5 Habits to Financial Freedom

It was January 2014 and my doctor scolded me for high cholesterol (250), being 20 pounds overweight, and threatened to put me on cholesterol medicine.  I knew I needed to change my lifestyle habits.  I cut back on red meat and sweets, got a personal trainer, started taking omega-3 daily, and began working out 3-4 days per week.  The first 3-4 months I didn’t feel like I was making great gains, but slowly I was losing one pound at a time and changing my metabolism.  When I went back a year later for my annual check-up, my cholesterol was down 54 points, I lost 15 pounds, and my doctor was surprised she didn’t have to put me on cholesterol medicine.  If you’ve ever tried to start a workout routine, you’re familiar with the inner struggle that occurs when you’re looking back and forth between your tennis shoes and the couch. You start to wonder how much one little workout really matters in the long run.  It isn’t until exercising becomes a habit that you are able to silence the persistent voice that swears your time would be better spent zoned out in front of the TV or computer vs. the gym and salad bowl.  Today, I have it on my calendar to workout every Monday, Wednesday, Thursday, and Saturday.  It’s a habit now, but it wasn’t easy. Financial freedom is built from the same foundation: positive habits molded from persistence chipping away one day at a time.  Here are five habits to start implementing today.

Habit 1: Performing Routine Check-Ups

Monthly automatic investing is helpful, but you should never fully remove yourself from the money management process.  Spending habits change, income fluctuates and bills have the tendency to increase without notice, so it’s important to get in the routine of doing a monthly money check-up. Compare your actual spending to your budgeted spending, assess and pay in-coming bills, ensure that all accounts are in good standing and you aren’t being charged unnecessary fees. If you notice that something isn’t working with your overall plan, now is the time to make the necessary changes.  Without this money habit, you can’t truly be in the driver’s seat when it comes to your finances.  With today’s automatic payment/billing with service providers linked directly to your bank account, it’s easy to overlook.  Don’t get lazy on the couch, stay focused on your tennis shoes to ensure you’re not overpaying, and your monthly expenses are not increasing per your budget.

Habit 2: Spending Less Than You Earn

It’s a simple equation: if you have more money going out each month than coming in, you will end up in the red. Ending up in the red for one month can quickly turn into a seemingly insurmountable pile of debt and no designated savings for the future.  If you’re already in this boat, there are two solutions: spend less or make more.  Getting into the habit of spending less than you earn, banking influxes of cash from things like bonuses and pay increases, and avoiding the ever-present temptation of lifestyle inflation is the cornerstone of creating a financial cushion you can count on now and into the future.  One service that I use to keep track of my net worth and monthly spending vs. income is Personal Capital.  There are other online services out there such as Mint, but the important piece is understanding your monthly income vs. spend.

Habit 3: Paying Yourself First
Just like your personal health, making positive decisions for your money when faced with the temptations of everyday life comes down to two things — willpower and creating systems to make up for the days when your willpower just doesn’t exist.  One such system is paying yourself first, meaning you deposit money into your savings account (or investment accounts) before anything else. It essentially makes saving an expense just like your electric bill or mortgage payment – before it can be haphazardly allocated to random and unnecessary purchases.  Once this habit is established, you’ll adapt to your new spending limit, and your savings will steadily increase without any additional sweat or hard work on your part.  At Real Estate Concierges, we call this our 20/30/50 financial plan where the 20 is paying yourself 20% of your take home pay first, before any other bills are paid.  Invest in yourself first!

Habit 4: Avoiding Buyer’s Remorse

Considering the vast number of people who struggle under the weight of consumer debt, overspending is a significant issue in the United States. Much of this spending is habit-based — not need-based.  Get in the habit of asking yourself these questions:

1) Does this purchase have a positive purpose?

2) What will I need to forgo in order to make this purchase?

3) Will I save more by purchasing this item elsewhere or at a later time?

Often times, simply stopping to think before whipping out your credit card will be enough to realize how unnecessary so many purchases actually are.

Habit 5: Creating and Sticking to a Plan to Eliminate Your Debt

If you’re simply paying the minimum monthly amount on your debt, you might think you’re following a solid repayment plan set forth by your creditor. The truth is, it is in your creditor’s best interest to keep you in debt for as long as possible – and collect massive amounts of interest in the process.  Instead, you should be the one in charge of determining how much you can pay monthly (above and beyond the minimum due) and when your official date of debt freedom will be. One strategy that I like is to start with your lowest balance and apply the maximum amount per your budget to pay it off.  So if your budget is only $50/month above all your monthly minimum debt payments, apply that $50 to your lowest credit card balance to pay it off first.  Then apply that $50+min payment of the credit card you just paid off to the next lowest debt balance that you have (credit card, car loan, etc.).  It’s gratifying to eliminate each debt/loan and move on to paying off the next.  Get in the habit of regularly checking your repayment progress, revisiting and recalculating your plan, and – most of all – making sure you are the one fully in charge of your debt repayment journey.

Just like your personal fitness plan, chip away one day at a time as results don’t happen overnight. It’s the daily habits that will transcend across everything you put your mind to; health, wealth, and achieving financial freedom.  Here’s to your health and future wealth!

Here are 7 ways owning a home is a smart money move.

I never wanted to be a ‘renter’, but rather a homeowner and landlord.  I graduated college in June 1993 and purchased my first home in January 1994.  Since January 1994, I’ve always been a homeowner and landlord building wealth through owning real estate for the past 21 years.  I always wanted a long-term relationship with a mortgage broker giving me money vs. a landlord taking my money.  My goal was never to make someone else wealthy by lining their pockets with my monthly rent check that pays their debt while their home appreciates in value over time.  The financial benefits of homeownership are evident year-round. Let’s examine how homeownership makes “cents” — from tax benefits to financial stability.

1. Homeownership builds wealth over time

We were taught growing up that owning a home is a financially savvy move. Our parents and grandparents thought so as well. But this past decade of real estate turbulence has shaken everyone’s confidence in homeownership. That is why it’s so important that we discuss this again now that we’re in a “new” market.  Homeownership can be a very savvy financial move — but only if people buy homes they can actually afford.

2. You build equity every month

Your equity in your home is the amount of money you can sell it for minus what you still owe. Every month you make a mortgage payment, and every month a portion of what you pay reduces the amount you owe. That reduction of your mortgage every month increases your equity. That is especially true now with the elimination of risky mortgages like negative amortized and interest-only loans — thanks to the new “Qualified Mortgage” rules. The way mortgages work is that the principal portion of your payment increases slightly every month year after year. It’s lowest on your first payment and highest on your last payment. Thus, as the months and years go by, your equity grows!

3. You reap mortgage tax deduction benefits

Mortgage deduction: The tax code allows homeowners to deduct the mortgage interest from their tax obligations. This can be a huge deduction, since interest payments are often the largest component of your mortgage payment in the early years of owning a home.

Some closing cost deductions: The first year you buy your home, you are able to claim the points (also called origination fees) on your loan, no matter whether they are paid by you or the seller. Since origination fees of 1% or more are common, the savings are considerable.

Property tax is deductible: Real estate property taxes paid on your primary residence and a vacation home are fully deductible for income tax purposes.

4. Tax deductions on home equity lines

In addition to your mortgage interest, you can deduct interest paid on a home equity loan (or line of credit). You can transfer your credit card debts to your home equity loan, pay a lower interest rate, and get a deduction on the interest as well.

5. Capital gains exclusion

If you buy a home to live in as your primary residence for more than two years, then you qualify for this deduction. When you sell, you can keep profits up to $250,000 if you are single, or $500,000 if you are married, and not owe any capital gains taxes. It may sound ridiculous to say that your house actually appreciated after these past several years of falling house prices. However, if you purchased your home prior to 2003, chances are, it has appreciated in value and this tax benefit will come in very handy.

6. A mortgage is like a forced savings plan

Paying your mortgage every month and reducing the principal is like a forced savings plan. Each month you are building up more valuable equity in your home. In a sense, you are being forced to save — and that’s a good thing.

7. Long term, buying is cheaper than renting

In the first few years, it may be cheaper to rent. But as the interest portion of your mortgage payment decreases, the interest will eventually be lower than the rent you would have been paying. But more importantly, you’re not throwing away all that money on rent. You have to live someplace, so instead of paying off your landlord’s home or building, pay off your own!

I’ve always looked at a home as an investment, not a house I would live in forever.  Even if I move in three to five years, can I rent the house to cover the mortgage and create a positive cash flow investment for my future wealth building goals?  Real Estate is a long-term investment growth strategy, so approach it as such vs. just a home purchase.

10 Reasons to Make Repairs before You List.

If you’re planning to list your home for sale, it’s time to tackle all the necessary repairs. These repairs can save you money in the long run — money spent on improvements now will be far less than the cost of that first price reduction if your house sits on the market. When my wife and I sold our second home in 2005, it was a seller’s market, but we knew adding fresh mulch in the flower beds for curb appeal, repairing a few boards in the front of the house, and repairing a few window latches would reduce the items in the inspection and increase the buyer appeal for our home.

Even if your home doesn’t linger on the market, you run the risk of a buyer asking for concessions and credits for items you didn’t fix, and the quotes from experts doing the work will almost certainly be higher than your own out-of-pocket cost.

If you still need convincing, here are 10 reasons to make repairs before you put your house on the market and get top dollar.

1. You’ll have to fix problems anyway — or make concessions

Your buyers are going to do an inspection, and the inspector will be able to identify all the issues and suggest needed repairs. There’s no avoiding it. You will have to fix any problems, credit money back to the buyer, or drop your price to compensate.

2. It will save you money

Many common repairs are easy to solve, inexpensive, and can be tackled in a weekend. They’re likely to be the things that were already on your list of weekend projects for the past year, and if they bother you, they’ll also bother a buyer. Leaky faucets, ripped window screens, ceiling stains, cracks in the plaster — they may seem like minor issues, but when you’ve got a whole house full of problems like these, they add up to one big seller headache.

3. Your home — not its flaws — will be the focus

Eliminating distracting drawbacks will allow buyers to have a positive experience as they tour your home. That means open-house visitors will be able to focus on your home’s positive, not negative, features.

4. A well-maintained home gets better offers

Getting your home completely prepped and ready will increase its perceived value because you’re showing buyers that your property is well maintained.

5. You can hold firm on your price

You won’t have to do a price reduction to reflect the estimated (and often overinflated) cost of repairs!

6. Rush jobs cost more, every time

Last-minute repairs done on a tight timeline are almost always more costly since you don’t have time to shop around for estimates. Plus, your time crunch begs for tradespeople to charge higher rush fees for squeezing the work into their schedule.

7. Actual costs and estimates don’t always match

Your actual cost to fix an item will almost always be less than a buyer’s estimate after their inspection — but since you won’t necessarily have time to fix everything before closing, you risk losing the sale if you don’t agree to the estimate.

8. You won’t risk losing the deal

You’ll avoid credits back to the buyer for problems identified during the inspection and haggling that drags on and on over minor issues, possibly costing you the deal. (You’d be surprised how ugly things can get when you’re down to the wire negotiating the added cost of repairing the cracks in the chimney.)

9. You’ll get more potential buyers in the door

Your Real Estate Concierge will love showing off an impeccable home, and buyer’s agents will be dying to get their clients in the front door. That brings in more potential buyers — which equates to more chances of finding the right one willing to pay your sale price.

10. You’ll sell your home faster

And for a higher price. Ka-ching.  The goal is to get more than one buyer interested in your home to create a bidding war and maximize your return on your home sale.

Own anything with 20/30/50!

Financial discipline is key to financial freedom.  It’s not what you make, but rather what you do with what you bring home.  Whether you're a parent with two kids or a recent college grad working your first job, our 20/30/50 guideline can help you assess your budget to work towards owning anything! It’s an easy approach to understand where your money is going and how to put a plan in place to own anything!  Notice I didn’t say own everything, but rather put a plan in place to own anything you want.

My guideline breaks your budget down into three simple buckets. It’s designed to help you figure out how much you may want to allocate to each area every month, and can also help you determine the order in which your money can be allocated.

20/30/50 Broken Down - Easy as 1-2-3

1. Pay Yourself 20% to achieve financial freedom!

At a minimum, pay yourself at least 20% of your take-home pay toward important payments or contributions that will help you secure your financial freedom. We believe there are three essential goals everyone should strive for first: paying down high interest credit card debt, having a six month emergency fund, and investing to achieve financial freedom and generating wealth through real estate.  If you bring home $5k per month, then $1k per month should be investing in yourself to achieve financial freedom!  Think about yourself first!

2. Flexible Spending - 30%

Consider budgeting no more than 30% of your take-home pay toward flexible spending. These are day-to-day expenses that can vary from month to month, like eating out, groceries, shopping, hobbies, entertainment, or gas.

We include groceries in flexible spending because even though food is a necessity in your budget, how you spend on food can vary. Some weeks you might eat out more, while others you may buy more groceries to cook at home. It doesn’t really matter what you spend your money on each month in this category, as long as you're aware of your spending and not going over your total flex budget each month.

3. Fixed Costs - 50%

These are bills and expenses that don’t vary much from month to month, like rent or mortgage payments, utilities and car payments. We also include subscriptions, such as gym memberships and Netflix accounts, in fixed costs because you’re committed to paying them on a monthly basis.

When it comes to fixed costs, we suggest you aim to keep your monthly total no more than 50% of your take-home pay.

One Note About Retirement Income

As you might have noticed, the 20/30/50 guideline applies only to take-home pay. Any contributions you make to retirement before your paycheck hits your bank account are not included. For that reason, you may actually be contributing more toward your financial goals than this breakdown would suggest. And you may find that it's a good thing to keep that retirement money out of sight, out of mind, especially if you have an employer match program with a 401k program.

If you ever have any questions, your Real Estate Concierge is here to help or give us a call at 855-REC-6700 or concierge@reconcierges.com. Here's to building your wealth!

How Much Can You Afford? - Get Pre-Approved

When my wife and I bought our first home in 1994, our PITI (Principle, Interest, Taxes, and Insurance) was about 30% of our gross monthly income, well within the lending Debt-to-Income ratio.  However, it’s important to understand not just what the maximum is you can afford and qualify for, but also making sure you enjoy your home and are not ‘house poor’. From my experience, a 25% PITI to gross monthly income is a good guideline to provide a comfortable mortgage payment with extra money each month for an average lifestyle. Either way, it’s important to understand your finances and maximum borrowing leverage available to you.

Especially in today’s Seller’s Market, getting pre-approved gives the buyer leverage over other buyers that do not have a pre-approved mortgage letter.  The first step in the loan process is to make contact with a loan consultant and begin the application process. At this time the loan consultant will begin gathering all pertinent loan application information from you such as:

• Last 2 Years of Federal Tax Returns
• Last 2 months of bank statements and investments (mutual funds, brokerage)
• Last 30 days of paystubs
• Copy of Driver’s License for each person that will be on the loan

The consultant will let you know exactly what documents you will need to provide and address important questions during your initial meeting so they can design the proper loan scenario for you.

Loan consultants will guide you through the entire loan process at this time. Loan consultants are qualified to answer any questions you may have about loan process, so don’t hesitate to ask. After your initial meeting with the loan consultant, the following steps are taken to complete the application process:

• A credit report is pulled.
• An application is signed.
• Disclosures are signed.
• Explanation letters are written to explain specific situations that affect your financial ability to repay a mortgage loan.
• Supporting documentation is presented by you to the mortgage company to validate the information provided for the loan application
• An underwriting pre-approval is performed by an automated underwriting service or a manual underwriter.
• A commitment fee, application fee, or good faith deposit is paid by the homebuyer to the mortgage company.
• A pre-approval letter with conditions is presented to you. House hunting begins

Any questions you might have about getting pre-approved, your Real Estate Concierge can help provide some recommendations and local contacts. - email us at concierge@reconcierges.com or call us at 855-REC-6700.

Choosing the right time to list your home can make all the difference.

There’s a season for everything — including real estate.  When my wife and I sold our first home in 2000, we lucked out and decided to list our home in June. Our first child was 6 months old and we were ready for a bigger home, but had no idea that summer was one of the best seasons to sell due to summer vacation and parents looking to upgrade and relocate in between school years.

If you’re gearing up to list your home for sale, you should connect with your agent to discuss your home sale action plan. But there are also a number of calendar-based factors you should be just as thoughtful about as you put together your plan for selling.

Here are five calendars that should be on every home seller’s radar.

1. The academic calendar

Families with school-age children often find it less disruptive to house-hunt in late spring/early summer with the aim of moving in before school starts. Of course, we all know what they say about the best-laid plans, so by no means should you let this stop you from listing your home at another time of year.

Demand for homes with convenient proximity to strong schools can increase during the summer school break and around other times of year when kids are not in school.  When my wife and I sold our first, home, we did not have school age children, but knew this was the best time to sell.  Our son was only 18 months old, but we knew summer was a critical period for our family/child oriented neighborhood.  We listed our home in May and closed in June, 2000.  

2. The tax calendar

I cannot count the number of relatively unmotivated looky-loo buyers I’ve worked with over the years who became suddenly motivated from a massive, looming tax bill. For instance, many new professionals will seek to close escrow on homes between the time they graduate and the end of that same year, in an effort to deduct their closing costs and mortgage interest from their new large incomes and avoid a big tax bill the following April. Similarly, just after tax time in April, a flood of newly motivated buyers come into the market, advised by their CPAs that the mortgage interest deduction is their best bet for not having to write as big a check to the IRS next year.

Fortunately for sellers, more buyers and more motivation means more demand and can translate into a faster sale at a higher price than at other times of the year.

3. The weather calendar

Many sellers who live in cold-weather climates are aware that wintry conditions can dramatically cut down the numbers of buyers who are out viewing properties. This is why buyer searches for homes peak in January in warm-weather states like California, Hawaii, and Florida — and not until after the spring thaw in the Midwest, the South, the Northeast, and most of the West.

The combination of what’s happening with the weather and the specific features of your home can interact to impact your home’s prospects for sale — and its ultimate sale price. Behavioral economics researchers have found that homes with swimming pools (and water slides, perhaps?) sell for more in the summertime than they do in winter.

“When it is sweltering outside, a swimming pool just looks attractive. There’s an emotional connection because it reminds us of fun times we have in the summer,” says Jaren Pope, assistant professor of economics at Brigham Young University.

So if it’s summer and you’re selling a home with ski slope access, you might want to paint the picture of a cozy, fun-filled winter by staging the place with ski gear and other items that help prospective buyers visualize how much fun they’ll have when winter comes. And vice versa: If it’s winter and you’re selling a house with a pool, consider making sure it is steamy and heated, if it has those features. Stage it with lounges, towels, lights — anything that showcases the pool to offset a cold-weather buyer’s psychological tendency to discount the appeal of a pool in the winter.

4. The holiday calendar

During the holidays, many buyers simply prefer to spend their downtime celebrating with family and friends versus. house hunting, especially in locales where the winters are wet or cold. Nationwide, December is the slowest month of the year for home searches, and November is the second-slowest.

Does this mean the holidays are a bad time to have your house on the market? Not necessarily. Some homes show beautifully when all lit up and tastefully dressed up for the holidays. And the truth is that there is a hardy contingent of buyers motivated to close by year’s end for tax purposes, every year in every market. While buyers might be fewer in number, those who will brave rain, sleet, and snow and forgo holiday parties to house-hunt can be some of the most motivated buyers of all.

5. The Gregorian calendar

We’re talking about the regular old January-through-December calendar here.

Home buying tends to be a popular resolution among those with money on their minds at the beginning of the year — and also among people looking forward to career promotions, developing their love and family relationships, or relocating to a new hometown. Make sure your home is well-represented on sites like Trulia at the beginning of the year, when these life- and financial-change visionaries start searching for their next nests.

If you’re ready to list your home or have any questions, give us a call at 855-REC-6700 or email us at concierge@reconcierges.com

5 steps to get your house market-ready to Sell.

You’ve made the decision: You’re going to sell your home. Now you’re probably wondering Where do I go from here? Start putting fresh paint on the walls? Panic?

Don’t stress: Your Real Estate Concierge is here to help.  Unfortunately, when my wife and I sold our first home in 2000,  we didn’t know where to start or how to prepare.   There weren’t blogs or great content available online at the time.  However, in addition to what you can research online, I wanted to share a few simple steps to think about as you get your home ready to sell and maximize your return on investment.

1. Be vigilant with your stuff

Make the adage “less is more” your mantra. The detritus of life tends to stack up in our living spaces, which may be fine for every day but isn’t great for selling. Now is the time to tackle those organization and cleaning projects.  Make a Goodwill bag and get a receipt.  Giving to charity is a great feeling and also a tax savings advantage.

Give items away, recycle them, or pack them away for your next house. And remember, packing items away doesn’t mean shoving them in the hallway closet. Buyers will likely open every cabinet and drawer (pretty much), so those spaces should be tidy too.

While making your home buyer-ready, get a head start on packing for your new home and rent a portable storage container. This way, you’ll have a place to store displaced items — but you won’t have to drive it across town or get rid of it. Score!

2. Define a timeline and plan with your agent

As you’re getting your house in order, establish your timeline and expectations with your agent. You’re not looking for just any agent; but a real estate coach to guide you through and beyond the transaction.  Selling a home can seem overwhelming, but with a coordinated plan, timeline, and expectations with your Real Estate Concierge, you will have a higher chance of success.  

3. Dig out all relevant paperwork

While you’re cleaning and scrubbing, keep an eye out for paperwork that’s been stashed in random places throughout the years. Warranties, installation invoices, mortgage paperwork — gather it together.

If you can’t find the documents, you can always select “I don’t know” on the seller’s disclosure notice. But this isn’t the best tactic. Buyers want an active, informed seller who is involved with the details of their home. Give the people what they want, and in turn you’ll have an easier time selling your home for top dollar.

4. Schedule a strategy session with your agent

Purging and cleaning were the warm-up act. Now you’re ready for the main event. After you’ve signed on the dotted line with your real estate professional, schedule a walk-through before listing.

Take their feedback seriously. They know what color to paint that old maroon accent wall, how to stage the living room so it looks 20% bigger, and how to deal with outdated kitchen cabinets.

They also know how to allocate your dollars to impress potential buyers.

5. Repair and remodel

Work your way through your agent’s list of recommended repair tasks. If they advise a couple of remodel projects, make these a priority so listing photos can be scheduled. Remember, your agent is plugged into the local market and has some insider knowledge.

If it’s a buyer’s market, consider scheduling a pre-listing inspection. Nothing gives buyers the warm fuzzies more than seeing a completed inspection with items already attended to and checked off.

Take these five simple steps after deciding to sell your home and before you know it, you’ll be ready to step up to the closing table to sign your papers.  If you need any help, give us a call at 855-REC-6700 or email us at concierge@reconcierges.com