Once You’re a Pickle

Diane is embarking on some Making Money 201 activities (part-time teaching; real-estate investment ) and so on … full points for trying! We had quite a few discussions off-line (actually by e-mail, so I guess that’s really ‘on-line’) about RE attorneys, accountants, structures and the like … maybe, we can ask Diane to write a post about her experiences in ‘converting’ her old home into a rental (e.g. why, how do the numbers stack up, how did she go about finding agents/accountants/attorneys/etc.)?

____________________________________

I quit my J.O.B. in October to move to NC to be with my fiance.

A lot of what we’ve been going thru (and are still going thru) can be seen on “Clean House” shown on Style TV (discovered by accident, but well worth the lessons these guys give)  – trying to let go of things I don’t need anymore in my future – selling or donating them – and reevaluating how much every thing is worth to me.   There is still a lot we could all live without, but for now, we are still moving “down” to one 4-bedroom house (although I have kept my house as an investment).

Is my debt too much still? Yes, coming down some, but I am moving assets around to do that rather than relying on an income.

By July, cash flow will need to increase by at least $2500 per month, plus enough for taxes.   In theory I can get another J.O.B., but I want to invest my time in me for this, because I need to do more than that.

July gives me a short-term goal.  July is when two of my credit card rates’ low rates go way-up-high.  I have choices.  One should be paid off two months before then (that’s the plan).  I may also be able to move the second debt to another card (for a fee and a rate) and then have enough available cash to extend July out and use the cash for another investment.

Sitting at the beginning of December,

Expenses:  What are they?  I’ve pared them down a lot, but living with my fiance is giving me a lot of amenities that I am not having to pay for (and had stopped paying for), but we are both trying to watch all the things I’d been watching (lights, water running, spending).  We are looking at which vehicle to sell;  I may drop my cell phone later this month (it’s no longer on contract, so no fee there).

Here’s what is left:  I am paying for:  mortgage, student loan, credit card loans, expenses for lines of income I’m working to create (RE, writing, Zumba Instructor Network (ZIN)), my own health requirements, and then there are medical bills for the boys, child support payments for the boys, and now orthodontics for one son and soon the other).

What can I do about them?  I’ve challenged my sons needing a nanny at their ages (old enough to babysit), but agree to support their need for orthodontics.  I could argue the point, but these are my sons and I won’t.  I could drop out of ZIN, but taking Zumba classes in NC would cost more than continuing the membership, so if I only do classes for myself, I’m better off, and if I create classes, I may recoup more than that while basically still doing my own workout (different focus if teaching, but no doubt that I’ll get a workout as well).  ZIN stays in for both practical and health reasons.

Insurance costs more in NC.  I also am told I’ll be charged tax for the value of my vehicle when I register it here, so good chance that mine will be the one sold.  I’ll miss it a lot.  The money is also already ear-marked (as the minivan was) for my boys’ eventual need for their own cheap wheels, so I will set aside a certain amount for them, and the rest I can use to invest or pay down debt

Looking ahead to Making Money 201, I am evaluating properties, having enlisted the help of a realtor, and considering the other options I have to have in place. I believe I can find angels, but am looking to find properties that will justify the traditional/conventional lenders who will probably lend the bulk of the money for the property, yet I am open to more creative ways and am looking for those as well.

Savings? I have some, but I am moving it from tax-deferred accounts to paying bills now, so they are going down. A 401k, a traditional IRA with some money in McDonald’s stock, but everything else is in cash, and the 401k will rollover into the IRA soon.

Other considerations – looking at creating other avenues of income. I have a goal of having $3600 more income per month by July. Not a lot with a J.O.B., but doing it all by and for myself (as a foundation to bigger things) is where I want to be doing it. I feel going back to a full-time J.O.B. would be a cop-out.

In the meantime, I may substitute teach. This fulfills me in two ways: I feel like I am giving back to the community – to the students and the teachers as well as to the parents whose kids are going to whichever school district I am helping. I think many business folks should try to put in time substituting at a school because there is a lot of knowledge that can be handed down from someone who’s been there doing that kind of work (or some kind of work other than teaching because most of the students will not become teachers). I don’t expect or want this to be full-time 5-days a week, so I am not thinking it will provide the bulk of my financial needs, only a small part.

I am also going to pursue writing as a career during this time – a full-time job with pay – using and thereby learning internet and marketing online strategies (that’s what the eHow article about “How to Justify Buying a Buggati Veyron” was about – testing an internet marketing theory someone else on eHow had espoused.) There are different ways to go with that, and I need to choose one.

Although writers faced with a blank sheet of paper may be overcome with writer’s block, there is also something to be said about a blank sheet of paper.

Like a young child, a blank sheet of paper still has a myriad of possibilities for what it may become. Once ink is set, the paper has changed. A bolt of fabric is the same way for a quilter. Once cut, it cannot be put back into the form it once had and the myriad choices are reduced. Once you’re a pickle, you can’t go back to being a cucumber.

Now is the time for me to reduce the pathways available to me and begin concentrating on those for which there is time, interest, and ability and which will move me along toward meeting my Life’s Purpose.

What’s Going On

Diane told us all about her revised Number in this comment to my recent post:

I worked my number up again last night.

If I am getting this part of the exercise, it is to make us take a hard look at our “wanta” haves and look at see what we will say mid-stream when we get offered alternatives. Do we take Door Nr 3, or do we keep the $3M we’ve already got?

I skinnied down the list to pretty much “today” plus what I really really really REALLY want to do before I die. It shaved $3M off my number and left me with between $5.3M and $5.5M, in 5-6 years.

I also looked at the number from a passive income perspective – if it paid out 10% or 5% and then at 7%, how much would go to taxes (assuming I’m no better at avoiding those than I am now) and how much to covering those minimal things on my list.

This was to give me the picture of HOW MUCH would it take to sustain me later, given that I may be tempted at some point to throw in the towel in the face of aggravation, frustrations, and resistance by others in my life? The answer was a scary $5.3-5.5M.

Now, read on as Diane tells us what’s going on  since then …

It’s a quiet week on-line for me.  I took the plunge and after finally meeting with two of my bosses – who didn’t seem to think they wanted an employee who telecommuted – I resigned from my job as a necessary step to moving to NC.

The typical 2-week notice was (gratefully by me) allowed to shorten to give me time to get things together for the move.

The house is planned for renting to a friend, but I need to meet with a lawyer who specializes in residential real estate so that I can put a lease together that addresses not only standard terms, but also the special considerations that my friend is giving me in return for my reducing his rent – and it has to be something that we can both agree to in writing.

I am also looking at the tax and legal implications of converting the property from a personal piece of property to one that is owned by an LLC, and have talked with a property manager in the expectation that at some point I will need to have a property manager running the property for me (outside of my friend doing some of those functions for reduced rent at this point).  This is new to me – both selling and renting would be – so I am looking for legal advice.  That meeting (with the lawyer) is scheduled for next week.

Health insurance will end at the end of the month, so I have finally gotten to the doctor about my sore shoulder to see what is going on.  It’s more than advil/motrin type products can handle, and I am not sure that a massage will take care of whatever is going on.  He scheduled me for some tests/exams this week (all done now, awaiting results).

Concurrent with the move, I am relocating stuff into the garage for a EVERYTHING MUST SALE garage sale this week, and things that still need to get packed for the move to NC into the living room.  Most of the big items were moved to NC a couple of weeks ago, but I still have some large things to sell (or plan on another rental truck).

Then, the bathroom needs painting, a screen needs fixing, I need to hire carpet cleaners, pick out carpeting for the hall and a room, bring in the carpet layers to measure and install, and then the  whole place needs to be cleaned top-to-bottom!  I’m running out of time already, and most of this is scheduling, not doing it myself, but I am not quite nutso – not yet!

Lots to do, and my casual reading is two books Adrian had recommended, reviewing them while trying to locate a sample lease.  I spoke with a couple of others who deal with leases – another rental investor as well as the property manager at the last apartment complex in which I lived.  Both gave me some pointers on what kinds of terms are standard for different kinds of clientele.  I’m glad I’m not having to learn everything on this one deal, but I am getting my feet a little wet.

I did a lot of working on my numbers last week, and that revealed that I can live off my 401k and IRA AND pay off my credit card debt – up to July of next year without getting a job or other source of income.  (Note that a 10% penalty is less than a 30% drop in the 401k’s value, and that I won’t pay more income tax on the dollars from the IRA than what I would pay on any dollars I earn this or next year.  I will try to defer more withdrawals to next year as I know that this year is probably going to be higher than next year, but I do not think my rate will change that much anyway.  Perhaps now the interest on my student loan will be tax-deductible (as it was supposed to be).

By July 09, I hope to be doing other things that will push that date of being self-supporting (at least for my next investments) out, but I have lived off credit cards before and know that if push comes to shove, I can do it again.  (Note, I am not planning to do it again, I just know that I have paid them off, and I can do it again if necessary.)

I may find other temporary employment to help with cash flow as long as it allows me to have time to work on the really big things, which is the $8.5M in 6 years (first number for what I thought I minimally needed) or $5.5M in 6 years (for my number adjusted down to the true minimum needed).

I hope that momentum will pull me thru and I’ll sail on from the 5.5 to the 8.5, but I expect the first few years will be steep, hard learning curves, and it will grow more exponentially once I get more dollars to invest in me.

So, Mark, I am well on my way to NC now . . . soon, soon.  Where are you off to next?

Knowing What IS

 ”It depends on your definition of the word, “is.”

As a student of the English language, I had to agree with that statement.  As a student of change management, I heard it again.  We cannot change what “IS” until we know what that is. 

None of us is starting this 7 year journey at the starting gate called “zero” – our baselines are all going to be where we are at this moment in time.

A few months ago, Adrian introduced (most of) us to Networth IQ which helped us determine our net worth at that time.  It’s a kind of baseline of “what is” as well, but simply the financial aspect. 

Another important aspect is where we are emotionally and intellectually – where our heads are.

Here’s where I am:

1.  It’s time to update my Networth IQ. 

• I should have updated it last month, but deadlines at work and trying to divest my house of unnecessary things contributed to a major shortage of time, and while I saw the data on my computer, I never consolidated it completely nor put it on NetIQ. 

2.  I’m continuing to work Adrian’s Making Money 101 - debt reduction. 

• Have a litte mess with Chase Credit Cards going-on and they have about reached my last straw.  (Verizon did that last month after almost a year (similar to Chase) of different aggravating conditions coming up.
• I still like Verizon’s access, but the hassles now with service aren’t worth it. 
• Same for Chase.  Bills by them aren’t accessible online to my bank, dont’ always show up in the mail, and therefore trying to pay the minimum monthly and on-time has been problemmatic. 
• They recently reduced credit limits – which wouldn’t be a problem, but they raised my rate so that my next payment, being the “old” minimum, would now make me late on the payment and additional fees can take me over the new limit , thereby allowing Chase can tack on new charges for being “over limit.”  Games, games, games. 
• I’m tired of chasing my tail with them.  But, they have one last chance to fix things and that is to return my rate on one card back to what it was. 
• I’ve paid off another card and will transfer this card’s balance if Chase won’t work with me.

3.  I’m combining debt snowball with avalance right now.  (Here‘s AJC’s take on that.)

• Typically, I work on the largest interest first (since I work with numbers, this was logical to me). 
• Because of what Chase has been doing, I decided to pay off the smallest. 
• I just finished that and freed up a card for re-use.  This was Capital One and they have always played fair by me.  (Discover Card is another one that has always been good at this as well, so I’m happy to see another card showing the same honesty in its dealings with me. (Can’t speak for anyone else’s.))

4.  I’m looking ahead to Making Money 201 - future investments. 

• I’ve stopped my 401k temporarily as it was losing money lately and I am using that to pay down debt that will free up the ability to make future investments less stressful for me (I still have plenty of credit).
• Started reading about real estate investments.  Adrian had recommended some books on his 7million7years.com blog and I picked up a couple of them and am studying them. 
• Since time is not plentiful, I have set aside to read 1 chapter or 30 minutes a day, whichever is the most logical break.  I want to give myself time to think about what I am reading and not merely to skim it.  I note to myself that I will probably want to read these again and again – they are that good.

5.  I’m looking at some of Adrian’s suggestions about e-businesses. 

• From that, I have recognized that I have something similar to offer others who, like me, struggled with weight/diets after children or “just because” and that I can probably organize my personal blog on that better and offer it to others in an e-book format as well.  It would be a good learning experience for me, as well as help others (which is why I started that blog in the first place).

From this above, I’ve attempted to assess “where I AM” and define “what IS” for me. 

My next step will be to look at where I want to be (Adrian’s Rear Deck Speech and my $/Yrs goal) and start organizing the steps I’m taking NOW (notes above) and see if they are moving me in the direction or not (that would be called a “value-added assessment, btw”). 

• I should also brainstorm other ideas, not limiting myself but seeing if I know other options that are better than what I am doing now.  (Like, is there something Adrian can help me understand better? or, Can he turn me in a better direction than where I am headed? ….)

In order to get to A from B, you first have to define A and B – so, where are YOU and where do you want to be?