All My Worth

I started reading All Your Worth last night.  I’m a big fan of Elizabeth Warren, and recommend All Your Worth for its incredibly simple saving, spending, budgeting plan.  I use Mint.com but, deep down, I’m not a fan of tracking every penny spent or of budgeting.

Warren breaks finances down accordingly:

• 50% should go to must-haves
• 30% should go to wants
• 20% should go to savings

Buy the book (it’s $5 at Amazon) or check it out from your local library if you’re interested in why this method works so well.

Warren states that this plan will alleviate worry, and that is one of my goals: Although I save what I think is a reasonable amount, I always worry that I’m just not saving enough.  Today, I followed the exercises in the book to see where I fall.  

Must-Haves (monthly)

• Rent – $860 (includes utilities)
• Mortgage (includes property taxes; does not include extra payments, which belong elsewhere) – $2,374
• Assessments – $203.36
• Food – $180 (This is not all actual expenditures on food; just a place holder number for the minimum you’d need to survive.)
• Utilities (only cell phone for me) – $65
• Transportation (no car; just a monthly transit pass) – $45
• Healthcare – $14
• TOTAL MUST-HAVES: $3,538/month (This does not include my homeowners insurance, which is a one-time payment of $354 and is not a monthly expense, so for my own convenience I omitted it here.  Normally you would include all insurance in the Must-Haves category.)

Savings (monthly)

• 401(k) – $1,154
• Emergency fund – $500
• TOTAL SAVINGS: $1,654/month 

Income

• Salary income (after taxes) – $91,311/year
• Rental income – $12,000/year
• TOTAL ANNUAL INCOME: $103,311 (approximately $8,600/month, if there are three Fridays in the month – we get paid every-other Friday.)

What did I learn?

• My must-haves are less 50% of my total income… as long as my condo is rented for $1,500/month.  There’s the rub!  Without my rental income, my must-haves would be more than 50% and I’d be in a much tighter spot.
• I am saving 20% of my income almost exactly (probably more, since I occasionally throw in birthday money, extra money from checking, or a tax refund).
• I’m already less worried.  I now feel that I’m doing what I should be doing and that it’s enough (which was the missing piece).
• These findings also confirm other suspicions I’ve had for a while.  I can now prove that I can’t afford a car (even though, with a post-tax salary income of $91,000, many people think you CAN afford most anything even if you don’t WANT or NEED it) and be doing what I should be, financially.  
• We absolutely could not (in our present situation, all things being the same) afford to have children and keep doing what we should be.  Now that I’ve gone through this exercise, I am even more shocked that anyone can live in the Bay Area AND make less than we do AND have a car AND kids.  How can you possibly do that and maintain the 50%/30%/20% plan?

Frugal WTF of the Week

 

Watered down hydrogen peroxide - just $6.69!

At the grocery store today, the words “non-chlorine bleach” caught my eye.  Since this is an idea I can get behind, I took at look at the ingredients list.  The FULL ingredients list (which you can verify here) is:

• Hydrogen peroxide
• Water

Look at the posted photo for a moment.  Diluted hydrogen peroxide… for almost $7!  The bottle is 64 oz. of hydrogen peroxide and water.  Walgreens has two 32 oz. bottles of hydrogen peroxide for $3!  That’s 64 oz. of hydrogen peroxide alone.  So the extra $4 in the expensive green brand is for… water?

I’m the type of person who learned (thank you mom and grandma) to clean with vinegar, baking soda, hydrogen peroxide, water, and sometimes a squeeze of lemon or a drop of essential oil.  Therefore, my immediate reaction to seeing diluted hydrogen peroxide for almost $7 was “No one would pay for that.”  That, however, is always the cue to a good idea: If I would never pay for it, it usually means someone else would.  

As Sweet Mans said when he saw this, “Ah, but remember, it has THE POWER OF NATURE!”  Right.

My Friend Foreclosure, Almost One Year Later

Last year, a friend of mine decided to stop paying his mortgage.  If you’re new to this blog, you may be interested in Part One and Part Two of his story.  

Recently, a few of you have emailed to ask for an update.  I haven’t posted one because, well, nothing much has happened since May 1, 2008, the day my friend stopped paying his mortgage.  For the first few months, my friend received voicemail messages reminding him that payments were past due, followed by letters asking him to call the bank to make payment arrangements.  Around late September or early October he stopped hearing from the bank altogether.  My friend received not a single voicemail or letter until yesterday.

Yesterday, my friend received a letter that stated only that the bank hoped to go to court next month to officially begin foreclosure proceedings.  My friend called the bank for more information, but had an odd conversation with the customer service representative who answered.  With so many mortgages having been bundled and sold, my friend was curious to find out if the bank from which he obtained his mortgage is still the legal holder of the mortgage note, and if they could prove it.  The customer service representative told my friend that she did not have to answer his question.

Now that’s really interesting, isn’t it?  If I’m not mistaken, it’s questionable if an entity that does not legally hold the note to the property can file any sort of claim (like a foreclosure) on the property.  Failure to produce original mortgage paperwork has stopped other foreclosures. My friend is now looking into that, but this possibility may explain why this process has already moved so slowly – or not.  The sheer scale of the housing crisis is probably reason enough.

But there’s a new layer to this story as well: My friend’s condo building is in hock.  My friend purchased a condo in an eight-unit building.  He purchased his unit in early 2007.  At the time, only one other unit in the building had sold.  These were all of the units that would EVER sell in my friend’s building, to date.  This complicates matters because, in order for the control of a condo building to move from the building’s developer to a condo association, approximately 75% of the units must have sold.  Since only two of eight units sold, the “flip point” from developer to new association was never achieved.  The developer remained in charge of the building, which he probably never hoped for.  Most developers are eager to stay out of the property management business.

The developer was a questionable fellow to begin with.  He was an immigrant and not necessarily a U.S. citizen, which isn’t necessarily an issue.  But he engaged in some strange behavior, such as putting up wooden boards on the inside of the wrought iron fence surrounding the building and painting the wrought iron fence gold.  It looked ghetto, to put it mildly.  

A few months ago, the developer fled.  He’d been living in one of the six finished units in the building and left.  No one has seen him since, and no one can reach him.  There have been a few visits from various professional looking entities inquiring about the developer’s whereabouts, but the two lone building tenants have no idea where he is.  They suppose he returned to his country of origin in debt.

Given this, what will become of the building in which my friend resides?  We joked this evening about a “foreclosure race”: Which will be foreclosed on first, the building or my friend’s unit?  What will happen if no one can produce mortgage notes or other original paperwork on my friend’s unit or the building?

This is when the mind has fun entertaining unlikely scenarios.  Should my friend start renting out the finished condo units in the building for reasonable sums?  Will he or the other tenant be able to file a squatters claim on the property?  Oh, the possibilities.

As promised earlier in this story, I’ll keep you posted.