The real estate market is booming.  Some prices are up to pre bubble prices.  Is it too late to buy real estate?  The short answer is no!  My theory is prices are always higher than you like it.  If you are one of those people who are looking to buy at the bottom, you missed your chance!  Interest rates are the lowest in sixty (60) years.  What are you waiting for?

Real estate is no different than the stock market.  It goes through corrections or cycles.  It would be great, if real estate values would always go up, but it doesn’t.  The most recent real estate bubble was artificially created with relaxed credit policies.  Housing prices increased because of demand, speculation, low interest rates and easy lending policies.  What has changed?  Lending policies has tightened up considerably and demand continues.

In the stock market, you can always find an undervalued stock.  I believe you can find undervalued homes or income property in a rising market.  You should approach it similar to finding undervalued stock.  When you are looking for undervalued stocks, you might start with a list of stocks.  You may put them through a stock screener based on your financial criteria. You perform analysis based on research to determine value.

It should be no different with real estate, however buying a home is an emotional purchase.  It doesn’t have to be!  When you go to a real estate broker, they will qualify you.  What can you qualify for in terms of a mortgage?  Do you have a down payment?  What are your needs in terms of location, size or number of bedrooms, etc?  When I bought my first home, I used value investing criteria although there is always an emotional component to buying a home.

When I bought my first home, I could have fallen into the usual routine.  Instead, I found a broker (friend of a close friend) who listened to what I was looking for.  I was looking for something undervalued!  I had the cash, credit and willingness to do it.  I did not mind a fixer or distressed property as long as I could see value.  I ended up with a home that was 25% below value for the neighborhood.  It was a divorce sale and a fixer.  It just needed cosmetic repairs and replacement of carpet and drapes.

Having some financial criteria gave us parameters that kept the emotional side of buying a home in perspective.  It is just as easy in fall in love with a home that meets your financial criteria as it is to just fall in love with any home.  It had to meet both otherwise it doesn’t make sense!  Matching both made it a win/win!  How do you apply this value investing principles in today’s market?

There are still bank owned homes, foreclosures, short sellers and homes that are underwater.  There are less today than there were several years ago, but you are only looking for one.  I think it is always good to look for the undervalued home in a good neighborhood.  It may have deferred maintenance, needed repairs or remodeling.  Does it make sense to invest more money to see its value?  This is the criteria for flipping a home.  I am a value investor not a speculator!

Finding income property that is undervalued is a bit harder.  I was start with the broker first.  Real estate brokers hate first time buyers because they have to spend more time educating the buyer.  Learning the lingo and what is involved is very important.  This is no different from buying stocks!  You need to do the research and learn about the stocks.  You should learn all you can about income property before you talk to your first broker just like learning about stocks before you make your first trade.  What is next?

Start with the broker!  Interview them and find one you can work with and understands your goals.  It may take some time.  I interviewed thirty-five (35) brokers before I could find one that would work with me and I felt understood my goals.  This broker is important because he/she will negotiate for you and you need to trust him/her.  This is a longer range relationship than the occasional residence purchase.  Doing the front end research pays off handsomely later.

Final Thoughts

Whether you are looking for an undervalued residence or income property,  you want to have a set of financial criteria before you start looking at property.  In a good or bad economy, finding undervalued property is not easy.  It may be easier when the supply of homes were high and no one was buying.  You still need to go through the properties and make sure it matched your financial criteria.  You still need savings for a down payment and good credit.  That makes the search easier because you can qualify for the lowest interest rates. Real estate is the largest component of wealth and has been estimated to represent approximately one-half of the world’s wealth. Real estate is still a good investment for the long term!

Photo by:  David Paul Ohmer

Carnivals:

Yakezie Carnival at Money Life and More
Carnival of Financial Planning at Hurricanes, Panties
Finance Carn. for Young Adults at WILDaboutFinance
Carnival of MoneyPros at My Personal Finance Journey
Y and T’s Weekend Ramblings at Young and Thrifty.ca

Real estate is still a good investment for the long term!

A home is more than a tax shelter!  You may live in a condominium, cooperative, townhouse or a single family residence.  Whatever the type of home, it is your primary residence.  It may be your first tax shelter!  A legal method of minimizing or decreasing an investor’s taxable income and, therefore, his or her tax liability.  Buying a home decreases your taxes, but there is more!

Retirement Accounts

One of the best ways to reduce or defer taxes is contributing to a retirement plan.  Yes we moved from defined benefit plans to defined contribution plans.  Pensions are now rare and most have been replaced by 401 (k) plans.  In the even rarer instances that you can participate in both, you should.  A pension guarantees a fixed sum paid regularly or lump sum to an individual in retirement.  It is based on years of service and employee salaries.

A defined contribution plan permits participating employees to make contributions on a pre-tax basis.  This gives employees to voluntarily reduce their current salary or reduce their taxes to save for retirement.  In many cases, their employee may contribute a match to encourage the employee contributions.  There are various vesting requirements for the employer match based on individual company rules.  Common names for defined contribution plans are 401(k), 403(b), 457, TSP and IRA.  You are able to defer taxes and pay taxes based on what you withdraw in retirement after 59 1/2 years old.

There are limitations for deferring taxes in a defined contribution plan due to income restrictions, annual deferral limits and perhaps no employer match!  It is generally the first opportunity to shelter your income from taxes and allow it to grow without paying taxes until you withdraw the funds in retirement.  You will pay taxes when your income is lower in retirement.  Unfortunately, not enough people participate in defined contribution plans such as an Individual Retirement Account (IRA) commonly known as company 401(k).

Home ownership

When you buy a home, you are buying shelter and saving taxes.  You can deduct your mortgage interest and property taxes.  For most people, that means you can itemize your deductions.  The Internal Revenue Service is subsidizing home ownership!  The points you pay for your mortgage are even deductible.  You can even deduct points used to refinance your mortgage, although over time.  If it stopped there, you should be very happy with home ownership.

Home ownership allows you to build up equity in your property unlike renting your home. When you sell your home, you can even keep up to $250K in capital gains ($500K for married sellers) on sales of homes.  The exclusion requires that it must be your personal residence for two (2) of the last five (5) years.  The federal government encourages home ownership through low interest rates.  It is a great tax shelter and wealth building tool too!

Income property

Investing in rental property is one of the best shelters.  One of your best investments just got better.  You take your home and convert it into a rental property.  Instead of selling your first home, just keep it and rent it out.  You lived there five (5) years, and you probably can rent it out with a positive cash flow.  The home will continue to appreciate and someone else is paying for your expenses.  Over time you can acquire more rental properties and generate additional income.  If you live in each property two (2) out of the last five (5) years, the capital gain up to $250K ($500K if married) is excluded!

In addition, you can depreciate the property and shelter income.  Depreciation is an income tax deduction that allows the taxpayer to recover the cost of the asset.  This is based on the useful life of the asset.  Buildings, machinery, equipment, furniture, fixtures, computers, outdoor lighting, parking lots, cars and trucks are examples of assets that will last more than one (1) year.  I used this successfully when I owned income property.  It is a way of sheltering income.

Business

Starting or buying a business is a great way to shelter income.  Even a lemonade stand has equipment that should be depreciated.  The more assets a business has, the more depreciation to shelter income.  The stand, equipment and other assets can be depreciated.  The supplies, to make the lemonade is a legitimate expenses deducted before you can show a profit.  It is the net income or profit that we normally would pay taxes for can be reduced further using depreciation. In other words, you are saving taxes.

This favorable treatment of businesses is the federal government’s way of encourage business formation.  It is the expectation that as you make more money you will eventually pay taxes.  Depreciation is a way of recovering your investment in the business over time and sheltering some of your income.

Long Term Investments

When you sell an investment at a profit (owned a year or longer), you are subject to capital gains tax.  Investments held less than a year are taxed at ordinary tax rates.  Long term losses must offset capital gains.  Investments include stock, mutual funds, options, your home, or business.  2013 long term capital gains tax rates are still 15% for income up to $400.000 a year and 20% for taxpayers who earn $400,000 of ordinary income.  These lower tax rates are intended to encourage investment in stocks and businesses.

Final thoughts

You can complain about taxes or do something about them.  I offered a variety of options where you can shelter a portion of your income from taxes.  You can complain about taxes or do something about them.  I offered a variety of options where you can shelter a portion of your income from taxes.  You cannot eliminate taxes, but you can reduce them significantly.  A little tax planning can be worthwhile and you can save much more than the cost of planning.  What are you going to do ?  Complain about taxes or take advantage of a legal tax shelter?

Photo by: Brett Jordan

Can you earn minimum wage and still become a millionaire? The short answer is yes!  I am sure you have heard of so called poor people becoming millionaires, although not overnight.   I am not talking about professional athletes, entertainers or lottery winners.  I am talking about everyday people earning very little money and over time become millionaires.  Not just millionaires, but multi-millionaires!

Savings

You are probably thinking how can someone who is earning so little become a millionaire.  Well it is not easy, but becoming a millionaire is not easy anyway!  It all starts with a goal!  If you are earning minimum wage it may take more sacrifice or effort, but it is possible.  Your first step is to find some money to save which can be as little as $4 per day.  Savings is the best way out of poverty!

Finding savings when you are earning so little is no easy task, but it is possible.  Little things can yield a lot of money.  Something as simple as buying coffee, grabbing a donut or buying lunch can easily exceed $4 per day.  You may have to have roommates or find additional ways to reduce your expenses.  Usually people who work minimum wage jobs start early so you have the advantage of time.

Training

With time on your side, you can get training to improve your earnings capability.  Whether you decide to go to college, enter an apprenticeship or additional training, you can increase your income.  You could start a business, work overtime or sell things.  Learn how to add to your income by learning new skills.  Make things, sells extra things, offer services such as mowing lawns, babysitting or other odd jobs.

Budgeting

Budgeting is not just for people who earn more money.  Actually budgeting is even more important for people who do not earn much.  Remember a budget is a structure to help you achieve your financial goals.  Start budgeting and you will find where you are spending your money.  This is the first step to find extra money for savings and help you make better spending decisions.

Earn more money

You start out earning minimum wage, but you do not have to stay there!  You do good work and you receive increases, promotions or change jobs to earn more money. Every time you earn more, you add 50% of any increase to savings.  It helps accelerate your savings and will bring to millionaire status a little sooner.  The key to becoming a millionaire is not spending it all.  This is very hard to do when you are earning minimum wage!

Work your plan

If you think this is easy, then everyone would do it!   When you are earning minimum wage, you already cut a lot of things out just to have some savings.  You do side jos or work overtime just to have a little extra.  You have to keep your eye on the goal and stay motivated to stick with your plan.  Progress to your goal is some motivation but not all of it.

Final thoughts

We often think that minimum wage earners cannot save any money or do much about their plight in life.  That is a myth!  All it takes is some discipline and a willingness to do something about it.  Isn’t that true of all of us?  A plan such as a budget can be the discipline to help us reach a financial goal.  What are you doing about your financial goals?  You are probably earning considerably more than minimum wage and cannot save $4 per day.  If a minimum wage person can reach millionaire status, you can too!

Photo by:  Editor B

Carnivals:

Y and T’s Weekend Ramblings at Young and Thrifty.ca
Finance Carn. for Young Adults at Fat Guy,Skinny Wallet
Carnival of Retirement at Brick By Brick Investing
Carn. of Financial Camaraderie at My University Money
Carnival of Financial Planning at PF Carny
Yakezie Carnival at Growing Money Smart
Carnival of MoneyPros at Thirty Six Months

If a minimum wage person can reach millionaire status, you can too!

What is other people’s money?  When you buy real estate, you usually get a mortgage which is other people’s money.  It is a way of leveraging your down payment in order to buy an asset.  When you borrow money to buy a business, it is other people’s money. Whenever you borrow money to make an investment or financial transaction, you may be using other people’s money (OPM) in the form of a loan.

It does not take money to make money!  It reminds me of a quote about firefighters.  They are the people who run into buildings when everyone is running out!  People who are wealthy buy when everyone is selling or take risks when everyone is risk averse.  Do wealthy people know something the rest of us don’t?  They have courage to do things when the rest of us don’t.

Money is officially legal tender defined by government exchanged for goods, services or debt.  It is how we use it that will make you wealthy or just pay the bills.  Money is used as payment for services such as payroll.  You work and earn money in the form of a check, direct deposit or cash.  If you own your own business, you need cash to give change, pay for goods and services or pay your employees.  It is hard to live without money.

I live very well without cash!  I have direct deposit for my paycheck; I use credit cards and avoid cash as much as I can.  Some people would say I am using other people’s money by using credit cards for almost all of my purchases.  Although it may be a credit card, I treat it as a charge card.  I always pay it off at the end of the month.  Using a credit card is a cash flow device.  If I switched to cash, it would affect my budget!  Besides I would lose out on rewards such as frequent flier miles, cash rebates and hotel points.

Many personal finance bloggers think debt is bad, but imagine buying a house with cash!  The real power of money is using it which includes using other people’s money in the form of a mortgage.  A 20% down payment with an 80% mortgage at 3% seems like a no brainer!  If your home appreciates 5% a year, your down payment is earning a better than market return and you are earning more than you have to pay in interest.  Sounds like a win/win!

The mortgage interest is tax deductible which means you are subsidized by the federal government to buy a home.  Housing and businesses are subsidized by the federal government because it helps our economy.  When I invested in apartment buildings I used leverage to buy an asset.  Unlike a home, you can generate income from a business asset.  I would buy an asset that I knew could increase by just making small improvements and generate more income.  Very similar to any business,

Businesses are sold all the time and usually there is some financing involved.  It is leveraging an asset.  You are using other people’s money to buy an asset that you believe is undervalued and you think you can increase the income.  You get to use other people’s money at probably 4-5% rate and you can generate more income that exceeds your expenses and generate a profit.  Although you can expand or grow a business with profits generated internally, it will take longer.

Borrowing money will help you reach your goal faster or maybe reach economies of scale.  It takes more management to operate small apartment buildings (duplex & fourplex) than owning larger buildings.  That may mean borrowing more for either more units or larger buildings.  Most businesses borrow money for their business.  Doesn’t it make sense to borrow money that you may pay approximately 5-6% to earn a profit of 25-50%?  It is the basis for business and the economy.  Bankers are lending other people’s money for the margin they will earn.

Business does the same thing!  They are looking at their profit margin and determining if they can afford to expand.  They look at using their cash and/or borrowing funds (OPM) to generate better profits.  The wealthy people have access to money in the form of other people’s money which helps them to buy assets.  On a large scale, there are mergers in the airline industry to lower costs and generate more profit.  Still, more often companies go public to generate cash to grow their company.  The stock they sell draws other people’s money to help the company grow.

Final thoughts 

Although debt is a four letter word, it is not bad!  If you can buy a business, assets or expand an existing business; you generally use a loan to do it. A loan is other people’s money who is earning a return on their money.  I know there is a desire to reduce or pay off debt, but it should be debt that is not associated with an asset that appreciates or generates income.  Using other people’s money to help you build up a portfolio of assets that will increase income or net worth is desirable.

Photo by:  Alan Cleaver

The foreign exchange (Forex) market is where currencies are traded.  It is no different than any other commodity.  It is the largest international market although there is no central market.  Why have a Forex market?  It is intended to facilitate international trade.  Although the U.S. dollar is the basis for a lot of trade, it is not the only currency.  In fact, the value of the U.S. dollar is based on other currencies.

Who trades foreign currencies?  It ranges from large banks, governments, currency speculators, institutional investors, international corporations and travelers.  I never thought I was a forex trader when I exchanged currency at the bank before I traveled to Europe.  Perhaps I contributed to the exchange of currency. The most traded currency is the U.S. dollar which makes up about 85% of all trades.

How are Forex rates determined?  Economic factors may be the biggest contributor to their value in exchange.  For example, our debt, credit rating and economic conditions strongly influence U.S. dollar value.  Political conditions such as stability of government and political structure.  Market psychology similar to the stock market is influenced by what people think about a particular currency.  Trading currencies is affected by a variety of things including electronic trading.

George Soros was famous for currency speculation during the early 1990s.  He sold short $10 billion in British pounds and earned more than a billion in profit.  He saw a weakness in the British pound and took advantage of the market and profited from his move.  His is probably the most famous currency speculator, but not the only one.  Currency speculation is the practice of engaging in risky financial transactions in an attempt to profit from short or medium term fluctuations in the market.

Speculators can artificially inflate vales or decrease values.  It can create an economic bubble and a lot of volatility.  Currency speculation involves buying, selling, and holding currencies to make a profit from favorable fluctuations in exchange rates.  If you are interested in trading foreign currency, you may benefit from the tools on Forex Loft.  Forex is the world’s biggest financial market and you can do very well if you know what you are doing.  Four trillion dollars is traded daily on markets that are open 24 hours a day 5 days a week worldwide.

Final thoughts

If you decide that you want to trade foreign currency, you need a broker.  Before you embark in foreign currency trading, understand that you lose money.  It is similar to buying stock, you think it will increase in value and it doesn’t.  Your trade will result in a loss.  Most traders win some and lose some!  This is a risky business and you should know a lot about it before you make a trade.

Photo by:  epSos de

Do details matter? Have you ever taken something apart and when you put it back together you have a part left over?  It may or may not affect the overall operation, but it might!  Details are important, but they are not all equal!  I think it is the accountant in me that makes me pay attention to details. In accounting, everything has to balance just like in life.  Do details matter to you?

Cooking?

A good meal is a bunch of details brought together and executed well.  I always admire people who can cook well.  I know it is not that difficult to follow a recipe, but there is more to it than that.  Isn’t there?  Maybe it is just a matter of following the instructions!  Next time you make a cake or bake cookies, leave out the sugar and let me know how it tastes.  If that is true, everyone could cook well.  Everyone can learn how to cook, although not everyone will be good at it.  Is is details or confidence with details?

Umbrella?

I recently was reading about $150 umbrellas.  When you read a lot, you become indiscriminate in what you read.  I live in southern California where it does not rain very often.  It is one of the reasons we have to import water from northern California.  So why do I need a $150 umbrella?  I really don’t need one, but I love quality products.  In the article, they described what made the umbrella more expensive.  I bought a much less expensive umbrella a number of years ago.  I think I paid $21 and it came with a lifetime warranty.  A detail that is important and makes my less expensive umbrella just as good as the expensive one.

Although the materials probably are different in the more expensive umbrella, it does not matter.  More expensive parts may or may not create a better product.  I have a lifetime warranty and needed it a couple years ago.  One of the metal pieces failed and they replaced the umbrella.  A good warranty is good marketing or a detail that comes in handy, if something goes wrong.  It is one of the reasons I like certain products or stores.  Does the warranty make the product better or is the product better because of the warranty?

College degrees?

At one time a college degree was a guarantee for success.  It still is, but not immediately.  Unemployment is still high (7.6%), but it is only 4% among college graduates.  You will earn approximately one million dollars more than a high school graduate in your lifetime.  How can you make yourself more employable after you graduate?  Simple, just show how you applied your education during college to the real world!  An internship (paid or unpaid), summer jobs, part time work, self employed or joint projects with industry. It is a tangible application of your skills, but just a detail!  A detail that helps you market yourself!  Details that are hard to suddenly accomplish after the fact.  You can still show you can apply your skills in a variety of ways.  Just do it!

Budgets?

Budgets are a bunch a details that if executed well will help you reach your financial goals.  Budgeting and planning in general use details to help you reach your financial and other goals.  A detailed plan whether to build a home, business or a financial plan is necessary to reach your goal.  Can you plan retirement without knowing how much you will contribute each year and how many years to reach your desired goal?  Can you imagine taking a vacation without any planning?  A goal without a detailed plan is just a wish! It is all in the details.

Art?

I love art, not all art though!  I have acquired some art over the years.  There are certain artists that I like for my office.  I like photographs too.  There are some framed in my office and home.  I am not talking about the personal ones of family and friends, but places I have visited or would like to visit.  You can look at art and say it is just a series of lines or dots arranged in a particular way.  Art is a skill acquired by experience, study or observation.  I realize I don’t have those skills, but I can appreciate good art when I see it.  Art is a personal choice!

Good art is a series of details whether it is a photograph, painting, drawing, film, sculpture, nature or some other realization of someone’s imagination.  It may affect us emotionally or in some other way.  Art may be just a series of details, but it is those details that move us!  For me, it can be the Pacific Ocean, a lithograph, Paris at night or canals in Amsterdam.  It moves me and makes me happy!  Details that make me react emotionally cannot be bad.  It enriches our lives!

Sports?

Sports are a series of details.  You learn skills and practice until you get it.  If you are good at sports, you spent more time on the details.  Many sports require more practice than others such as golf or tennis.  Sports is a lot like life!  You need to work on the details and practice to be successful.  When I started investing in income property, it was like learning a new sport.  I needed to learn a lot of details until I got it. I kept working on it as I built my business and became more successful.  It was a lot of time on details. Have you learned something new that you needed to learn a lot of details to become good at it?

Final Thoughts

Although I gave some examples, there are many more  for your consideration.  Details are important and you need to pay attention to them.  Some may say it is a minor inconsequential item, part or detail, but taken together will affect the outcome or result.  If you have a detailed goal and plan, you are likely to achieve the goal.  Details are important in everyday life!  Is your education just grades or is it many details?  My college experience were  classes, sports, fraternity, social and a lot more!   We learn a lot of details, facts or sometimes inane things that seem to be meaningless, but you never know when you will use them.  Are they just details or are they pieces of information to join together to help you achieve success?  We are the sum of our experiences which are filled with details!  Details do matter!

Photo by: szeke

Carnivals:

Yakezie Carnival at The Frugal Toad
Carn. of Financial Camaraderie at Making Sense of Cents
Carnival of MoneyPros at Money Pros
Y and T’s Weekend Ramblings at Young and Thrifty.ca
Carnival of Retirement at Midlife Finance

Details do matter!

In case you are wondering, I am not dating!  I just thought I should share some information about a dating service that answers the money issue.  You won’t have to ask your date about money because you will know their credit score!  As a service to my readers, I thought I would dedicate some time to discuss dating services and does it answer the real  question.  How is your FICO score?

I find it interesting that you can meet someone and marry, but never talk about what is really important.  In this case, money is just one of the important things!  Some of you may find this uncomfortable for a variety of reasons.  I find it funny, that it is easier to talk about politics, religion or sex than talking about money.  Is money and how you use it more controversial than anything else?

When do you bring up money when you are dating?  I found a dating service that answers the question for you.  Creditscoredating.com and Datemycreditscore.com will answer the credit score question!  That is the good news although it does not guarantee you will fall in love with a person with a good credit score.  A good credit score is certainly better than a bad one.  Does a good credit score mean you are more compatible?  There should be less financial conflicts!  Perhaps!

I think a credit score is just addressing one issue.  There are many more involved in a good marriage, although I like the concept of getting that issue out of the way.  Do you think that a good credit score will indicate generosity of spirit or spending habits?  Of course not!  A credit score just means he or she is financially responsible with their bills.  I have a friend who is very responsible, but has credit card debt.  A high score  does not tell us enough about the individual, does it?  You may pay your bills on time, but have a negative net worth!

How we spend our money, attitudes about debt and investing is much more important than a credit score.  A credit score is similar to asking your height and weight.  You could figure out the person’s Body Mass Index (BMI).  BMI is a measure of weight proportionate to height.  In other words, you can evaluate whether the person is overweight or obese.  I think I would know it by just looking at the person.  A good credit score may be more complicated, but it only says the person is financially responsible.

A credit score is a little bit more telling than a BMI score, but not much.  A BMI score will not tell me if the person is healthy.  A credit score does not tell me about their personal finance values, goals or net worth.  A credit score just shows that you made your payments on time, and you did not max out your credit.  Is that enough to determine financial compatibility?  I don’t think so!  What do you really want to know?  I hope your list is long, but don’t try to ask all those questions in one night.

No list will ever be complete enough so you have to be comfortable with your mate’s values vs. specific questions.  If you wanted to have children and your mate did not, I would say that is a deal breaker.  If your attitude about debt is radically different, I would say you are not compatible.  If your goal is to go into your own business and your mate sees that as too risky, you would miss out on your dream.   Compromise is important, but not on significant issues.   More people divorce because of money problems so don’t take this lightly.  Not discussing it is not an option!

As I indicated, there is a lot of things a credit score will not tell you about a person.  The credit score makes no judgment about your financial choices!  If your outstanding debt is under 30% of your credit limit, you will have a good credit score, but all of your debt is credit card debt at 18+% interest.  You could have the same score and your outstanding debt is a mortgage.  You have 50% equity in your home and your mate has just debt.   Is this a match?  On the surface, I would want more answers.

Dating, marriage and relationships are much more complicated.  I don’t think anything can replace a conversation, perhaps a very long one.  Remember, financial compatibility is just one of the important issues.  I prefer understanding someone’s values because I could never ask enough questions.  Values are broader statements that usually do not change and tells me more about the person than 100 question interrogation.  If you don’t know, it would be a broad question such as how do you feel about having children or debt or what are your long range goals?

Final Thoughts

If you think a dating service questionnaire will solve your compatibility issues, I have bridge for you!  Nothing replaces getting to know the other person for a period of time.  Getting comfortable with his/her values and the person before a serious relationship can lead to something like marriage.   I remember a good friend in college who had a checklist for dating.  If the girl did not meet his criteria, he did not go out.  The result was he had no dates in college.  I think it is a bit extreme and impractical.  You should meet a lot of people to find what works and what doesn’t.  Perhaps online dating will help in this respect?

Photo by:  Bart Claeys

The usual definition for extreme includes words like serious, hazardous, dangerous, highest degree, exceptional, severe, physical or mental risk or hardship.  I realize that retirement as a goal may be worthwhile enough to take risks, but extreme may be too far.  Fool’s gold is anything that turns out to be worthless!  Have you gone to extremes for retirement savings?  Is it working for you? 

Extreme Actions

In practical terms, extreme retirement is giving up everything now for a retirement.  I am not referring to just giving up dining out or taking big risks in the stock market.  Extreme retirement is savings rates in excess of 60-70%.  It means giving up a great deal for your goal.  Taking it to the extreme reminds me of those liquid diets.  You know, you drink a shake for two (2) meals a day and have a lite meal for dinner.  You will definitely lose weight, but at what cost?

Maybe you have tried to lose weight for years and nothing worked!  You figure, you can do one of these extreme diets and lose the weight.  If you are desperate, you can endure anything for a short period of time.  It sounds like a good way to jump start a diet!  Unfortunately, there are people who think you can endure this until you lose fifty (50) pounds.  What usually happens is you start and have some success, but stop because it is too rigid or restrictive.

You go into it with the best of intentions and you fail.  This is one of the reasons there are so many diets.  There are quite a number of fad diets too!  They are extreme such as the shake for two meals day or juice for five days or fast for twenty four hours.  Stay away from anything extreme, it is unhealthy and generally does not work.  You have to find the one that works for you!  Unless you change your habits, you will fail.  Unfortunately, you will gain back the weight after you go off of it.

Extreme savings rates or giving up everything for retirement savings is too rigid and restrictive.  Similar to the fad diets!  Life is more than just saving for retirement!  You are supposed to enjoy life.  Do you work to live or live to work?  When you achieve your goal, you will feel deprived just like a person on a diet and gain the weight back.  If you give up everything, will you feel deprived?  It reminds me of those “no spend” months! I can easily hold off spending for a month, but it means I will spend it next month.

In the same way, extreme retirement savings is so restrictive you will want to break it.  Extreme savings rates of 60-70% means you cannot do much.  How long could you maintain this savings rate?  What would your living space be like?  I suppose multiple roommates, second hand furniture or living at home.  What would you eat?  Rice and beans?  Isn’t eating a pleasurable experience? I am willing to give up a lot, but not everything.

Could you afford a car?  Would you just go to work and come home?  I am in favor of free entertainment, but that has its limits too.  How would you date or  have a family?  It is pretty extreme to maintain this lifestyle for an extended period.  I can see doing this for a short period to save for a down payment for a house or pay off debt.  I think your tolerance for this sacrifice has its limits, probably a few years.

Extreme Retirement

Ten (10) or twenty (20) years of extreme sacrifice helped you achieve retirement!  Now what?  You had the discipline or determination to to give up a great deal to reach retirement.  I think it is wonderful that you sacrificed so much , but when do you enjoy your life?  Will your retirement be extreme too?  You will live in a small apartment and live on practically nothing.  You are used to the lifestyle so it is no longer a sacrifice, but was it worth it?

Once in retirement, you still give up everything to live a simple life.  I can see how this may sound attractive if you hate your job or career.  In fact I can see why some people will sacrifice a great deal for early retirement.  I know I sacrificed some things to achieve financial freedom at an early (38 years old ) age.  I sacrificed the things that I felt were unimportant.  I did not give up vacations or my children’s private school.  My wife and I lived in a very nice house some would say was grandiose!

You cannot maintain an extreme anything for long periods of time.  Life is supposed to be enjoyed and experienced.  It is much easier to do something like this by yourself, so relationships are hard to maintain.  Most of life’s pleasures are enjoying things and experiences with other people.  I have often heard people who sacrificed ask when does the fun stuff occur?  I think you need a balance in life.  Certain things are worthwhile to sacrifice for your goals, but not everything.  What do you think?

I know you can live in a four hundred (400) square foot apartment, spend very little on food and save 60-70% of your earnings.  My question is for how long?  Can you marry and have a family?  If you did give up everything to reach this goal, what is the pay off?  Is it a frugal (extreme) retirement?  I suppose I could still travel, but it would be extreme too such as $5 per day and I camp out.

Final Thoughts

I am not saying that you should not give everything a 110% effort, but think about how long you can do that?  What is the outcome you are trying to achieve?  Is the effort worth it?  What kind of life do you want to have?  My most enjoyable experiences were with friends and family.  The cost was modest or free, but to save 60-70% of my income would mean saying “no” to many of those experiences!   I certainly could not afford to send my children to private school or live in a nice home.  I These are things that are important to me and I am not willing to compromise my what I find is important.  I saved and invested, but not extreme savings!

Photo by:  Tax Credits

Carnivals:

Y and T’s Weekend Ramblings at Young and Thrifty.ca
Carnival of MoneyPros at Making Sense of Cents
Carnival of Retirement at PF Carny

I saved and invested, but not extreme savings!

Handwriting has become a lost art!  Technology has changed our communication.  Simple communication of writing a letter or note is not something we do anymore.  We email, tweet, text, share on Facebook, post on a blog, post on a website, chat, connect online, or make a call on a cell or VOIP phone.  Technology changed everything!   Has the ability to actually write become obsolete?

Stand out from the crowd 

If it has, it is also an opportunity for you to stand out!  A simple thank you note after an interview may be just the thing to put you over the top.  A handwritten note may be obsolete, but is personal.  It is romantic to the right person.  It is motivational for a child.  It is special as a thank you for a gift.  Something you should do after receiving a gift for a birthday, wedding, anniversary or some other special occasion.  It still is valued!

When I was a poor college student, I used handwritten letters and notes to show my feelings for my then girlfriend.  I stopped buying cards a long time ago!  I never found cards to express my feelings as well as I could.  Writing my own cards is more personal and more meaningful too. Too bad it is dying out.  Soon there will be people who no longer can read cursive writing.  Writing will go the way of dinosaurs!

Museums have letter collections

There is a reason we collect letters of famous people to exhibit in museums?  We learn so much from people’s writing because it gives us insight into the writer. You don’t have to be famous to be worth saving either!  I remember receiving a handwritten note from my wife’s grandfather.  It was encouraging, inspiring and just made me feel good.   Would a text have the same impact?  140 characters do have its limits!  It could, but would you save it?

So much writing is archived in libraries, museums or personal collections.  There are museums dedicated to U.S. Presidents where you can find their personal writing.  Now, we will need a typed translation because soon there will be generations who cannot read cursive writing.  Besides, many people’s writing is difficult to read anyway.  Technology has changed communication and we need to adapt.

Graphology

If you really want to learn about someone, read their letters!  Graphologists go further, they analyze your writing.  Graphology is the study of handwriting, especially when regarded as an expression of the writer’s character, personality, abilities, etc.  It is sometimes used to analyze personality and behavior.  It is sometimes used in criminology.  They use a number (as many as 300) features to analyze writing for personality and behavior.   Handwriting is part of your personal image!

Why handwriting is important?

A simple handwritten note will have impact!  It is personal and expresses your feelings whether as a thank you, card for a special occasion, note of congratulations, expresses love, regret, encouragement, help in a sale or close a deal.  It has impact!  Some may use it to seal an interview or express their love at Valentine’s Day.  Both are important in their own way.  A simple handwritten note from your boss, mate or someone in your life will affect you much more than a text, email or some other electronic device.

A handwritten note is personal and it takes more time than some electronic message.  It is usually valued more just because it is on paper.  Whether it is a thank you not, a letter or a business plan on the back of a napkin, it is valued.  It used to be a rudimentary contract between two (2) people, words were more valued or there were fewer choices.  I am not trying to turn the clock back, but it is a way to stand out from the crowd.

Over my professional business career, I have interviewed hundreds, if not thousands of people and never received a thank you note. A handwritten thank you note or just a note would distinguish you from all the other candidates.  You are out there networking for your next job, to connect or just to increase your presence in your industry, you want to clinch your connection with a note.  A simple handwritten note will have more impact.

Final thoughts

Is handwriting a lost art?  Technology has replaced almost all of it, but you can use it to your advantage.  You can stand out by writing a note, letter or some other personal way to communicate.  It still matters, but it is up to each of us!  It has more impact than an email, text, or some other electronic communication.  Whether you use it to nail an interview, follow up an networking meeting, encourage an employee, a thank you note, a letter or some other reason.  Technology is adapting by developing programs to recognize handwriting and organizing it.  It even provides to take notes or write electronically, but it does not replace a handwritten note.  They are still manufacturing pencils and pens.  We still value a beautifully written note, don’t we  or is handwriting a dying art!

Photo by:  kevinzim

Many of you probably pay into a 401(k) plan, which of course is a retirement scheme that helps you invest your money wisely for old age. Experts suggest that no country’s pension system is clearly superior to another’s, although some are slightly better in terms of the benefits they deliver.

In the case of the USA, economists view the retirement benefits as less generous perhaps than those offered in countries in Europe, for example, although the gap is closing as the age of retirement increases and those governments seek to adjust their systems. Here are a few countries whose systems are different from the USA’s and which offer a different perspective on securing a financial future for retirement:

The Netherlands focuses on healthcare

The Netherlands is generally recognised as providing one of the world’s best pension schemes, particularly with regards to health care, of which high-quality, modern technology and comprehensive coverage are a part of the package. The retirement income consists of a “quasi-mandatory earnings-related occupational pension linked to industrial agreements” (according to researchers at Boston College).

For transparency, opt for Australia’s defined-contributions system

This is a three-pronged pension system that consists of income-based pension benefits, funded from general tax revenues, mandated contributions by the employer to a defined pension plan and voluntary contributions by the employee. Two features of Australia’s scheme are notable: one, it’s a defined contribution system rather than a defined benefit plan (in contrast to the US system) and secondly, the retirement age is increasing from 65 in 2017 to 67 by 2023, which should offer additional security to retirees.

Not a fan of pensions? The UAE provides end-of-service gratuity only

Although the UAE is in the process of instituting a pension scheme for employees, it offers end-of-service gratuity at the moment, which consists of 21 days’ wages for each year of service for the first five years and 30 days’ wages for each additional year beyond five years on the condition that the total gratuity doesn’t exceed the aggregate of two years’ wages. Many employees choose to deposit a small amount each month into their bank accounts  in the UAE in the method of a traditional pension scheme.

United Kingdom rolls out a new private pension system

Also in the process of revising its national pension scheme, the UK requires employers to automatically enrol eligible employees in a retirement account and provide a minimum contribution over the next three years. This is the National Employment Savings Trust (NEST), which will initially require a minimum of 2 per cent employee earnings with at least 1 per cent contributed from the employer. The contribution ratio will increase to 8:3 per cent by 2018, with an annual contribution limit of £4,400.

In general, investing in a pension is the securest way to protect your finances for retirement. Experts caution, however, that public pensions around the world are being scaled back and that as a failsafe, it’s wise to put funds away voluntarily as well.

Photo by:  Uggboy