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Why own a home vs renting

September 18, 2011 by Jeff Davidson 9 Comments

owning vs renting your homeRenting vs. Owning a home which is better? Recently I seen some tweets and an article stating that renting was way better and less of a hassle. I for one strongly disagree for several reasons. Number one being money. Some say that a house has to many expenses and to hard to maintain, while renting you can just call your landlord to fix what ever breaks and every thing is cheaper. While yes you are responsible for the upkeep of your home I believe that when you are renting you are throwing your money away. Ok that may be harsh, you are at the least giving your money away instead of keeping it for yourself.

Let’s look at it this way. For ease of math let’s say you are paying $1,000 a month renting your home and you live there for 30 years. You just gave some one $360,000. After the 30 years you can continue to rent, paying that $1,000 a month, but in reality rents do increase so you will most likely be paying a lot more. Yes you can move and find a lower rent but over time it will go up.

Now let’s say you purchase a home and again for the ease of math you are paying a mortgage of $1,0000. At the end of the 30 years you have paid off this house. You can continue to live here and yes you will have to continue paying property tax but eh it’s no $1000 a month. Most important thing you do have is property which is more than likely worth quite a bit more than your buying price instead of giving someone $360,000 you more than likely have that much in equity now. You can borrow against it or sell it and use it towards a better home or retirement.

Want to know something else. While that rent did increase overtime if you were smart with your loan, your house payment didn’t increase. Some may say what about property taxes, I don’t want to pay that. What do you think you are paying when you pay rent? You are paying someone else’s property tax. When someone rents you a house or apt they figure in their mortgage, taxes, insurance, maintenance and finally a profit. Yes you are paying everything you would have if you owned your home plus giving them a little extra.

When I say home it can be a house or a condo, either way you are investing in your living space and your future. This is just one aspect to me that that says home ownership is much better than renting, and a simplistic view I know. No it will not always be easy, you have to do your research and be smart when purchasing your home. Bottom line though is that when owning your home, with each and every mortgage payment you make you are increasing the equity with in your home and thus improving your net worth rather than improving the net worth of someone else. Even in the recent downward slump in housing prices my house is still worth twice as much as what I original paid for it.

Whats your take? would you rather rent than own?

 

Like this post? please share 🙂

Filed Under: Investing

Tracking your Financial Status with Mint.com

September 12, 2011 by Jeff Davidson 5 Comments

Couple posts ago I mentioned a new service I started using to track all my debts and more. This service is mint.com now owned by intuit, yes same company that makes quicken. A lot of those in the PF community already know and use this service but incase you dont here’s the scoop. This online service is free of charge and allows you to track all your accounts, debts, investments as well as budgets and goals. Not only does it give you one place to view your financial status but it analyzes your spending and make suggestions as well as send you text/email alerts that you set up. I started using this service when I was looking up quicken, hoping to get my finances in order again.

Is it Really Free?

Yes it is free to sign up and use. The way they make their money is by analyzing your spending and your accounts and then making recommendations to you that will help you. For instance they may notice your savings account may only pay 1% interest so they will recommend some others that pay more. Im sure they also do analysis of all the data of their users to see trends in spending and such but your info is not shared. Im ok with this, dont matter to me if someone uses how much groceries I spend money on for a report somewhere.

Getting Started

You start off by entering each account and the online access info you use to normally view your information. Almost every financial institute allows you to access your account online and mint.com has these already in their system. Just do a search and then enter your log in info for that site. You enter your banks, investment firms, mortgage, credit cards, all of it. If you own property you would also enter the address for each one and it will use Zestimate to find an estimate on its value (if you have a loan on the property you also tie it to the loan). Once that is done every time you log into your mint.com account you have all your accounts visible on the overview page, showing all the balances and values with your net worth on the bottom.

Not only that your overview page will show you alerts, upcoming bills (it automatically finds the due dates) budget graphs, goals and portfolio highlights. And of course at the bottom suggestions for improvements.

Transactions

You can click on any of your accounts or the transaction tab up top and it will show you all your transactions, or just ones associated to the account you choose. When I did this it went back to May getting transactions so it gets a good history when you start, not sure if this limit is Mint’s or my Banks. It will also categorize all your transactions, and do a pretty damn good job, but you can of course add your own then set up rules to make sure it gets the right category. I look at it like quicken but I dont have to do any data entry. Whats neat is if you click on a transaction, say my insurance payment, in the upper right it gives you a little snapshot of what you have spent on this payee in the past few months with a comparison to the national average (seems I’m paying a little more)

mint.com budgets

mint.com budgets

Budgets

One of the keys to financial planning and debt reduction is budgets. With mint.com you can set up budgets for any and all of your categories and it will be automatically tracked with the transactions. This is displayed in a nice graph on the budgets page and color coded of course (green, yellow, red) to track you progress. There is a snap shot on the right shows your total income/spending/goal budget progress as well. These are all monthly budgets and reset on the 1st for you.

 

mint.com goals

mint.com goals

Setting Goals

This is for more of your long term goals and it has a few wizards to help you in setting them, like credit card reduction. You would activate this goal, it will find all your credit card accounts and show you a payment schedule based on minimums (you can increase) and sets it up with the snowball plan. Pay off one and apply its payments to the next credit card until all paid off. It will even calculate an estimated date for pay off based on this, and based on your current payments. It also has goals for emergency funds, retirement, saving for college and of course custom goals.

mint.com trends

mint.com trends

Trends

This area gives you nice little pie charts and graphs that show you how are spending your money, how you are making it, assets, debts, and net worth. If you have your categories all set up the way you want these graphs will come in handy to see were your money is coming and going and help you make decisions on where you need to cut back.

mint.com investments

mint.com investments

Investments

The investments tab is pretty self explanatory but worth mentioning. Again it takes  all your investment accounts that you entered and draws in all the data to give you daily status of value and charts comparing your investment to the Dow or S&P plus much more. If you have multiple accounts for investments this is a great way to get a snapshot of your total portfolio, again with no data entry which is my favorite. (ya thats a rough patch for me this month).

 

 

mint.com iPhone app

mint.com iPhone app

Going Mobile and Alerts

They do currently have an iphone app (I believe droid as well) that allows you to view key items on the go. The big use for it is to enter cash transactions that wouldn’t normally come through from your bank, they can then be analyze with other transactions for your budgets and trends.

You can even set up your alerts for items like bills due, low account balance, unusual activity, even credit score changes. These can be emailed and/or texted to you. You can even set up a weekly summary to be emailed to you showing you where your money went that week.

 

 

Conclusions

As mentioned earlier in the post this is a lot like quicken but without the hassle of data entry. Almost everything is done automatically. You can tweak things as needed and once everything is set to your liking its a great way to just log in and see your whole financial picture on one page, from any computer. Safe and secure it will help you keep track of your financial life and thus help focus on the debt pay off and maximizing your savings.

 

Have you tried Mint.com? Whats your thoughts?

Like this post? Please share or tweet 🙂

 

Filed Under: Articles, Debt, Investing, Savings Tagged With: budget, debt, income, savings, tracking

Stock Investments for Passive Income Stream

August 17, 2011 by Jeff Davidson 3 Comments

dividend-reinvestmentInvesting in the stock market can be a very good source for one of our multiple streams of income and financial stability. I’m not here to advocate day trading; some do well, but it takes time and effort (and risk) and I’m looking for a more passive stream of revenue. What I do recommend is a buy and hold method of investing focusing on dividend paying stocks. Now there are of course always risks when dealing with the stock market, so please do your research before investing. Yes, you will have to do a little work (work now so you don’t have to later, remember) When looking for your first few stocks you will have to do some research to be sure they are a sound company and have a history of increasing their dividend yield. Afterwards you will want to be sure you continue to add (buy additional shares) on a monthly basis and just like compound interest you will start to see your money grow with little work on your part.

Of course with any passive income stream you want to have a handle on the costs, as that will eat away at the money you make. So you need to consider how you will be investing in stocks as there are fees with any method you end up choosing. The aim is to keep them at a minimum while still getting the level of service you require.

DRiPs

DRiP’s are one way to start out slowly investing your money, especially if you don’t have a lot to start with. It stands for Dividend Reinvestment Program and it is a way for you to buy stock with a company directly. The main point of it is you can start the program typically with a little bit of money (sometimes as low as $10) for nominal to no fees. Then when its time for the company to pay its dividends they are automatically reinvested for you at no charge. The other beauty of the program (and play on the name) is your ability to ‘drip’ in additional funds by setting up an automatic investment, where they will take a set amount out of your bank each month and buy additional stock. This too can be a very low amount and allows you to put aside some money each month towards your future. Get a bonus or tax return and want to invest a little more?  Sure, you can buy additional shares anytime with most programs. Most of the time these programs are direct with the company you are investing in, but lately to make it easier on them there are now third party agents. These agents or brokerages can come in handy as they allow you to have DRiPs with multiple companies under one account, but it could also increase your fees.

Buy and Hold.com

BuyandHold.com is an online brokerage I have used in the past when I was more heavily investing. The beauty of Buy and Hold is they take the concept of DRiPs and apply it to the entire stock market. Meaning it doesn’t matter if the company itself has a DRiP program or not, they still will reinvest your dividends and capital payments from non dividend paying stocks. They also do not have minimums like most brokerages and allow purchases of fractional stocks (so you are buying by dollar amount not quantity of shares) which makes it a little easier. Like a DRiP you can also set up for automatic monthly investments and spread the dollar amount across a number of stocks you wish to purchase. You are also welcome to buy additional shares at any time.

What’s the catch, you say? Well, there is a small one. To keep costs down (a purchase or sell is only $2.99 per transaction) you place your order and the trade is made at the next ‘window’ not real time. So you may not get that great price it’s at at that exact time. They do have 3 windows a day and for the mentality of ‘buy and hold’ and ‘dollar cost averaging’ then this is not a deal breaker. They do offer real time trades if you wish for $15 each (I reserve this for a sell if needed). All this for $6.95 a month (which includes 2 window trades) which is  great for keeping your costs down. I mean with most online brokerages you would be paying about $20 for those 2 trades, this way you will see returns on your money much faster. If you plan on doing more than 5 trades a month they also offer a $15 a month unlimited window trade option.

Just a note, there is no affiliate plan for buyandhold.com (I don’t even hold stock in them). I don’t get paid if you sign up. I just really liked the service 🙂

Conclusions

So it’s just like niche marketing:  you want to research your companies for long term growth and dividend payments (keyword research). Purchase your stocks in a low fee account (setting up your site). Continue to drip in money automatically and reinvest your dividends (monetize your site). Be sure you diversify your stocks so you can make money in most climates (same with your niches). Once it’s all set up, you let it run on automatic while checking on it from time to time and modifying as needed.

This is especially useful for those of you younger ones out there. Time is a powerful friend in the stock market and the younger you start the better off you will be later in life and the earlier you can retire (ahh if only I could go back knowing what I do now). Just putting $20-$50 aside each month (or week) can turn in to tens of thousands for you when you are ready to start a family or the kids college fund (unless you put in a new kitchen, another story). But you are never too old to start, so stop thinking about it (or if you haven’t maybe you should) and put a plan into action.

What about you? Are you ready to start an investment program? Let me know your thoughts!

Filed Under: Investing

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