Three Questions to Answer for a Happier

Step #1 — What does retirement mean to you?


Many people think of retirement as a time in your life where you can work if you want to, but not because you have to. In other words, how would you feel if you could work for fun and/or pursue your passions without worrying about money? This requires financial independence, or having enough money to:

Cover your needs and basic wants

After taxes

After inflation

For some period of time (usually you and your beloved's

lifetime)

The amount of money necessary for financial independence is called "Critical Capital". This is a pile of money that can sustain all your retirement expenses with inflation and after taxes for the requisite time period. This may be in an assortment of piles of money such as funds in your 401(k), Roth IRAs, and taxable money. Retirement could mean reaching a point where you have enough Critical Capital to spend your money making a life versus being forced to spend your life making money. Now that's exciting!

Step #2 — What is the role of mortgage planning?

Your mortgage is most likely your single largest debt, and your house is most likely your single largest asset. Your mortgage and home equity situation impact your:

Cash flow

Tax deductions (or lack thereof)

Net worth and wealth position

Liquidity (access to your money)

Estate and legacy planning

It's important to ask yourself whether your mortgage or real estate equity strategy is helping or hurting your chances of acquiring the right amount of Critical Capital. Does it make more sense to use a smaller mortgage and invest more cash flow into your Critical Capital fund? Does it make more sense to use a bigger mortgage and invest more upfront cash into your Critical Capital fund? What about using or planning to use reverse mortgage now or at some point in the future? Mortgage planning asks and answers all these questions to help you avoid missing your mark and not having enough Critical Capital. Your mortgage, housing, and cash flow strategy play a large role in helping you achieve financial independence.

Step #3 — How will you get enough Critical Capital?

Remember, the amount of money necessary for financial independence is called "Critical Capital". There are three specific steps that I use to help you acquire enough Critical Capital for financial independence:

1. Calculate Critical Capital — how much do you need?

Determine the future value of how much you have already saved — what will your current investments be worth in the future?

2. Determine how much you still need to save — how can you change your cash flow or real estate equity situation in order to make up for the shortfall?

3. As a CMPS professional, I work as a team with your CPA, CFPR and other financial advisors to help you determine how much cash flow you need during retirement and the best way to generate that income. I can also refer you to a financial planner if you don't already have one. Either way, give me a call or send me an email to schedule a time to discuss your options in further detail.

As a CMPS professional, I work as a team with your CPA, CFPR and other financial advisors to help you determine how much cash flow you need during retirement and the best way to generate that income. I can also refer you to a financial planner if you don't already have one. Either way, give me a call or send me an email to schedule a time to discuss your options in further detail.

Can Bad Credit Still Cost You a Job?

Published: Friday, 8 Apr 2011  3:18 PM ET

By: Cindy Perman

CNBC.com Staff Writer

The recession left a lot of people with bad credit — even people that previously had sterling credit. So, are hiring managers now willing to overlook bad credit or can it still cost you a job?


Bad credit is like a ball and chain when you're interviewing for a job.

“I’ve always de-emphasized the credit report,” said Greg George, who does a lot of background checks and due diligence with his firm GTI Advisors. “People face various challenges in life from business failures and layoffs to medical bankruptcy and other issues that may cause/reflect financial distress. This does not mean that they are bad people or necessarily a risk.”

In fact, he said, when it comes to the entrepreneurs he investigates for venture-capital clients, bad credit can almost be a good thing.

“If you understand how entrepreneurs think — they go through one start-up. Blow that up. It’s a lot of work,” George said. “This one individual I was doing a background check on had two bankruptcies. And the investor looked at me and said, ‘that just means he’s more experienced!’”

In fact, he advises clients to not weigh heavily on a credit check — especially in places like Michigan that were hard hit by the recession. What’s more important is to verify the person’s identity — their name, previous employers and where they went to school. It’s also important to check for any legal red flags such as lawsuits against the person for fraud, George said.

Chris DesBarres, who owns Help Unlimited, a company that helps individuals, mostly senior citizens, manager their day-to-day finances, said he uses credit checks when making hiring decisions – but only after he’s decided he wants to hire someone.

“As a screening tool, a credit check is a horrible — and expensive — method,” DesBarres said.

When he does use credit checks, DesBarres said, he’s looking for four key things: The amount of debt the person is holding, any bankruptcies, recent red flags such as maxing out credit cards and any debts that are now in collection.

Many companies limit use of credit checks to positions that include fiduciary responsibilities.

Since the recession, several states have passed laws limiting the use of credit checks during the hiring process, supplementing protections outlined in the federal Fair Credit Reporting Act.

Aside from the fact that people with previously sterling credit might have had their credit dinged during the recession, Connecticut state lawmaker Matthew Lesser, in pitching legislation to limit use of credit reports, offered another argument: “Bernie Madoff had a pretty good credit score.”

A survey last year by the Society for Human Resource Management showed that 60 percent of employers do credit checks for some job candidates, while just 13 percent did it for all candidates.

Jay Meschke, president of executive-search firm EFL Associates, said his clients have started to loosen their standards when it comes to credit checks — but not for everyone.

“Since the downturn in the economy and since people have been losing their jobs and being unemployed for long periods of time, hiring managers have lessened their historical standards vis a vis what the credit report might tell about a candidate,” he said, also citing Detroit as an example.

However, those looser standards only go so far up the food chain.

“For executives, the historical standards still apply,” Meschke said. He cites two reasons: First, the unemployment rate for people with a college education is a lot lower — more like 4.8 percent, compared to the overall unemployment rate of 8.8 percent. So, executives would be less likely to be hit by the effects of unemployment. Second, they make a lot more money than most people, so they should have a nest egg to carry them through any periods of unemployment. If they don’t, and they manage their personal life that poorly, why would you hire them to manage your company?

Recognizing that there’s a difference between a person who lost their job during the recession and wound up with bad credit and a person who has always had bad credit, the credit-reporting agencies recently tweaked their scoring methodology.

They use a system called VantageScore to determine a person’s credit score, which takes into consideration a person’s payment history, how much they use their credit cards, if they carry a balance, how long they’ve been using credit cards and how much credit the person still has available. VantageScore 2.0, which launched at the beginning of 2011, blends data from two different timeframes — 2006 to 2008 and 2007 to 2009 — in order to distinguish those people who may have been fiscally responsible before the recession but fell on hard times in the past few years.

“By using a development sample from this extended window, VantageScore 2.0 captures both a broad and recent set of consumer behaviors across the full spectrum of economic events, reducing algorithm sensitivity to highly volatile behavior that can be found in a single timeframe and extending performance stability over time,” VantageScore said in a statement.

Regardless, Meschke said, hiring managers need to dig a little more nowadays to vet a candidate, not just take data from a background check at face value.

Meschke recalls one of his clients, a hospital, that contracted him to help find a chief nursing officer. They found a great candidate but learned through the background check that she had once declared bankruptcy. The job involved some financial responsibilities, so they almost didn't hire her. But, after they looked into it, they learned that the candidate and her family had taken in their grandparents and also taken over the loan on the grandparents’ house. Then, one member of the family lost their job and they had to foreclose on the grandparents’ house, sending the family into bankruptcy. The hospital gave her a second chance and the woman got the job.

Not only are people with bad credit being given a second chance in many cases, there’s also a camp that’s in favor of hiring those with bad credit.

“I’ve heard an argument that hiring someone with bad credit can be a really smart move — that employee really needs the job and will stay longer,” said Bonnie Zaben, the chief operating officer of media-recruiting firm Aclion. “It cuts down on employee turnover, which can be a real cost saver. Using the conventional wisdom that the costs of turnover is 150 percent salary, you’ve now saved a bundle by retaining that employee,” Zaben said.

One thing most hiring managers can agree on: Candidates who might have a blemish in their credit history need to volunteer that information and an explanation of what happened as quickly as possible.

“Don’t just hide behind it … Leaving it up to chance is a bad decision for a candidate,” Meschke said. “They will find out about it. It’s just a fact.”

Employers are more receptive to hearing an explanation than most candidates think.

"If you can give me a plausible explanation about why this derogatory information should not be a cause for concern, I’m more than happy to hear it,” DesBarres said.



April 10th ~ Sunday Brunch Seminar

Turn Lookers into Buyers!

Owner of Imagine Home Staging & Finishes, Lisa Shipley, will share first hand the art and value of staging a home, creating the first & lasting impression upon buyers looking to own your home.

Speakers: Kimberly Shute, Principal Broker, Keller Williams Realty Professionals
                 Lisa Shipley, Imagine Home Staging & Finishes

Cost: FREE

When: Sunday, April 10th, 2011
           1:00p - 2:00p Presentation, Questions & Answers
           2:00p - 2:30p Boutique Shopping

After a great hour of learning and enjoying a delicious brunch, browse and buy beautiful Stella & Dot jewelry and exquisite French linens. 5% of proceeds benefit Alliance Francaise de Portland.

REGISTER: www.RealEstateGuide4Women.wordpress.com

Where: Kamm House (Alliance Francaise)
             1425 SW 20th Ave, Portland

Tram: Goose Hollow/SW Jefferson St Max
Parking spaces available

For questions, please contact your host,
Kimberly Shute, 971.2271302

Sunday Brunch Seminar ~ March 6

Importance of Now
                 Why it’s Time to Make Your Move

Please join us March 6th

Sunday Brunch Seminar

Learn:
Rate vs. Price, which is more important
Short sale, bank owned, straight sale–which is right for you
Factors that affect timing ~ why now is prime time




Speakers:
Kimberly Shute, Principal Broker, Keller Williams Realty Professionals
Carrie Reed, Alpine Mortgage, Certified Mortgage Planning Specialist


Cost: FREE


When: Sunday, March 6th, 2011
1:00p – 2:00p Refreshments (Mimosas, Fruit & French pastries)
2:00p – 2:30p Boutique Shopping


Where: KAMM House
Tram: Goose Hollow/SW Jefferson St MAX Station
1425 SW 20th Ave, Portland
Parking spaces available in front of KAMM House


REGISTER ONLINE ~ www.RealEstateGuide4Women.wordpress.com

Any questions, please contact your host,
Kimberly Shute,
971.227.1302

Who;s House Is Being Saved By Obama?

By Les Christie, staff writerFebruary 1, 2011: 2:07 PM ET

NEW YORK (CNNMoney) -- More than half a million Americans have received permanent mortgage modifications from the Obama administration's flagship foreclosure prevention program, the Home Affordable Modification Program.


So who are these homeowners?

To begin with, the reason they are falling behind on their mortgages isn't because their loans are unaffordable, according to a report released Monday by the Treasury Department.

Instead, defaults are stemming from the weak economy and unemployment: In December, 60% of the borrowers who received permanent HAMP mods were facing a loss of income. Just 11% were the result of unaffordable mortgages.

L.A. and New York City have the largest concentrations of these beneficiaries, and their ethnicity roughly reflects the nation as a whole: 33% of borrowers who received permanent modifications were white, while 12% were African American, 18% are Hispanic and 3% are Asian. (The numbers don't add up to 100% because many people did not report ethnicity.)

Median household income for them was just $46,000, well short of affluent. Their credit scores averaged about 570 at the time of modification, which would, under today's lending conditions, prevent them from obtaining loans.

Foreclosure pain index: 10 cities

Their mortgage balances -- after modification -- averaged $232,000. That is about five times median household income, about double what they'd usually be allowed to borrow on income of $46,000.

The help these borrowers receive is substantial, with the typical HAMP modification slashing about 40% off mortgage payments. About 18% of HAMP borrowers were able to reduce their payments by $1,000 a month or more.

Still, receiving a permanent HAMP mod does not guarantee that the borrowers will keep their homes. Of those who received a modification during the third quarter of 2009, more than 46% have already fallen at least two payments behind.

Homeowners with payment reductions of more than 30% were far less likely to become delinquent on their permanent modifications, compared with those receiving a payment reduction of 20% or less.

After 12 months, nearly 60% of borrowers whose loan payments went down less than 20% were at least two payments behind. Only 28% of those borrowers with payments reductions of 30% or more had fallen two payments behind or more

Sunday Brunch Seminar – Stiletto Tastes with Nine West Budget, How to be Financially Savvy When Buying a Home

This year I have combined efforts with other woman professionals to provided valued resources for helping woman. If you are single, divorced, separated, widowed, with or without children, this will be an invaluable resource for information to meet life changings short and long term financial goals.



Content and contacts will be available regarding the following areas:


Divorce lawyers
Financial planners
Mortgage brokers
CPA – tax
Home Stagers
Interior Decorators
Home Inspectors
More, much more!


Stay tuned as we build the blog. To begin, a monthly seminar series is kicking off and would love to have you come. Each month will be a new topic, varied speakers and helpful informative content.


UPCOMING EVENT

Stiletto Tastes on a Nine West Budget ~ How to be Financially Savvy when Buying a Home


Please join us Febraury 6th for Sunday Brunch Seminar Series with a Twist

Seminar Series with a Twist: View Stella & Dot jewelry (available for purchase) while sipping mimosas and enjoying French pastries and cap off with invaluable information about how to prepare for buying a home.

Learn:



 Financial Perspectives from a Realtor, a Mortgage Broker & a Financial Advisor


 Which Loan is Right for You? Key Considerations for an Informed Decision


 Financial Preparation for Your Home Purchase


Speakers:


 Kimberly Shute, Principal Broker, Keller Williams Realty Professionals


 Carrie Reed, Alpine Mortgage, Certified Mortgage Planning Specialist


 Adina Flynn, Ameriprise, Financial Advisor


Cost: FREE


When: Sunday, February 6th


10:30a – 11:00a Refreshments (Mimosas & French pastries) + Stella & Dot Jewelry


11:00p – 12:00p Presentation with Questions & Answers

12:00p – 12:30p Stella & Dot Jewelry with Heather Morrison


Where: KAMM House, 1425 SW 20th Ave., Portland, OR 97201


Tram: Goose Hollow/SW Jefferson St MAX Station


Parking available in front of Kamm House

REGISTER ONLINE: http://realestateguide4women.wordpress.com/

A secret tribute: Duck honors young man he's never met

Story Published: Jan 8, 2011 at 7:09 PM PST Story Updated: Jan 8, 2011 at 11:18 PM PST (KATU.com)

GLENDALE, Ariz. – One University of Oregon Duck is playing Monday's BCS Championship game in honor of a young man whose life ended too soon.


For more than a month it was D.J. Davis' secret. But after the Ducks' Civil War win, Davis was splashed on the front page of The Oregonian's sports section, leaving some to wonder whose picture was hanging from his uniform.

"Just knowing that somebody can have an impact on you, without even meeting them, is just an awesome experience," University of Oregon Wide Receiver D.J. Davis tells us.

It turns out that the photo tucked into Davis' waistband is of someone Davis has never met.

It's Declan Sullivan, a 20-year-old Notre Dame student whose death made national news. Sullivan died while taping a Fighting Irish football practice, when a wind storm toppled the tower where he stood.

"It just stayed with me," Davis tells us. "It's hard to shake something like that when it just stays in you ... I have a little brother who's 20 years old. He'll be 21 come Jan. 24, so I just kept thinking about my little brother being in that situation. I don't know what I'd be able to do if I lost him."

That's why, a few days after the accident, Davis searched for Sullivan's name on a computer at the team's hotel where they were staying before the U.S.C. game, printed a picture of Sullivan and turned a quarterback wristband into a tribute. He has worn that wristband on game days ever since.

"He's been a real help to me, just as far as wearing it and letting other people know the tragic event that happened," Davis said. "...[T]o let them know about his story is one of the things that I want to do."

After The Oregonian's picture took Davis' secret-tribute public, the wide receiver ended up making a connection with Sullivan's family.

"I've actually e-mailed back and forth a little bit with his brother, Max Sullivan," Davis said. "We've had a couple conversations, just about the situation, and ... that he'd be rooting for me come Jan. 10."

30-Year Fixed Mortgage Rate Dips to 4.77%%

Published: Thursday, 6 Jan 2011  10:42 AM ET By: Reuters (CNCB.COM)

Rates on fixed mortgages dipped this week after rising steadily over the last two months.


Freddie Mac said Thursday the average rate on the 30-year mortgage dropped to 4.77 percent from 4.86 percent the previous week. It hit a 40-year low of 4.17 percent in November.

The average rate on the 15-year loan slipped to 4.13 percent from 4.20 percent. It reached 3.57 percent in November, the lowest level on records starting in 1991.

Rates have been rising since November. Investors have shifted money out of Treasurys and into stocks. Many expect the tax-cut plan will fuel economic growth and increase inflation. Yields tend to rise on inflation fears.

Mortgage rates tend to track the yield on the 10-year Treasury note. Those rates have been fluctuating in recent weeks.

Low mortgage rates did little to boost home sales last year and higher rates now could hamper a robust recovery.

The number of borrowers who applied for a mortgage in December was 10 percent below the same month in 2009, according to Capital Economics. Refinance activity has dropped off 44 percent since rates hit their lows. The number of purchase applications has been rising along with sales, but last year's sales pace was shaping up to be the slowest in 13 years.

To calculate average mortgage rates, Freddie Mac collects rates from lenders across the country on Monday through Wednesday of each week. Rates often fluctuate significantly, even within a single day.

The average rate on a five-year adjustable-rate mortgage slipped to 3.75 percent from 3.77 percent. The five-year hit 3.25 percent last month, the lowest rate on records dating back to January 2005.

The average rate on one-year adjustable-rate home loans fell to 3.24 percent from 3.26 percent.

The rates do not include add-on fees, known as points. One point is equal to 1 percent of the total loan amount. The average fee for the 30-year and 15-year loans in Freddie Mac's survey was 0.8 point. The average fee for the five-year ARM was 0.7 point, and the fee for the 1-year ARM was 0.6 point.

Hooray? Higher mortgage rates spurred home sales uptick

Posted by Nin-Hai Tseng, writer-reporter December 23, 2010 3:18 pm

The country's economic engine seems to be running in reverse as more expensive borrowing spurs home sales, and an uptick in borrowing sends mortgage rates back down.


The recent surge in mortgage rates, by all rational calculations, should have made America's already troubled housing market worse off. Instead, higher borrowing costs modestly boosted homes sales in November.

Before slipping down slightly this week, mortgage rates had risen for several weeks in a row as yields on 10-year Treasury bills, which largely influence the cost of mortgages, rose. The average rate for a 30-year fixed loan increased to 4.83% in the week ending December 16 from 4.61% the previous week, marking a fourth week of increases, according to Freddie Mac (FRE). The rate increases were some of the highest seen since June of this year.

Intuitively, it would make sense that higher borrowing costs would discourage potential homebuyers. And vice versa. But quite the opposite has happened.

Before the recent surge, mortgage rates had fallen to historic lows but failed to spur much refinancing or home purchases as virtually all major banks tightened lending standards. When mortgage rates started rising recently, potential homebuyers waiting in the sidelines took notice.

In November, the share of home purchases by first-time buyers surged to 37.2% from 34.4% the previous month, according to a monthly survey by Campbell/Inside Mortgage Finance, which tracks mortgage and housing industry trends.

"That's extremely significant," says Tom Popik, the survey's research director. Since the survey launched in 2009, there's typically only been a one-percentage point change, if any at all, among first-time homebuyers.

The higher rates seem to have served as a warning shot, drawing in buyers eager to lock in historically low rates before they edge any higher. In a sense, they were waiting for an uptick to prove that rates had gone as far down as possible, before deciding to buy. Unlike current homeowners, first timers are positioned well to respond quickly to fluctuations in mortgage rates.

Popik says it's unlikely the rise in rates will spur many more home purchases. After a while, potential homebuyers will again think mortgages are becoming too expensive. For now though, rising rates have brought a boost, however small, to the struggling housing market. November sales of new homes rose 5.5% to a seasonally adjusted annual rate of 290,000 units, the Commerce Department reported December 15.

Naturally, in response to the uptick in home sales and increase in demand for lending, mortgage rates have most recently . . . fallen again. Somewhere, that makes perfect sense.

November Home Loan Modifications Up: Treasury

Published: Wednesday, 22 Dec 2010 11:24 AM ET By: Reuters (CNBC.com)

The U.S. Treasury Department said on Wednesday that about 30,000 homeowners facing foreclosure got permanent help in November through a loan modification program that should help them keep their homes, an increase from 23,750 in October.

But dropouts from the Obama administration's premier foreclosure prevention program, called the Home Affordable Mortgage Program or HAMP, since its inception now total 774,081. About 1.46 million delinquent borrowers were eligible for help under the program.

Treasury said there were about 505,000 borrowers at the end of November who had active permanent loan modifications in place, up from 483,000 in October.

Christmas 2010 Could be Merriest Since Recession: CNBC Survey

Published: Monday, 13 Dec 2010 10:00 AM ET By: CNBC.com

Christmas 2010 could turn out to be the merriest since the recession began, with the exclusive CNBC All-America Economic Survey finding Americans somewhat more optimistic but real optimism remains elusive.


The survey of 800 people of all income groups, regions and walks of life finds that pessimism is down across the nation, but Americans will still hold a tight grip on their holiday spending dollars, with only a small increase in spending compared to last year.

Just over half of the survey respondents judge the current state of the economy as poor, but the 53 percent figure is the lowest reading since February 2008.

About 20 percent of the nation expects the economy to get worse over the next year, well below the 43 percent reading registered during the height of the recession in June 2008 and the lowest reading in three years.

Yet, just 7 percent judge the current state of the economy as excellent or good and just 37 percent believe it will improve next year, virtually unchanged from October and last Christmas.

Among other findings of the survey:

A very Apple-y Christmas: One in six Americans plan to give or receive an Apple product for the holidays; for upper income groups, the figure is one in four.

The wealthy get thrifty: 60 percent of Americans say they’ll spend more this Christmas than last year, up from 50 percent in 2009

But the average amount they plan to spend is up 0.7 percent compared to actual spending last year. One reason for the small increase: the wealthy seem to be getting more thrifty.

No stocks in the stockings: The holiday season finds Americans still down on the stock market with 46 percent saying it’s a bad time to invest. It’s an improvement from the 51 percent who were negative in October.

But rather than getting optimistic, Americans became more uncertain. The percentage saying they were unsure about whether to invest in stocks rose to 19 percent from 12 percent in October.

More upbeat on wage gains and home values: For the first time since 2007, average Americans believe their home prices will rise in the next year. American optimism about wage gains over the next 12 months hit a two-year high, with an expected gain of 2.1 percent, up from 1.3 percent a year ago.

Wal-Mart , Best Buy Rebound: 48 percent of Americans pick big box stores like Wal-Mart as one their top two choices for spending their holiday dollars. That’s the highest level since 2006.

Online surge: Online spending hits a milestone with one in four Americans saying that shopping on the net is one of their top two choices for spending, the largest percentage ever.

Online security worries: But on-line security remains a major issue. 60 percent of Americans still do little or no shopping at all on line, which equals the percentage of Americans who say they are concerned about on-line security.

In hard times, kids win, adults lose: When it comes to cutting back their spending, Americans will first choose to economize on gifts to adults, friends and co-workers.

One place they're reluctant to cut back is on gifts to kids. And the last place they'll cut back is on food and holiday meals. 7 percent of the public say they’ll economize by regifting.

Video madness: 44 percent of Americans say video games make bad gifts because kids spend too much time in front of the screen. 33 percent say they make good gifts because kids love them. Americans with kids are just about split on the issue.

20 Hidden Costs of Home Ownership

Published: Thursday, 2 Dec 2010 4:38 PM ET By: Cindy Perman (CNBC)
 
When Bill Douglass and his wife bought their first home, he budgeted for $250 a month for maintenance costs.


He soon found out that it was $300 a month — just to maintain the lawn.

“I have to admit, I was rather naïve about the costs involved in being a homeowner,” he said.

Two months after they moved in, a FedEx truck accidentally backed into the house, damaging the gutter. That was $900. Then they had a baby girl! It cost an estimated $10,000 for the first year of a baby’s life, according to this baby calculator. Then, the air conditioner went on the fritz. That was $8,000 to replace it. They soon discovered that their neighborhood is prone to power outages, so they needed to consider dropping $10,000 for a backup generator.

“Most people are unprepared for the big repairs — and even the small repairs,” said Guy Cecala, publisher of Inside Mortgage Finance magazine. “When the toilet starts flooding, you can’t call someone like you did when you were renting. You’ve got to fix it yourself.”

To help you get prepared, here are 20 Hidden Costs of Home Ownership.

1. Your heart. You may set a budget for how much you can spend on a new house, but then you find something you love — something you can’t stop thinking about — and even though it’s $50,000 or $100,000 over your budget, you buy it anyway.

“Oftentimes, homeowners make the largest financial decision of their lives — buying a home — with their heart, not their head. They get emotionally involved with the property,” said Gail Cunningham, vice president of public relations for the National Foundation for Credit Counseling. “That can put them on a very slippery slope.”

“I suggest people make all financial decisions with their head — and leave their heart out of it!” Cunningham advises.

2. Property taxes. You might think — “I’m paying $1,200 in rent. For that, I could be paying a mortgage and own my own place!” Well, yes. But if you’re only plugging in the principle and interest rate into your mortgage calculator, you’re missing out on a huge expense right out of the gate — property taxes.

You need to find out what the taxes are in advance (they’re usually on the MLS listing), divide it by 12 and immediately add it to your estimated monthly payment.

And remember, the taxes are just going to keep going up — you could even get a tax increase in the first year you own your home — so make sure you have room left in the budget to pay even more taxes.

3. Insurance. It costs a lot more to insure a home than, say, a one-bedroom apartment. So even if you had renters’ insurance, you’re going to have to up the budget for insurance. And, there are a lot of factors to consider when it comes to insurance.

Thought you saved more by buying an older house? Well, guess what: It’s going to cost more to insure it because the electrical, heating and plumbing are older and more prone to disaster. Wait, did you fall behind on credit-card payments during the recession but thought you were in the clear because you always paid your mortgage? Well, guess what: Insurance companies can periodically check your credit score and raise your rates based on their assessment of your “risk” level.

Plus, if you live in a flood zone, earthquake zone, tsunami zone or volcano zone, you’re going to have to pay extra for hazard insurance.

4. Appearance. Before the first thing in your house even breaks, there is going to be something that you want to change because this is YOUR HOUSE and when people see YOUR HOUSE, you want them to know that you have taste.

“You don’t want it to look like the worst house on the block,” said Neil Ellington, the executive vice president of CESI Debt Solutions.

So, you add shutters, a paved walkway up to the house, flower boxes, landscaping … it’s amazing how much you spend on the outside of the house that you never had to spend on an apartment.

5. The Lawn. First of all, if you decide to contract the lawn out, it’s going to cost you $100 or so a month for someone to cut the lawn, plus another $100 a month for weed killer, pest control and fertilizer. Plus, any extra you decide to spend on new trees, bushes, flowers or fencing.

If you decide to do it yourself to save money, it’s still going to cost you. You’ve now got to buy a lawnmower, weed whacker, hedge trimmers, a hose, sprinkler, rake, gloves, buckets and more. And, of course, if you don’t have a garage big enough to store all of your new lawn gear, you now also need to buy and install a shed to house them.

Ellington said he and his wife live in a drought-prone area so, to save money on water costs opted to put down stone in a part of the lawn. Well guess what? Stones cost a lot of money, too! Unless you find a builder or homeowner who’s looking to unload some stones from a construction site, stones are going to cost you more than you think. At Home Depot for example, a small, 11”x14”, resin landscape rock (we’re not even talking flagstone!) is $29.99. A bag of small landscape rocks cost $5 to $50.

6. Add-Ons: decks, patios, sheds and additional rooms. That shed probably set you back a few Benjamins but guess what? It’s also going to bump up your taxes. Any addition or improvement you make, whether it’s a shed, deck, kitchen renovation or expansion of your master bedroom, is not only going to cost you for parts and labor (which can run into the thousands) but it’s going to make your taxes go up. Every year.

7. Maintenance. A co-worker thought he was catching a break on maintenance costs because he had a fireplace but it wasn’t a working fireplace. Well, then someone told him the chimney — you know, the non-working chimney on the outside of the house — needed to be repointed because the bricks were loose and could fall off and hurt someone. So, he has to pay more than $1,000 to have a mason come in and stabilize that purely aesthetic chimney. How charming!

There are a million unexpected maintenance costs like this. You’ve got to reseal the driveway, restain the deck, clean the gutters, repair and eventually replace the roof, repair any cracks in the siding, patch the front steps — and that’s just the outside! On the inside, you’ve got to repair the appliances, fix any plumbing leaks, replace filters, seal your doors and windows, drain the water heater and clean the chimney.

Plus, patch the walls, replace the toilets, repaint, restain the floors or replace the carpet and regrout the bathroom.

This is why you always hear homeowners say — It’s always something! (It's also, incidentally, the reason that mommy and daddy sometimes seem grumpy for no reason!)

8. Cleaning. Cleaning a house is a lot of work. Whereas you might’ve had one vacuum and set of cleaning supplies in an apartment, now you may want to have multiple vacuums and sets of cleaning supplies so you don’t have to lug them up and down one or two flights of steps.

Beyond the cost of multiple sets of supplies, cleaning takes time and energy — something you might not have, especially if all the adults in the home work. If you opt to hire a cleaning person, that’s going to cost you $100 or more for every visit, which can add up to over $1,000 during the year.

9. Time! Time is “the No. 1 thing — your biggest cost — of being a homeowner,” Ellington said.

You don’t realize what all your rent went toward and when you have to do it yourself, it costs you a lot — a LOT — of time.

“The time you used to spend with your kids, now you spend on lawn maintenance or changing a light bulb!” Ellington quipped.

10. The furnace and air-conditioning. So, you buy a house and the inspector tells you that the furnace is only four years old and that you may have another 16 or more years left on it. You figure you’re in the clear, you’ll be long gone by then, right? Wrong. A lot of people will tell you you’ll get 20 years out of a furnace but it’s really closer to 10, Cecala says. Then, consider the fact that if the furnace is four or more years old, it probably isn’t energy efficient. So, instead of repairing your furnace or air conditioning units for the next few years, it’s probably better to shell out the cash for a new furnace or central air.


Make sure you know what type of furnace you have before you buy the home. We found out all too late that our new home, with the gorgeous addition and luxurious central air actually had two furnaces because when the previous homeowner did that renovation, he didn’t extend the old heating system into the addition, he just put the vents for the new A/C system in there, which means you have to run both furnaces to heat both the old and the new sections of the house.

11. Wiring – cable, phone, Internet. When Amy Martin and her husband bought their first house a few years ago, they discovered that their cable service was spotty — some channels worked but others didn’t. When they went to get it repaired, they were told that they were “leaking” cable because the wiring in their house was either not the right size or connected wrong.

The wires on the outside are the utility company’s responsibility but any of the wiring on the inside of the house is YOUR responsibility. So, they had to bring an electrician in for 3 to 4 hours to rewire the home.

“In most cases, when you are house hunting, you tour the house a few times, and may or may not be present for the inspection. By the time you've purchased it, you've spent a grand total of about 2-3 hours in the house!” Martin exclaimed, which, for those keeping score, is less time than the electrician spent in the house rewiring the cable!

12. DIY. With the rise of home-improvement channels, everyone, it seems, has DIY — do-it-yourself — fever. Lay down your own flooring? No problem! Strip the bathroom, knock down a wall and put in a new master suite? No problem!

Actually, problem. Most of us, no matter how many hours of HGTV we’ve logged, don’t know a lot about plumbing, electricity, support beams or the finer nuances of cutting granite.

So, in reality, when you think you’re saving on labor costs by doing it yourself, you may be costing yourself more if you ruin the materials you bought, had to buy a second set and then had to pay a guy to come do it for you anyway!

13. Extra stuff the guy finds when he comes for something else. So, you bring in a guy to help you with the kitchen remodel and while he’s outside on his smoke break, he reaches under the front porch and pulls out what looks like a handful of straw. In fact, that’s rotting wood from your front porch — you know, the one your precious little girl bounces on when she’s playing with her friends.

To your untrained eye, the porch, the chimney — it all looks good. But bring in a professional and they’ll inevitably find two or more things that need fixed.

14. Safety. From fixing the front porch to installing an alarm system, adding motion-detector lights or lighting a footpath, those extra safety features are going to cost you extra money.

15. Pest control. If you saw a bug or a mouse in your apartment, you just called the landlord. When you own your own house, there’s no one there to hear your screams. Dealing with termites, cockroaches, mice, bats or the latest pest craze, bed bugs, costs a lot of money. Spend a couple hundred dollars for routine maintenance and it will save you lot more later if you have to get the place bombed and throw out some of your furniture or replace the floor because the varmints got to it.

16. Savings. Do you know how much money you can save by installing new windows, a programmable thermostat and energy-saving light bulbs? A whole lot! But guess what? In order to save a lot, you’ve got to spend a lot up front. While you’re focused on the savings, your money is slipping out the back door.

“These are expenses that people don’t think about when they buy a home but have to think about after the initial honeymoon phase with the house — it’s just like a marriage!” Ellington said.

17. Emergency. Like Douglass, you generally don’t realize until after the FedEx truck has backed up into your house and you’ve had a bouncing, baby girl that your neighborhood is prone to power outages. And remember, power outages usually happen at the worst times — when it’s ridiculously hot out or freezing cold, which means you'll probably be desperate enough to spend a lot of money to be comfortable!

They sell smaller generators but you’ll soon learn that they don’t power much and you have to refuel them often. Realistically, you’re looking at a couple thousand dollars to power up the basics. Or, be prepared to shell out a couple hundred bucks a night for a hotel. If you have kids, make sure it has an indoor pool — one family in one room with one TV is challenging for one night, and you have no idea how many days it will be before the power comes back on!

18. Kids. Not only are you kids going to cost you money for diapers, baby food, clothes they're going to grow out of, jeans, soccer lessons, dance classes, phones and college, but they’re going to cost you a couple thousand in damages over the years. They're going to draw on the walls, run into the screen door, put a baseball through a window, spill cranberry juice all over the living-room rug — and more. When it’s a rental, the most you had to worry about was your security deposit. Owning your own home, you’ll reminisce the days when that was all it would’ve cost you.

Some people set aside jars of money for vacations or other fun items, you might do well to set aside a jar for kid disasters!

19. Nearby construction. Make sure you know who owns the land around you and what the zoning laws are. If you buy a home with an amazing view and then someone comes and builds a 20-story condo building in front of it, that’s going to cost you big time when it comes time to sell your house. Likewise, if nearby land is designated for commercial use, you never know when a gas station will go up or a giant shopping center that will make your road busy and slash your property value.

20. Buyer demands. Congratulations! You’ve made it through 1-19 on the list. But don’t take a rest just yet — 20 is a big one. It’s important to keep up with routine maintenance — buying a new furnace, replacing the roof and fixing that wobbly board in the porch. Because when you go to sell your house, those are the things that a buyer is going to notice — and they could cost you the deal. After getting the home inspection, it’s not uncommon for a buyer to demand that you replace the furnace or get a new roof as a condition of the sale. You’re already going to have a lot of costs (paying the real-estate agent, closing costs, moving costs, etc.) so you don't want to have to tack on another $10,000 or so for repairs — or worse, have them knock money off the sale price because of it.

Before you buy a house, it’s important to figure out if you can afford all the costs of a new home.

As a good rule of thumb, don’t spend a lot on discretionary items — like clothes, gadgets and vacations — in those first few years. Set aside much as you can for the unexpected expenses and wait a year or two to see how it shakes out.

The National Federation for Credit Counseling has a list of questions on their Web site you should ask yourself to see if you’re ready to own your own home. Plus, they have more than 800 locations nationwide that offer free first-time-homebuyer courses to educate people on all the ins and outs of buying a home and the responsibilities that go with it.

Ellington also suggests hanging out with a friend who’s a homeowner on the weekends. Volunteer to do his yard work. Find out how much time and money is involved before you commit to having your own house.

“It’s like marriage,” Ellington said. “If you prepare for it, you’re much better off!”

Tiny House Movement Thrives Amid Real Estate Bust

By: AP Published: Monday, 29 Nov 2010  4:21 PM ET (CNBC)
As Americans downsize in the aftermath of a colossal real estate bust, at least one tiny corner of the housing market appears to be thriving.


To save money or simplify their lives, a small but growing number of Americans are buying or building homes that could fit inside many people's living rooms, according to entrepreneurs in the small house industry.

Some put these wheeled homes in their backyards to use as offices, studios or extra bedrooms. Others use them as mobile vacation homes they can park in the woods. But the most intrepid of the tiny house owners live in them full-time, paring down their possessions and often living off the grid.

"It's very un-American in the sense that living small means consuming less," said Jay Shafer, 46, co-founder of the Small House Society, sitting on the porch of his wooden cabin in California wine country. "Living in a small house like this really entails knowing what you need to be happy and getting rid of everything else."

Shafer, author of "The Small House Book," built the 89-square-foot house himself a decade ago and lived in it full-time until his son was born last year. Inside a space the size of an ice cream truck, he has a kitchen with gas stove and sink, bathroom with shower, two-seater porch, bedroom loft and a "great room" where he can work and entertain—as long as he doesn't invite more than a couple guests.

He and his family now live in relatively sprawling 500-square foot home next to the tiny one.

Shafer, co-owner of the Tumbleweed Tiny House Company, designs and builds miniature homes with a minimalist style that prizes quality over quantity and makes sure no cubic inch goes to waste. Most can be hooked up to public utilities. The houses, which pack a range of amenities in spaces smaller than some people's closets, are sold for $40,000 to $50,000 ready-made, but cost half as much if you build it yourself.

Tumbleweed's business has grown significantly since the housing crisis began, Shafer said. He now sells about 50 blueprints, which cost $400 to $1,000 each, a year, up from 10 five years ago. The eight workshops he teaches around the country each year attract 40 participants on average, he said.

"People's reasons for living small vary a lot, but there seems to be a common thread of sustainability," Shafer said. "A lot of people don't want to use many more resources or put out more emissions than they have to."

Compared to trailers, these little houses are built with higher-quality materials, better insulation and eye-catching design. But they still have wheels that make them portable—and allow owners to get around housing regulations for stationary homes.

It doesn't pay to remodel your home

By Les Christie, staff writerNovember 16, 2010: 5:32 AM ET

NEW YORK (CNNMoney.com) -- Looking to spruce up your home and wondering what will give you the most bang for your buck at resell time?


Install new fiber-cement siding. That cost an average of $13,382 and returned 80% of the investment, according to Remodeling magazine's 2010 Remodeling Cost vs. Value survey, done in partnership with the National Association of Realtors (NAR).

Like every other renovation job though, it returned a lower percentage of its costs in added home value this year than it did in 2009.

In general, anyone planning a home remodeling will pay a lot more for the job than they will get back in return when they sell. Only 60% of remodeling costs in 2010 would be recouped by homeowners, the report said.

Exterior improvements mostly performed better than interior ones, owing to the necessity of maintaining a home's "curb appeal."

"In today's buyers market, given the large inventory, where people have so much selection, it's important to have the exterior catch the eye so they're willing to step inside," according to Lawrence Yun, chief economist for NAR.

3 Cheap Ways to Make Your Old Kitchen Feel New
The cost vs. value equation has been getting less attractive for years, but 2010 has seen a particular decline in the percentage of home improvement costs recouped.

On the average remodeling job, homeowners recouped 16% less value than they had in 2009, the steepest slide the survey has recorded in its nine-year history. This happened despite the fact that construction costs declined for the first time since 2004.

Adding a new mid-range bath, for example, returned nearly 100% of its approximately $15,000 cost back in 2003. Today, the same job costs more than $40,000 and only returns about half its cost.

Get a High-Quality Remodel For Less
In general, the more spent for a job, the lower the percentage of return. That's apparent in comparing kitchen remodels.

A mid-range kitchen remodel costs nearly $60,000 and returns just 70% of that expense at resale. A high-end renovation adds just 60% of its $113,000 cost.

The lowest return of any job was for a midrange home office renovation, which cost an average of $28,888 and added $13,235, just 45.8%.

Low cost exterior improvements do well. An exterior steel door replacement return 102% of its $1,218 cost and new garage doors recoup 84% of theirs.

Two jobs tied for the best return on any midrange remodeling investment costing more than $10,000. Adding a wood deck or doing a minor kitchen remodeling, which involves replacing cabinet doors and counters, buying new appliances, sinks and faucets and repainting walls and trim et al, both recouped 72.8% of their costs.

Home Ownership at Lowest Level in a Decade

Published: Tuesday, 2 Nov 2010 11:34 AM ET (CNBC)

The nation's homeownership rate remained at its lowest in more than a decade, hampered by a rise in foreclosures and weak demand for housing.

The percentage of households that owned their homes was unchanged at 66.9 percent in the July-September quarter, the Census Bureau said Tuesday. That's the same as the April-June quarter.

The last time the rate was lower was in 1999, when the rate was 66.7 percent.

The homeownership rate was around 64 percent from 1985 through 1995. It then rose dramatically during the Clinton and Bush administrations, hitting a peak of more than 69 percent in 2004 at the height of the housing boom.

After the housing bubble burst, the rate has been declining gradually.

About 18.8 million homes, or 14.4 percent of all houses and apartments, were vacant, according to the government survey. Without vacation homes, that rate would be 11 percent.

The number of vacant homes has soared over the past four years from about 16 million at the start of 2006. It has been hovering around 19 million since the end of 2008. There are around 131 million housing units nationwide, according to the Census Bureau.

About 2.5 percent of all primary residences were vacant and for sale and 10.3 percent of all year-round rental units were listed as vacant and for rent.

Forget it. You're not getting your house back

By Charles Riley, staff reporter October 18, 2010: 11:13 AM ET

NEW YORK (CNNMoney.com) -- Is this the break that millions of people have been hoping for?


Evidence continues to mount that major banks flouted their own foreclosure procedures -- and possibly the law -- when repossessing homes from owners who fell behind on payments. And that begs the question: Can owners who were wrongfully evicted take their home back? What if a new owner has already bought the place and moved in?

That's the messy scenario that lawyers, banks and hordes of ex-homeowners are facing, after revelations that loan servicer employees might have signed off on documents without a proper review, a process dubbed "robo-signing."

Experts say that very few homeowners will ever get their houses back. The possible exception: The handful of people who were wrongfully swept up by the mortgage tsunami, despite the fact that they were current on their payments.

But getting a judge to unwind a foreclosure is tough.

"The law imposes a very heavy burden on those seeking to attack final court judgments," says Robert Lawless, a professor at the University of Illinois College of Law.

If a court does rule a foreclosure invalid, either because the lender didn't have the paperwork in order or because the mortgage was not actually in default, a home's title will revert to the original owner, even if the property has since been purchased by a third party.

So where does that leave the original homeowners? It's difficult to say, because this is truly uncharted territory, and because foreclosures are subject to state laws, which vary widely.

But one thing is clear: If the original homeowner doesn't have the cash to catch up on the mortgage, the lender will restart the foreclosure process and, with the paperwork in order this time, repossess the house.

"The bottom line is that for the vast majority of these cases it's just going to delay the inevitable," said George Craft, a Texas based real estate attorney. The new owner should be able to stay in the house while the second foreclosure works through the courts because by this point, the original homeowner has probably found a new place to live.

Even someone who was wrongly evicted has probably found a new home and would prefer to take a cash settlement rather than try to reclaim their house. Most of these homeowners will almost certainly sue their lender, which is of course exposed to a tremendous amount of liability.

"Monetary damages will be the way people are compensated, because it's much easier for courts to monitor and institute," according to Andrew Raines, a California lawyer who specializes in real estate.

In the rare case that a foreclosure victim does want a house back after a third party has moved in, the new buyers will be compensated by title insurance.

Almost all lenders require mortgage applicants to purchase title insurance, which is designed to guard against gaps in the title record due to human error. If a title reverts to the original homeowner, title insurance should cover any financial loss incurred if the new owner is ordered to vacate the house.

Of course, that might not be the end of it -- there will probably be a flood of lawsuits bouncing between victims, title insurers and lenders that will further jam up a system that's already backlogged.

"One of the best and worst parts of our judicial system," said Lawless, "is that anyone has access to the courts to assert their grievance against another."

JPMorgan Chase expanding foreclosure review

By Charles Riley, staff reporter October 11, 2010: 2:00 PM ET

NEW YORK (CNNMoney.com) -- JPMorgan Chase is expanding its review of foreclosure documents, according to a person close to the bank.


In September, Chase announced a review of 56,000 foreclosure cases in 23 states that require a judge to sign off on a foreclosure. The recent move expands the inspection to states that do not require judicial approval.

Under the latest expansion, the foreclosure process will continue while documents are being examined, expected to take a few weeks.

In the initial review, Chase requested that the courts not enter judgments until completion of the audit. Without a judgment from a court, those homes cannot be sold.

The initial review was announced after the lender discovered that its employees may have signed affidavits on the basis of reviews done by other personnel.

In those 56,000 cases, JPMorgan Chase has asked its local foreclosure attorneys to communicate to courts, affected homeowners and their lawyers. The notification process is underway, a company spokesman said.

Foreclosure freeze FAQ

Banks have come under increasing pressure from lawmakers in recent weeks to review foreclosures or to expand existing reviews.

On Friday, Bank of America announced it was halting foreclosure sales in all 50 states as part of a widening investigation into flaws in the process. The bank said the foreclosure process on delinquent borrowers will continue, but it will not proceed to judgment or a foreclosure sale.

Ally Financial, previously known as GMAC, the finance arm of General Motors, has said it is temporarily suspending evictions and post-foreclosure closings in states that require judicial review while it conducts a review of documents.

Bank of America halts foreclosures in 23 states

By Hibah Yousuf, staff reporter October 1, 2010: 7:12 PM ET

NEW YORK (CNNMoney.com) -- Bank of America is the latest in a string of banks to freeze home foreclosures in 23 states as it investigates whether there were flaws in its process.


"We have been assessing our existing processes," Bank of America said in a statement. "To be certain affidavits have followed the correct procedures, Bank of America will delay the process in order to amend all affidavits in foreclosure cases that have not yet gone to judgment in the 23 states where courts have jurisdiction over foreclosures."

Bank of America did not have an estimate of the number of homeowners that will be affected by the delayed process.

The announcement comes two days after JP Morgan Chase said it will also halt foreclosures for about 56,000 homeowners after learning that its employees may have approved foreclosures without personally reviewing loan files.

A Chase spokesman said it is working with outside counsel over the next few weeks to review its process to confirm that it meets the appropriate standards.

Last week, Ally Financial, previously known as GMAC, the finance arm of General Motors, said it will also pause foreclosures in the 23 states.

Mortgage lender Freddie Mac said Friday that it is "deeply concerned" with the recent reports and said the alleged practices are not in compliance with its guidelines.

"We expect to provide instructions to our servicers later today that are intended to ensure that their foreclosure processes are in compliance with state law and Freddie Mac's servicing requirements," the lender said in a statement. "It's essential that the industry work together to protect borrowers' rights and ensure the integrity of the foreclosure process."

Homebuyer tax credit: 950,000 must repay

(CNNMoney.com) -- Nearly half of all Americans who claimed the first-time homebuyer tax credit on their 2009 tax returns will have to repay the government.


According to a report from the Inspector General for Tax Administration, released to the public Thursday, about 950,000 of the nearly 1.8 million Americans who claimed the tax credit on their 2009 tax returns will have to return the money.

The confusion comes because homebuyers were eligible for two different credits, depending on when their homes were purchased.

Those who bought properties during 2008 were to deduct, dollar for dollar, up to 10% of the home's purchase price or $7,500, whichever was less. The catch: The money was a no-interest loan that had to be repaid within 15 years.

Had they waited to buy until 2009, they could have gotten a much sweeter deal. Congress extended the credit and made it a refund rather than a loan.

Now, the IRS is developing a strategy for separating the 2009 taxpayers who are required to repay the credit from those who are not.

A review by the Inspector General earlier this year found that the IRS could not easily distinguish between home purchases made in 2008 and 2009. That heightened concerns that some claims could be erroneous or even fraudulent, that buyers could, for example, claim their purchase came later than it actually occurred.

Thursday's release reported that 73,000 claims, more than 4% of the 1.8 million homebuyers who received the credit, had incorrect purchase dates recorded by the IRS.

Some of the inaccuracies counted against the taxpayers, Nearly 60,000 were listed as purchasing in 2008 (meaning they had to repay the credit) or had no purchase dates at all, rather than their correct 2009 purchase dates, which would free them of the obligation to pay it back.

It is also taking a look at all those deceased taxpayers who received credits.

The inspector general reported that 1,326 single people listed as dead by the Social Security Administration claimed more than $10 million in credits. The IRS threw out 528 of those 1,326 claims, saving $4 million.

By Les Christie, staff writerSeptember 9, 2010: 2:40 PM ET

So Where's the Good News? by John Mauldin

Ok, I could go on for hours, sorting through the problems. Where is the good news I promised?


Here's what I should have said to Tiffani's group: Let's face it. Running a small business is never easy. I am a serial entrepreneur. I have started and run a lot of very different businesses. Some have been very, very good and some went down in spectacular flames. I can remember some near-death experiences when the economy was booming. I have watched a million-dollar income stream dwindle to zero and there was not a damn thing I could do about it, except enjoy the money while it was there and use it to buy the next income stream. I have had to rebuild several times from scratch as markets shifted drastically underneath my feet. And I've changed directions as new opportunities revealed themselves.


In all this I'm like every other small-business entrepreneur out there. It is never easy. But that is what we do. We get up in the morning and figure it out. Some 80% of startups die within ten years. But we pick ourselves up and start over.


I know unemployment is 10%. But that means almost 90% are employed. Consumers are saving more. So adjust. Figure out what your New Normal looks like.


The '70s were a bitch. I woke up many times in the middle of the night with real pains in my stomach wondering whether to pay the rent or make payroll. So did a lot of people. But look at all the new companies that came out of that era and changed everything: Microsoft, Apple, Intel, etc. Cell phones. The internet. The list is long.


Yes, we have to make our way in this Muddle Through World. It will be challenging, but I can almost guarantee you that when we do get through there will be other challenges. If it was easy everybody could do it and there would be no money in it. Embrace the challenge!


I asked one of my really close (36 years) friends and business associates last year how his business was doing. "We are doing great!" he said. That was not the answer I was expecting. "Why? How?" I asked.


"Well, most of our competitors have folded. We survived and got the business."


Ultimately, that is how we get out of this. A hundred million families and millions of businesses figuring it out, learning how to adapt to the New Normal. Sadly, some of them won't make it. But most of us will!


As I said, I am a serial entrepreneur. I have a friend who designs and oversees large teams of programmers of really robust analytic software, very cutting-edge stuff. She is a winner, and I am backing her (I know nothing about software but the rule is, invest in people!). We'll see how it goes, but my bet is that in a few years there will be a lot of people getting jobs because we take on some risk now.


We are adapting our own business here. We will soon have new websites. I will be doing (at first) an audio podcast called the Mauldin Minute and then (hopefully) by the end of the year morphing into video. That's the wave of the future and I need to keep up.


I am addicted to information and reading . We are going to try and make some money from my addiction. What would you pay to look over my shoulder and read the 5-10 most important things I find in a week? I will become your personal reader. Will that be a life-style changer? No, but it will provide some income diversification.


When Tiffani made her presentation to her Vistage group about our business, she had a lot of charts and graphs. I was surprised how our sources of income have varied over time. Some previously large (at least on my scale) sources literally dried up within a few years, completely askew from our original optimistic expectations. It was very apparent that we cannot sit and assume things will be the same year to year. So we adapt.


I have been presented with a very different opportunity in a non-finance field that is right in my wheelhouse, as they say. Tiffani and Ryan and I are going to pursue it. Will it thrive? Be a real business in five years? We will see, but I have the ability to take that risk and I am going to do so.


And so will hundreds of thousands of other visionaries and dreamers. That is how we get through this. We work through the ugly and then we get to the 2020s, and I think we will once again be talking about the Roaring 20s! Whole new industries will come into existence. Pay attention to the advancements in robotics. Biotech will be HUGE this decade, but we need to change the rules so we don't lose the intellectual property and the jobs. Electric cars will boom as we replace our fleet all over the world. Nanotech later in the '20s. Green energy and nuclear. Artificial intelligence (finally!). Really cheap (I mean really cheap!) wireless high-speed broadband all over the world will open the door to all kinds of possibilities. I met last night with very credible scientists who have developed a way to filter water very cheaply. A desalinization module that fits in a cargo container. Yes, they need a lot of money to finish, but they will figure it out. And on and on. The opportunities are going to be huge. Trillions will be made.


So, we get through this. We Muddle Through. We figure it out, one business and family at a time. And as a culture, a world, we get to a better place. My bet is that in 2020 no one is going to want to go back to the good old days of 2010. We will be excited about the future and all the cool stuff that is happening.


Recessions and tough times are God's way of telling you that you need to adjust a few things, both on a personal and business level – also nationally and globally. I am an optimist. I believe we will adjust and grow, not just in the US but as an emerging world. There are just so many opportunities.


So, don't let the problems I write about in this letter make you crawl into a cave. Just be realistic and figure out where your opportunities are. And then go make them happen! You are responsible for creating your own future. And I hope it is a good one. I plan on making mine one.

I found John Mauldin’s article inspiring. I hope you enjoy it as well. Wishing you all a great week!