Toying Around with Real Estate

Yoyos come in two basic styles: there is the “classic” which looks like a simple hamburger turned on it’s edge, and the “butterfly” which resembles a compressed hour glass, turned on it’s side.. The spinning toy may be clear like glass or made of some richly-colored opaque plastic. Perhaps his new toy is made of a hybrid space-aged metal or it just might whistle when he throws it just right. With a little practice the young lad learns legendary tricks like “the sleeper,” “walk the dog” and “rock the cradle.” But, even though there is a wide variety of flamboyant yoyo’s to choose from they all perform the same humble function - they go up and down.

Close your eyes and imagine such a youngster with a brand new cherry-red, semi-transparent butterfly-style yoyo. In your mind’s eye. notice him at the foot of a trail which leads up a hill towards a fantastic magical pot of gold. Observe him throwing the yoyo up and down. Up and down. Up and down. With that yoyo still in motion, envision our friend heading up that trail toward the awaiting treasure. Now, chart the path of the shiny red toy as it travels up and down the string and progresses up the hill at the same time. Notice that even though the yoyo sometimes goes down, the general trend is always up. That same pattern applies to real estate values in most markets.

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Cluttered Minds

Have you ever known somebody whose life was “broken’? You know the type. They always seem to be riding the drama train. They have problems holding relationships together. They make their work more difficult than it ought to be. Chances are they have weight problems. They worry too much. They might be wrestling with drugs, tobacco or alcohol issues.

Everything is out of control for these poor souls. There are all sorts of unfinished projects in their basement or garage. Their desk is untidy and overrun with dust. Their kitchen sink is full of dishes. They seem to have more stuff than places to put it. They have too much debt from entertaining their minds with unneeded purchases. It is obvious that they got off track somewhere along the way. They are overwhelmed.

I would imagine that psychologists make a fortune analyzing people like this but some times our problems come down to something as simple as we don’t know how to get organized. When the mountain is so large, we just don’t know what to do first. When we examine the sea of confusion that is our lives, we don’t know how or where to find an island of sanity. We need somebody to help us remove the clutter from our minds and lives. This is the case for the person suffering from a cluttered mind, and it is true for people who are struggling with financial drama. A person might have money woes because she is suddenly single due to a death or divorce. Someone else might have lost his job. Somebody else may have lost her home in foreclosure. Another person may have fallen ill or come across a personal tragedy of some sort. And very frequently men and women just never learned how to manage their money properly in the first place.

Obviously, I cannot fix divorces or make an employer give somebody a job, but I do know a bit about money management. My book, Stop Flushing Your Money Down the Drain, is devoted to shedding light on how we get into financial trouble and how we can get out.

Most people don’t have to get big pay raises or deny themselves basic pleasures. All they need to do is find out how they waste money, frequently in ways they do not even realize, and then redirect that wasted money into more productive endeavors.
For instance, do you know the difference between collision and liability insurance for your car? Which do you have? Why? What is the deductible? Why? Most people do not really understand their auto insurance policy and are most likely Flushing money down the drain that they could use more wisely.

Did you know many people pay for mortgage insurance on their home that they do not need and do not have to pay?

Somebody else may have been turned down for a new job just because his or her credit score was not very good. But nobody told them that new employers often look at credit reports and they didn’t even know there was some false and negative information on it. If they would only correct the false information, they will have a better chance at landing that next job. Failing to land a job is certainly Flushing money down the drain and you can fix that.

This is the kind of information we discuss in my book. If you would like a sneak peek, just let me know and I will be happy to share it with you.

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How much is $100 per month worth?

I teach a Continuing Education class, to Realtors, about working with investors and how to become their own best client. One of the lessons has to do with the real value of a small regular income, such as $100 per month.

I show the students that $100 per month, at seven percent interest, for ten years compounds to $17,000. Furthermore, if a person was to invest $17,000 at that same 7%, the monthly interest income is, coincidentally, $100 per month.

Conclusion: One-hundred dollars per month is the equivalent of $17,000 and vice versa.

I am not hung up on the numbers of 7% or ten years. We could modify the interest rate or the term and end up with a modified conclusion, but that is not particularly relevant. My objective is to shine light on the fact that every $100 per month represents a great deal of buying power, and in my example that number happens to be $17,000.

Predictably, most people are more likely to be net borrowers than net lenders so the above dynamic works against them in ways they had not even imagined. That is to say that for every $100 per month we pay in interest, we are also losing the opportunity to use that money to generate passive income, which is the key to building wealth.

Passive income is money that jumps into your bank account, automatically, whether you work or not. Can you imagine how much easier life would be for seniors if they had an extra $1,000 or more in monthly passive income? If they could have saved $200,000 in their lifetimes, and if they could invest that money at a realistic rate of 6%, that is how much extra income they would have. This is a lot easier than most people realize. One important path is by stopping compound interest from working against us and instead make it work for us.

If you have a credit card balance of $5,000 that you do not pay off, and if the interest rate on that card is 14%, you will pay $700 per year, just in interest. If that was a one-time matter, it may not be that big of a deal, but this debt lives on and repeats itself year after year.

If we assume that you could have invested that money somewhere else at a mere 4% interest, it would compound and grow to nearly $80,000 in an adult’s lifetime of forty years.
So ask yourself if you would like to have an extra $80,000 when you retire? That is a big reward for simply paying off your credit cards in full and on time every month. You are going to pay them off anyway, sooner or later, so why not pocket 80 big ones for paying this debt the correct way? That is one reason why I say, if you cannot pay off your credit cards in full and on time every month, you are living beyond your means.

Avoiding unnecessary interest expenses is just like earning extra income, whether it is $100 per month, $700 per year, or any other amount. To stop flushing your money on lost interest expenses, I suggest you reel in your spending habits a bit and pay extra on your cards until you get them down to a zero balance. Then avoid debt that you cannot payoff when the bill comes in.

Then you can start socking away a $100 per month and when your retirement years arrive you will have a very pleasant life-style.

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