Being Logical and Never Buy a House

by David@MoneyNing.com · 68 comments

rent propertyMy wife sent me a link to calculate the cost of renting vs buying a home the other day, which was basically a pitch from a home builder on why owning a home is so great. If you believe the calculations, buying our dream home will save us $1,075,638 after 30 years.

On the surface, it sounds like we’ve got to jump on this home buying bandwagon that everyone else is on. After all, who would turn down 1 million dollars of savings? Looking at it further though, and there are many flaws with the calculation.

First of all, although it has a box to put in a percentage for home value appreciation, it assumes that the property tax amount is the same for the entire 30 years. Unfortunately, this assumption is just wrong. We will probably never get a new property tax assessment every year, but we can bet that property taxes will steadily increase along with the estimated home value in the long run.

Second of all, the calculation assumes no cost associated with obtaining a loan. This is again incorrect. When a loan is made, there are upfront closing fees that just need to be paid. Some people end up taking a bigger loan to cover the closing costs but this is still money paid up front that could be earning interest in our saving accounts.

Third of all, buying a home usually accompanies a huge down payment. This is money that would otherwise be earning interest. This might sound like a small detail, but the down payment could more than double at 3% a year after 30 years.

Finally (there are more, but let’s stop here since I think we see the point), it doesn’t say anything about the higher monthly payment that we have to come up with if we decide to buy. This situation stays the same for years before rent appreciates enough to surpass it. The extra cost of owning a home for the first many years could instead be invested or saved, which would further cut into the perceived savings that the website is leading us to believe.

If we look at the calculation of owning vs renting more carefully, owning a house might actually be more expensive after 30 year if we include the extra cost of maintenance. Hopefully, no one falls for these scams.

How to Get Rich Quick

by David@MoneyNing.com · 10 comments

Everyone who is reading this because he/she wants to know how to get rich quick needs to realize that there’s no calculated way of doing so.  Every day, there are many people who all of a sudden become rich whether it’s because of the lottery or betting big on the right stock which skyrocketed.  Unfortunately for us though, these are mostly based on luck and can never be repeated systematically.

So, in order to get rich, the first thing we have to learn is be patient.  Time my friends.  That’s the only fixed variable in the get rich formula.

If we want to get rich, we first need to start saving to create a positive cash flow.  Whether it’s a dollar or a thousand dollars, we need to save as much as we can.  There will be sacrifices like not being able to buy that 50-inch LCD TV or the latest Gucci bag, but everything we buy is just an obstacle to our road of becoming rich.

Of course, the better our cash flow situation, the faster we can become rich.  However, just saving is not enough, or at least won’t be fast enough.  In order to shorten our path to the goal, we need to have compound interest work for us.  I’m sure everyone is familiar with this, so I won’t try to pitch the power of compound interest.  Just note that the higher the return, the faster we can increase our wealth.

There are tons of ways to gain interest with our money, and every way involves some risk.  The higher the risk, the bigger the potential return.  For example, online savings account is a pretty safe way to gain interest, but it only gives roughly a 3 percent APR at the time that this article is published.

A way to get higher returns with our money is through investing in stocks.  This has proven to have the highest return over a 20 year time horizon, but those that have been invested in the last 3-6 months will have wished that all their money was transferred to the online savings account.  This is due to the short term unpredictable nature of the stock market even though the potential reward is bigger.

In short, my point here is that there’s no cookie cutting way to get rich.  At least there’s no sure way to get rich quick.  In order to shorten the time it takes to become rich, we just have to take on more risk.  Whether we are willing to take on the risk is up to us, because we are the one that will live with the decision.

As a famous person once said, there’s no free lunch in this world.

Stretching Our Dollars to Make Our Budget Planning Easier

by David@MoneyNing.com · 14 comments

dollar bill

Today, I think I figured out another reason why I spend less money and thus make my budget planning easier than everyone else. It’s not because I waste less money, nor is it because I buy less things. It’s basically because I stretch the use of my dollar.

What do I really mean by that? Well, I realized that every time I feel that something needs to be replaced, I end up using it for another 6 months. I still remember the day before the wedding when my mom was complaining that my pair of pants was just really old.

When I think that something is still usable, I tend to keep using it even though it might not look the newest. I’m not sure where I picked this up, but I’ve found that this single trait has saved me so much money all through life. For example, I am using a laptop that’s 5 years old. Sure, it’s a little slow, but it does the job perfectly because this laptop is used to blog and answer emails. Comparing this to someone who might have bought two laptops in the same time frame, I’ve just saved the price of one laptop.

Keep more of your money -- stretch every dollar

So if we really want to keep more of our money, all we need to do is stretch every dollar. Sometimes, these things that we want to throw away is still usable and very functional. Stop throwing them away just because things get a little old. By keeping the same thing that we sometimes want to throw away, we can really spend much less money.

Walking to the Supermarket

by David@MoneyNing.com · 10 comments

walking

Last night, I walked with my wife to the nearby supermarket. At first, I didn’t want to go because I was tired from work and just wanted to sit around. However, my wife convinced me to go with her in the end and I was so glad that I did. We ended up having so much fun. The fact that we had a healthy walk and also saved some money was icing on the cake.

It all started after work when my wife wanted to buy some eggs. We moved recently, so we are still in the discovery stage instead of having a set route for everything. So, she decided to walk down to the closest grocery store to buy eggs because of a lack of a better alternative. I didn’t really want to get out of the house at that point but I agreed to go with her anyway.

During our walk, we talked and shared our day with each other and it was super nice. We don’t usually walk to places, so it was nice to be able to share that time together. If we drove, we probably wouldn’t have shared and talked with each other as much.

When we reached the supermarket, we realized that they had a pack of 18 eggs on sale for $1.89. This was much cheaper than what we were expecting (we’ve seen as much as $4 for 12). What a nice surprise which made our walk back even more pleasant.

So, last night’s walk saved me money on the eggs, gave me a chance to share with my wife, some exercise and also saved transportation costs.

Maybe you should try walking sometime. It is better for the environment, healthier for you and beneficial for your wealth.

Reduce the Moving Expenses – A General Negotiation Tip

by David@MoneyNing.com · 8 comments

moving boxes

We are moved in to our new apartment and pretty much all settled at this point. Thanks to my wife, everything went extremely smooth. She not only helped coordinate everybody to help with packing, but she also found a good moving company to do the actual moving. Just to give you an idea of how efficient the whole thing went, we got married on Saturday Feb 9 with nothing packed, rested the whole day Sunday and was in the new apartment by Tuesday Feb 12.

So before I say anything else, I’ve got to say THANK YOU to my wonderful wife. (Okay, on with the article…)

Thinking back, there would be one thing we thought could’ve been better, which was having a smaller moving bill. The moving company told us that they charge $100 / hr for their service from the get go. When asked about what the total charge would be, the mover told us that it is quite difficult to calculate it since they haven’t seen our place and don’t know how long it will take. He went on further to say that we can just wait for everything to be all set and done and then talk about it at the end. We agreed to this, and it was our big mistake.

On moving day, the movers came and very carefully moved our furniture, taping up everything to make sure nothing can be damaged. This wouldn’t be bad normally but we instantly knew we would be in trouble because it will take a long time. As the day went on, our bill kept on going up. What ended up happening was that they took 5 hours to move our 1 bedroom apartment (1 hour was to drive from the old apartment to the new), totaling $500 at $100 per hour. At that point, there weren’t much we could do since we already agreed to calculate everything at the end and we were aware of the $100 per hr charge. We were able to negotiate it down to $400, but it was still a lot of money.

We are fully aware that if we set the price in the beginning, the movers could’ve taken 3 hours to move everything instead of 5. However, as it is advantageous for them to take their time, they did. Next time, we will negotiate a final moving price before we give them any commitment. This is known as negotiating from a position of strength because they want our business and we are the decision maker. If they want our business, they will have to give us a satisfactory final moving cost and not try to charge us by the hour.

Filing Form 1040X When We Need to Correct Our Filed Tax Return

by David@MoneyNing.com · 80 comments

amend tax form 1040xWhat should we do when we realized that we made a mistake on our return but it was already filed?

Basically, it will depend on whether you e-filed or not. If you e-filed and the IRS rejects your return, then you have a chance to fix the error and resubmit. However, if you e-filed and the IRS accepts your return (meaning the return is already on the way), then you will have to wait till after you receive your refund. Once you receive your check, you should prepare and file a Form 1040X. Note is that this form can only be mailed and cannot be filed electronically. Once you mail the form, it may take the IRS up to 3 months to process the Form 1040X, so don’t be alarmed if you don’t hear from them after 2 months.

There are basically 4 steps to file a 1040X:

  1. Have your original Form 1040 handy – You will need information on the original form to file the 1040X
  2. Note Changes – Take notes on each change on the original tax forms and the reason for each change
  3. Fill out Form 1040X – The information on steps 1 and 2 will help with this
  4. Mail the form – Remember to include all accompanying documents.

It is more work to correct errors but it is very important to be accurate with our filing because we don’t want to be caught with an filing error with the IRS. I will be sure to keep everyone updated on the progress.

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