Della William

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Useful Tips when Getting Car Insurance

carinsuranceYou only get car insurance once per year so there is exactly no frequency in this task which will make you get used to the methods.  Even if you have been getting car insurance for the past few years, it is likely that you are still not used to it as you are more likely just getting what is being offered to you in order to make things fast and uncomplicated.

If you are the type that prefer getting car insurance quick and done with as fast as possible, there is a distinct possibility that you are either paying more than what is truly ideal for your coverage or the type of coverage you need, or that you do not have the necessary protection as you are only getting the cheapest car insurance policy available.  The thing is that you surely would not want any of the two as it is always best getting car insurance coverage that is best suited for your driving situations and needs.  If you are about to get car insurance, here are two very useful tips.

  1. Do Your Research – most of us are very fortunate that we now live in an information age where many of the information that we need about nearly anything is available to us online and that all we have to do is take time to find, read, and understand them; this of course also includes the many things about car insurance. If you need to get car insurance within a few days, it is best that you do your research on the different policies available and which of them suits your needs best.
  2. Go Only to Car Insurance Brokers – car insurance brokers do not work for any insurance company but are instead affiliated or associated with the different car insurers available in your state or province. When you go to car insurance brokers such as car insurance Grande Prairie, it will be like making a one stop shopping on different car insurance providers.  This is because the affiliation of car insurance brokers with different auto insurance companies means your car insurance broker can provide you with the different car insurance quotes from different car insurance companies; thus giving you the option on which insurance company you would like your car to be insured.  Your decision can be based on pricing, insurance company rating, or a bit of both.
Posted by Della William on

Saving money while staying fit

Think you need an expensive gym membership to stay fit? Not according the The NYTimes’ Walecia Konrad:

As the nation’s economic woes drag on, many people are rethinking their investments in pricey gym memberships and home exercise equipment. After all, the average health club membership is $750 annually, including sign-up fees and monthly dues. Treadmills can cost upwards of $1,000.

Many fitness buffs are finding that less expensive alternatives can be just as invigorating. “These days people realize you can burn the same number of calories for a lot less money,” said Beth Kobliner, personal finance expert and author of “Get a Financial Life.” “All kinds of programs have popped up post-recession that offer lower-cost ways to exercise.”

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6 types of millionaires

MSN Money had an interesting post awhile ago about an annual survey of millionaires. They classified the millionaires into six categories, according to how they made their money, their risk tolerance, attitudes about wealth, etc.

Satisfied Savers (24% of Total)

  • Average age: 60
  • Built wealth through hard work, by living below their means and taking moderate risks
  • Financially savvy
  • Lost relatively little in the bear market
  • Know how to make their money work for them
  • Enjoy making a difference through charitable efforts

Status Chasers (18% of Total)

  • Average age: 55
  • Achieved wealth through work and some inheritance
  • Want it all but haven’t been able to achieve their major goals yet
  • Define wealth as a level three times their current net worth
  • Pessimistic about their own financial future
  • Less financially knowledgeable than their counterparts
  • Think of financial situation daily as a source of concern

Altruistic Achievers (17% of Total)

  • Average age: 54
  • Achieved wealth through work, some inheritance, good investments, owning a business, and living below their means
  • Self-made, driven to succeed, work hard, take risks
  • Use their wealth to help the less fortunate
  • Lack the time, interest and know-how to manage finances; rely on professional management
  • Lost the most in the bear market
  • Only one-quarter plan to retire completely

Secret Succeeders (17% of Total)

  • Average age: 55
  • Self-made: built fortunes through working in professional and managerial positions, making one or two particularly good investments and not spending
  • Live below their means
  • Suspicious of showing their wealth — fear they’ll lose it
  • Among the least charitable
  • Group includes the greatest percentage that admit they’ll do whatever it takes, including compromise principles, to stay ahead
  • Not especially financially savvy, but having financial control is key
  • Somewhat optimistic about their financial futures

Disengaged Inheritors (13% of Total)

  • Average age: 58
  • Received and built their wealth largely through inheritance, and living below their means
  • Second-wealthiest and second-oldest group
  • Lack the goals and drive to succeed
  • Think about their financial situation the least out of apathy and ambivalence
  • Not charitable, generally unhappy
  • Least financial know-how of the high-net worth segment

Deal Masters (11% of Total)

  • Average age: 49
  • Have amassed the greatest wealth, self-made, self-reliant
  • Built wealth by setting goals, working hard, being persistent, taking risks, relying on their own financial know-how
  • Segment comprises the largest number of small business owners
  • “Winner takes all” attitude
  • Confident and optimistic
  • Enjoy the challenge of making money
  • Think about financial situation daily — source of challenge, fun, and happiness
  • Lost the least in the bear market
  • One of the least charitable groups
  • Living their dream, little inclination to stop working
  • 62% would rather be stressed than have nothing to do

An interesting comment from the article:

“Most millionaires today don’t have inherited wealth. They’re not driving a Jag and they’re not flamboyant or flashy. They work hard, they’re frugal and they save and invest well…It’s not enough to stick your money under your mattress. You have to invest, but you have to do it wisely. Few hit it big hitting a stock. It’s a discipline. The message is one of steady habits as it relates to savings and investing. Living below your means is a key point, whether we’re talking about someone with $1.2 million or $80,000. There’s clearly also a work ethic; you hear a lot of these people say work is a joy.”

Looking over the list, I’d say I’m most likely to fall into the Deal Master category, with one notable exception: I will be very charitable with what I am blessed with. Aside from that, I can see myself in many of the descriptions in that last category. Which category will you fall into?

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My realization on real estate

I’m a huge proponent of real estate investment. I’ve come to realize that it’s not the panacea and get-rich-quick strategy that infomercial gurus would have you believe, and it’s definitely not easy money, but real estate investment can be a very lucrative long-term investment that can significantly enhance your wealth.

My latest realization is that around 45% of the gross rents of a residential property go to cover operating expenses, such as utilities, management, maintenance, taxes, insurance, uncollected rents, and legal and administrative fees. This leaves just 55% of the gross rents to cover mortgage payments. The most significant mistake that most new investors make is underestimating these expenses. Many investors simply compare the rents collected (or that they think they’ll collect) with the PITI (principal, interest, taxes, and insurance) and consider the rest profit. This is naive. I did this when I bought my first property, a 4plex, and I can tell you that it has been much more expensive than that.

I can also tell you that, in most areas, it is almost impossible to find a property for nothing down that will truly provide a net cashflow in the first year. However, that doesn’t make a nothing-down investment a bad one. On the contrary, buying an investment property without putting any cash down can be a great long-term investment, provided that you do it for the right reasons.

Other than buying for less than the fair market value (always a good idea), there are four ways to make (or lose) money through real estate investment:

1. Cashflow

This is what’s left after you pay for the operating expenses and the mortgage. It probably won’t be much at first, and you’ll probably actually experience a loss for the first few years. However, if you buy smart and manage smarter, you can convert this into a positive number by raising the rents over the years, while your mortgage payments will stay the same, provided you have a fixed-rate mortgage. After 30 years, or however long it takes you to pay off the mortgage, this number can be many thousands of dollars per month per property.

2. Appreciation

Real estate generally goes up in value over time. Over the very long term, it’s usually not quite as dramatic as what we’ve seen over the last few years, but your properties can easily double or triple in value over the course of 30 years. The important thing to remember here is that you don’t need to time the market if you hold long-term, generally 7-10 years or more. There’s an old saying in real estate that the best time to buy is 20 years ago. The second best time is now.

3. Loan amortization

Every month, a portion of your mortgage payment goes to reduce the outstanding balance on the loan. Initially, it’s a very small portion, but over time, that amount will grow larger and your liability against the property will drop rapidly, until you own the property free and clear. The best part of this is that your tenants will end up paying for almost all of this over the course of the mortgage term.

4. Tax incentives

Though not as lucrative as they once were, real estate still represents a great way to decrease your tax liability. There are many issues in this category, so I won’t go into them. Consult a reputable accountant, which you should be doing anyway if you’re going to invest in real estate.

The bottom line of real estate is this: real estate offers an opportunity to buy an cash-producing asset with someone else’s money and have that money paid back by someone else, and in the end, you own the property. After the first few years of feeding the alligator, your property should turn around and begin feeding you, and it will continue to do so forever, with the amount it feeds you only increasing each year.

Here’s my advice on getting started investing in real estate: get started. Don’t wait. Do your homework, seek wise counsel, and just do it.

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My thoughts on financial bondage

I’ve been reading “The Richest Man in Babylon”, a series of financial parables set in the Babylonian era. They’ve been around since the mid-1920’s and convey (very simply) some basic principles of finances and money management. They’re the kind of things we all know, but few of us seem to do. The highlights are the following:

1. A portion of all you earn is yours to keep. Save at least 10% of everything you make, no matter what
2. Do the above by controlling your expenses carefully with the use of a budget
3. Put those savings to work for you by investing
4. Don’t be risky in your investments
5. Buy a house
6. Plan for retirement and future generations
7. Increase your earning potential

Again, very basic stuff, but apparently the majority of people just don’t get it. For example, the average savings rate in America is now NEGATIVE. People who make $50k per year spend just over $50k per year and people who make $100k per year spend just over $100k per year. Average household debt goes up every year and the average American only has something like 15k set aside for retirement.

My company (CNET Networks) had a guy come in today from the Social Security Administration and speak to us about how Social Security works. Nothing really new. I was hoping he’d talk about some of the plans to fix SS, but he merely said that it will be bankrupt by 2040 unless we change something. Fantastic. The thing that struck me was, 1) how little money you get, even if you paid a fortune into Social Security, and 2) how jacked up it is to face a retirement of 20+ years knowing that there’s no way you can even come close to living on what you have. What person, at 66, wants to realize that they have to work until they die? How sad. The saddest part was that they actually increase your benefit if you work past 66, because they’re trying to keep people working as long as possible. Isn’t that great? We live in a country where senior citizens are encouraged by their government to work as long as possible, even well into their 70s, or until they die, whichever comes first.

It all kind of clicked for me this evening. I was reading the book again and this part jumped out. The speaker is a slave who fled his city because of debt and fell into the wrong circumstances, eventually ending up as a slave to a very wealthy lady.

“So I was turned over to Sira and that day I led her camel upon a long journey to her sick mother. I took the occasion to thank her for her intercession and also to tell her that I was not a slave by birth, but the son of a free man, an honorable saddle-maker of Babylon. I also told her much of my story. Her comments to me were disconcerting and I pondered much afterword on what she said.

‘How can you call yourself a free man when your weakness has brought you to this? If a man has in himself the soul of a slave, will he not become one no matter what his birth, even as water seeks its level? If a man has within him the soul of a free man, will he not become respected and honored in his own city in spite of his misfortune?'”

Think about it.

Posted by Della William on

My money quote of the week

From an article in Men’s Health on things you should do but probably haven’t:

“Be debt-free. Compounding interest is like a sorority girl on Ecstasy. She’ll go both ways, but you get a hell of a lot more out of it when she’s going your way.”