its value.

Use an In-Store Kiosk to Sell Gift Cards

There are kiosk locations at some wholesale department stores and some shopping malls. Depending on the location of the kiosk, you could obtain a cash voucher or a gift card for another retailer. The program within the machine reads the card for its value and offers you a sum based upon the popularity of the gift card as these can be recycled for other shoppers to purchase.

Sell Gift Cards on Auction Websites

Online auction websites do allow users to sell unused gift cards. Those bidding on the gift cards will likely try to get the card for as little as possible. Keep in mind that this was free for you and anything you get for it is a step in the right direction to getting the gift you really wanted.

You can choose to complete the sale or not based upon where the bids are. Most auction websites allow you to set a reserve price, which means that the price set is the lowest you’ll accept for the gift card.

Use Local for Sale Sites to Sell Unwanted Gift Cards

There are social media for sale groups within social media channels and of course, local online classifieds are available as well. In this situation, you’d post where the gift card is for and what the value is. You’ll receive offers and it is ideal to just take the best one offered.

You don’t have to be stuck with a gift card that you don’t want. Everyone has preferred stores and places that just don’t interest them. The resale value of gift cards is 60 to 80-percent of their loaded value. Be prepared to accept far less for the value of the card. Always be polite and thank the giver for the gift card. You don’t have to use it, but it wouldn’t hurt to check out the store to make sure there is absolutely nothing in the store before selling it off.

Items I Can’t Live Without

Debt transition

One of the ways to achieving financial independence is to hone your skill at determining wants versus needs. As you travel the journey to financial freedom, you may find yourself selling things you bought in the past, but have found that you don’t really need. We talk here often about developing “adult” money skills. These are things like being able to spend money to save money, and in this case, dealing with “sunk costs.” Selling something at a loss to reverse a bad decision shows you are able to isolate the purchase of it, and analyze the current benefit.

Materialism

Becoming less materialistic is what I’m driving at, here. But don’t confuse that with an elimination of materialism. If you want to live in a modern society and have friends, you will need to buy and own things. What you should be striving for is another “adult” money goal – spending more money in the short term to buy something that will last longer. For example, if you spend $50 for shoes that last six months, you will have owned four pairs of shitty shoes in a two year period. Compare that to the “money adult” who pulled the trigger and bought the $150 pair that are still kicking after four years. Quality vs quantity is something that money adults are able to deal with.

Now that we’ve described what I’m talking about, I want to embrace this “new materialism” and talk about some of the products I own and love. These are items that are crucial to my daily success, and because work is key to my success, a lot of these products help me with my day job.

Moleskine Notebook

I use this on a daily basis for work, to keep track of my to-do list, hours worked, upcoming weekly appointments, logins and passwords, and general notes like books I want to read. Will any notebook do? Not for me. This is one of the few times where I will specifically recommend a brand name product. The Moleskine weekly planner is the perfect size to fit in the inside pocket of a suit coat, and if not wearing a jacket, it will fit well in the back pocket of my pants. Using it has become an essential habit. So much so that if I forget to write down a to-do item inside it, it may as well not exist. If you want to get ahead in your career, using a weekly planner, in my opinion, is one piece of advice that can translate across most careers.

North Face backpack

For this item, the brand name isn’t important. What is important is that it is a high-quality backpack that I use every day for work. If you consult the fashion magazines, they will tell you that it is some type of fashion sin to wear a backpack with a suit, but I don’t care. They recommend a messenger bag or a briefcase. I’d rather have my hands free while travelling to and from the office, mainly because I need to make sure I can grab onto a strap on the train, and if I’m attacked by one of the many gangbangers who ride my train, I want to be able to easily give them a face full of pepper spray without worrying about my fashionable bag. The bag is essentially my man purse. Inside I carry my Microsoft Surface, portfolio, pens, journals, a small switchblade and flashlight, and my daily brown bag lunch.

Parker Jotter pen

This is another item that I will recommend as a brand. The Parker Jotter ballpoint pen is perfect. I continue to buy them, even though cheap throwaway pens might do the trick. The main reason is it’s solid construction and shirt clip. Yes, for some reason the clip is an engineering marvel. I’ve never had one break or fail. Another use for this pen is as a self defense weapon, Many personal safety experts will recommend carrying some type of kubotan, essentially a short and stout rod-like tool to use for striking and applying pressure to joints in order to break free from an attacker. The Parker Jotter is perfect for this because it is something you can carry anywhere without raising eyebrows like a keychain weapon. One strike to the face of an attacker will concentrate the force of your blow down to the size of…well, a pentip, causing significant pain and damage, enough for you to run away. Will it survive a strike? Probably not, but you will gladly buy another.

eBags Weekender

Yet again another specific brand-name recommendation. This bag is designed to be carry-on sized, and this fact alone has made this bag pay for itself. I have traveled internationally for up to two weeks with just this bag. It is expandable and collapsible without and hard sides, making it easy for you to jam it into those airport bag sizers and avoid a $100 checked bag fee. This bag is so well built that I can see it lasting the rest of my life. I will admit that this is probably something I can live without, but because travel is so important to me, I don’t plan on living without it. I love this product so much that I bought another.

Smartphone

In a post about moving past materialism, it is a bit painful to admit that I can’t live without a smartphone. You may recall that I recently wrote about switching to a $10 per month cell phone plan, something I accomplished by nixing the data package on my phone and switching to Republic Wireless. The great thing about these phones is that if you are at home or somewhere with a Wi-Fi connection, it works just like a phone with a data package. Making this switch has helped me get away from constantly checking social media feeds, something I now do at the end of the day at home. The hour or two I spend on my phone at night does confirm that a smartphone is something I can’t live without. I suppose what is really the draw on this product is that it is a reading device that fits in your pocket. I read a lot of informative articles and generally feel that I use it more like a newspaper. I can also read in the bathroom!

What Products Can You Not Live Without?

The moral of this post is that it’s okay to be thrifty and cheap in the spending areas of your life that you don’t care about. If you aren’t a foodie, you may not value expensive organic ingredients and exotic snacks. If you aren’t a car person, you may drive a beater with liability insurance. But it’s okay to be cheap in these areas if you allow some spending in areas that you enjoy. It is okay to buy a two hundred dollar pair of shoes if you know you will wear them for a few years. It’s okay to stay in cheap motels most of the year and then rent a fabulous villa when you make your big biennial international trip. Getting past materialism doesn’t have to be an all or nothing accomplishment. You can have fewer things and allow those things to be nicer and higher quality.

So tell us in comments: what items can you not live without?

Our Life Insurance Plan

Life Insurance

As I have mentioned before, Mr. BFS and I purchased a 10 year term life insurance policy for each of us after we decided to both go self-employed.  The reasoning was that we’d save enough in 10 years to be self-insured by the end of the policies.  Or in the unlikely event that we decided to have a child, we would want to revisit the policies anyway.

Our Current Plan

Our current life insurance policies cost us $27 total per month.  It’s $12 for me and $15 for Mr. BFS.  There is that reminder that guys tend to pass on faster.  Odd.

Anyway, the policies are for $250,000 each in case of accidental death.  It seems to only cover $37,500 each if we die from natural causes.  Even though I didn’t exactly realize this little point before, this sort of coverage suits us right now since $37,500 would cover our funeral costs and $250,000 would cover the funeral and could even pay off our current mortgage.  Or one of us could live off of $250,000 (or what’s left after the government takes its cut) for at least 2.5 years even if we completely stopped working.

Contemplating Our Options

As we get a little older, I realize that we may need to look into our options like HBF’s life insurance plans.  If we decide to have a kid, we’ll need to raise our coverage.  I’d want to make sure the surviving spouse has enough to live on with our kid for 2 years without working AND have at least a little to cover some of the larger kid expenses that will pop up like braces, a used car when they learn to drive, and even a little help with college.

If decide to stay kid-free, we still only have 7-8 years left of this plan.  We’re probably not going to be so well off to be self-insured as I thought, although we do keep healthy savings just in case.  I think another 10 year policy for each of us could do the trick though.

What do you think?  Is a $250,000 term life policy enough in your world?  What are you comfortable with?

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