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August 21, 2010 / Abigail Adams

Theory: Freelance work + Landlording = Not being a slave to a 9-5 desk job

When I first started this blog, I had the intention of researching careers that I think I may like, since I can’t seem to find anything I like for more than a few months and wind up quitting in about a year or so.  But I had a revelation that what I wanted to do, what I was good at and had passion for was something that has been sitting right in front of me for over three years and that was being a landlord.  Oh yes, I know what you are thinking, “that person who takes my rent and buys fancy cars and clothes and doesn’t fix any of the problems I have at my house.”  I used to think the same thing, but being on the opposite end of the relationship, I can see now what landlords go through.  I assure you I don’t have a fancy car (had the same car since 2002, a Camry) and I don’t buy fancy clothes, in fact I don’t by fancy anything.  The money I receive in rent goes directly towards my mortgage, and I don’t even make a profit with the rent.  I am still paying out of my pocket for part of the mortgage (in another post I will address the mechanics of how many units it takes to make a profit).  I digress. 

Since it takes a while to build up a real estate portfolio, I still need to some type of work in order to take care of every day expenses.  Even though I found what I love, I can’t do it full-time, so in the mean time I am still searching for something that I can do, something that I want to do and that is fun as well. 

I always float around the internet trying to find interesting websites that will help me in my journey and I think I came across just that, but again didn’t realize it until now, about a year after I first happened across it.  The website is called  The owner of the site is a 28-year-old Stanford grad who uses his unique view of personal finance and wealth building in order to get people motivated to get out of the rat race.  He is definitely not one of those stuffy finance experts who try to teach you that your portfolio should have a certain percentage of bonds and stocks, or pushes you to stick to a budget where you track ever penny of your spending.  Now I admit, I got caught up in trying to teach people the same thing (well, doing a budget but not tracking every penny), but after reading about his psychology behind money and what people want, I have changed my views as well.  He always presents challenges for people to open their minds to the possibility of making more money by doing something they want to do rather than being tied to a desk and computer.  He even developed a course to help people tap into freelance work with things they already have knowledge in.

This has me interested because I have so many ideas for work that can be used as freelance, but I always had no idea where to start.  His course helps people nail down just that.  I didn’t sign up for the course,yet, but he has a preview course that makes it seem it may be a good idea to enroll in the full course. 

I have a few ideas in my head, and maybe the course will help me figure out which one will have the “most bang for the buck.”  I am considering pet sitting/cleaning, teaching classes to retirement communities about the online world, helping landlords organize and understand their business and cashflow, helping people organize their electronic documents and photos or consulting to increase productivity and streamline processes in small businesses.  I will continue updating as I move forward.

August 6, 2010 / Abigail Adams

Consider making your first home a rental, a duplex

Whenever I talk to anyone thinking about buying a home, I give them two pieces of advice.  1. Consider purchasing a duplex at least as your first home.  The rent from one unit of the duplex will cover about half of your mortgage.  2. And no matter what type of property you purchase, have at least 10k in savings for your house (this doesn’t include closing costs and realtor fees). The first year in my home, I spent about 7-10k getting things fixed that had been neglected (trees trimmed, pipes fixed, furnace replaced, etc). 
The biggest thing I learned about being able to get out of the “rat race” is use other people’s money (OPM) to do so.  You leverage OPM in order to put yourself in a better spot sooner, so you have the freedom to do what you want with your time, rather than being a slave to “the man,” which I don’t think most people want to do. 
I’ll just give you a little bit of background about my property and what it is allowing me to do.  I am going to be very open about my experience, because I can’t stand when someone says to try something out, yet they don’t give you any concrete information.
Currently I live in a 3 unit property, and rent 2 of my units out. My mortgage is about $1000 a month, and my rentals cover about $800 of that (once I refinance my house, I will actually be making a profit over my mortgage payment, yay!).  So someone else is essentially paying my mortgage for me.  I still have to do repairs and improvements (ones I would have to do regardless if I were in a rental or not), but I am not paying $1000 out of my pocket, plus repairs by myself.  Let’s say a furnace needs to be replaced (about $1500) and I have no one helping pay my mortgage, I have to still cover my mortgage and the furnace, so that is $2500, as opposed to $1700 out of my pocket since I have the rentals.  This year I will gross a little under $12k from rental income (after all the repairs and improvements, I will have probably made about $7k – but I didn’t put this in my pocket as cash for me to spend, it paid for my mortgage, so it went in my pocket in the form of equity).  (*Note: This year I made a bit more in rental income because I had someone renting a room in my house that counted toward the overal income of the property, I usually make about $10k)
Another great thing about having a rental, is the tax savings.  When you own your own home, you are very limited as to what you can write off in your taxes.  If you own a rental, there are a plethora of things you can write off (ie the furnace, landscaping, utilities you pay for the rental, etc).  Last year I had over $12k in write offs solely based on my rental.  That reduces my taxes significantly, and all those write offs were money I was going to spend anyway, rental or not.
With all of this, there are a few things that are happening at the same time.  Someone else is building my equity for me because they are paying my mortgage, repairs and improvements I do increase the equity in my home, and I can write most of it off, which reduces my taxable income as well.  I pay less taxes and don’t pay a full mortgage, yet I reap the benefits of building equity in my name, which will allow me to use my money that I would otherwise be spending on a mortgage, on something else like building my nest egg, putting towards a vacation fund or purchasing another property. 
The average person lives in a house (that they have mortgages on) for 5-7 years, and never winds up owning any of the ones they live in.  The first house you buy will probably not be one you live in, in a few years.  So knowing that, may make it a bit easier to consider doing a rental to be able to build equity and save enough, so when you move in your next house, maybe it can be a lot better, rather than just a little better.  And by no means am I saying that you can’t get an awesome house as your first.  I did, and I love my house.   
Even if you decide you don’t want to consider this that is fine, I just wanted to put it out there so you had some idea of what it could mean to you if you were to consider the idea.  And who knows, maybe you will do something like this later in life.
There is one other thing I want you to know however, no matter what you do purchase.  If you get a 30 year mortgage, and stay in the house for the entire 30 years and pay everything off on schedule, you will have most likely paid double what the  mortgage was originally taken out for in regards to the selling price  (say the purchase price was $100k, thirty years later the house is worth $300k, when you go to sell it, you really only make a net profit of $100k, because you paid $200k to own it, and you probably don’t make a true net profit of $100, because over the years you probably put lots of money into the house, plus paid all the taxes on it, so maybe you only break even). 
One way to help yourself build equity faster and pay less in interest (the interest in a mortgage is front loaded, and the first 7 years you are mainly paying interest, and only a small portion of principal), is to make one extra payment a year, either by taking your payment and dividing it by 12 and paying that much more to principal each month, or picking a month each year to make an extra payment.  If you do this each year, you reduce the time it takes to pay off a 30 year mortgage by 7 years, you save a ton on interest and build equity faster.  But make sure your extra payments are going to principal only.
April 7, 2010 / Abigail Adams

Stop Spending Beyond Your Means, and Do a Budget (but do it just once)!

Anything that seems like an easy way out of debt is probably a scam. Getting out of debt is not easy, but it can be accomplished with determination and discipline.
Doing a budget is the most important step!  Most people have no idea where the money goes each month.  The budget doesn’t have to be 100% accurate, at 70% accurate budget is better than what most people are doing.
First you want to take inventory of your situation by doing a budget to see exactly where you are spending your money.  So many people think they are in debt because of a loan they took out or a car payment they have, when in fact, it is because they eat out 3-4 times a week, and go clothes shopping every weekend, buy a new XBox game once a week, and online shop everyday.
Also by doing a budget you can see where you can cut things out that you didn’t realize added up to so much over time, i.e. Starbucks every morning can cost around $60-70 a month, eating out two times a week can add up to $160, etc.   
Next you want to take inventory of what your balances are on your credit cards and any loans you may have, what the minimum payments are, and what the interest rate is for each.  Then you want to call the credit card companies and see if they can reduce your interest rates at all.  You can tell them you got a better offer somewhere else, and want to stay with them if they can lower your rate (even if they don’t lower your rate, don’t run to the next 0% offer you get in the mail…it’s very bad for your credit to continually move your debt around, and even worse to close cards out).
After your do the interest inventory, make a list of those debts in order from highest interest to lowest interest and begin putting as much money as you can towards the highest interest debt first, while only paying the minimum on the other debts.  Once you get your first high interest debt paid off, go to the next one, and pay the same amount you were paying on the first debt plus the minimum payment on the next.
Credit Card 1 @ 17% minimum payment $50 but paying 200 (paying 150 more) Once its paid off go to the next card
Credit card 2 @ 15% minimum payment $50 then adding the 200  (total of 250) from the first card to the minimum  payment of the current card, paid off then,
Credit Card 3 @ 10% minimum payment $50 then add the 250 from the second card to the minimum payment (total payment 300)
As you can see there is a snowball affect which helps you pay your debts down faster over time. 
Basically you need to find where you can cut some expenses out of your life, in order to add to the payments for your credit cards to snowball the debt down.  Cut all of your credit cards except one for emergencies, do not cancel them!  Don’t eat out but maybe 1-2 times a month as a reward for something good happening or celebrating an accomplishment, and start bringing your lunch to work.  There are tons of things you can do to help yourself out of the situation. 
 I hope this helps.

*** (08/19/2010) After floating around the internet, I realize people loath doing a budget and trying to stick to it.  When I mentioned doing a budget, you only do it once (until your financial situation changes).  All you are trying to do is understand where your money is going and not going.  When you do this once, you have all the information in your head to move forward and do what you need and want to do with your money.  If you choose to ignore your budget and continue your cycle of debt, fine.  But if you have your budget in the back of your mind before purchasing that 50″ TV for $600 when two months ago you knew you only have $300 extra a month to spend on the finer things in life, maybe you will wait until next month, when you have that $600 in hand to pay for it out right, and not have to open that 27% interest credit card.

April 7, 2010 / Abigail Adams

The Beginning…

I am sitting in my room in Iraq.  It is my second time here, but this time I am a contractor and not a soldier.  Over the past few months I have been racking my brain about what I want to do with my life, even getting quite anxious about what I am going to do when I leave here.  I have had 13 jobs (pool gate house, pool snack bar, men’s clothing store, department store, cashier, drug store, school nurse assistant, college orientation leader, dorm food services, U.S. Army Officer, Training Specialist, Financial Advisor and currently a biometric enrollment technician) since I was 14 years old (I don’t count the dog grooming “business” that my friend and I started when we were 8). 

I am continually asking myself what I want to do with my life.  How do I find something I love, and am passionate about so I don’t feel like I am working?  I feel there are so many options that I have no idea how to narrow them down, so I began writing a list of jobs/careers that I think I might like, hoping I find a pattern. 

I find clarity in writing down what I am thinking and feeling and believe doing this will help.  I am going to write about my quest for the “job that isn’t a job.”  I am also quite passionate about basic personal finance, so should the mood strike me, I will be putting in my 2 cents about different topics that interest me, especially when I hear people around me talking about irresponsible financial decisions (that’s how I come up with topcis).

Who know’s where this will lead…time will tell.

April 7, 2010 / Abigail Adams

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