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Archive for April, 2007

Clean Up Woman

April 29th, 2007 at 09:50 am

Anyone else remember that old song "Clean Up Woman?"

That song is running through my head this morning!

Already this morning I:
- Used my husband's dinner leftovers to make my breakfast (chopped up a bit of meat in to little pieces, zapped it in the microwave with some BBQ sauce, and rolled it up in a whole grain tortilla --- yum)
- Used his leftover toothpaste tube: He grabs and squeezes from the middle, and when he thinks there is nothing left in the tube I take it from him and get a couple more weeks' worth of brushing from it by starting at the bottom and squeezing the living daylights out of it!
- Used his leftover soap scraps: When the soap bar gets too small for his liking, he grabs a new bar. I save his little soap scraps, moisten them a bit, and squish them in to perfectly good little soap balls that I use for my showers.

I actually like doing these things; I like the creative challenge of finding ways to make things stretch as far as possible!

"The Millionaire Mind" - Balance Sheet Affluent

April 28th, 2007 at 12:05 pm

***CAUTION: Some serious "over-thinking" and a long post follows ... you may want to stop reading now, unless you enjoy mental gymnastics and don't bore easily*** Smile

"The Millionaire Mind" (TMM) is Thomas Stanley's excellent follow-up to "The Millionaire Next Door." In TMM, Dr. Stanley goes beyond studying mere millionaires to studying the most economically productive Americans, those with the very highest net worths (average $9.2 million) and incomes (average $749K).

Among those most economically productive Americans, he compares BAs (Balance Sheet Affluent) and IAs (Income Statement Affluent).

He starts with the following "Expected Net Worth" formula:

Age x .112 x Annual Realized Household Income = Expected Net Worth

BAs are those who have a net worth at least 2 times their Expected Net Worth.

IAs are those who have a net worth 1/2 or less than their Expected Net Worth.

Even tho' I am not a decamillionaire and never will be (unless the guys from Publishers Clearinghouse show up at my door with a bunch of balloons and a big check), and tho' my household's income is not even remotely close to the average income mentioned above, I have set a goal for myself to become BA by the age of 60.

Why this goal? Why BA? Why age 60?
1. I believe in emulating those you admire. I very much admire the BAs in TMM. Among their many admirable traits, they are humble and live well below their means.
2. My husband & I are self-employed business owners, which is very common among BAs, so we already have many of the traits and values of the BAs.
3. By becoming BA by age 60, I believe we will be well-prepared for a secure retirement.
4. I chose the age of 60 because it's on the low end of the retirement range. If we are BA by age 60, we may consider retiring early. If we are not BA by age 60, we'll probably keep on working.
5. I'm happy to say that we've reached the point in our lives where we are able to ask ourselves "Could we maybe spend a bit more? Could we donate more? Could we help our nieces and nephews through college when they reach that age? Could we take a trip somewhere (something we've not done for 5 years)? Dare we eat out more than once a month?!?" If I set annual goals to keep us on track towards becoming BA by age 60, and if we are at or ahead of that goal, then we can give ourselves permission to relax a bit and spend a couple bucks (prudently ... of course!)

So, this is the part where the serious over-thinking begins ...

In TMM, Dr. Stanley does not define what he means by "Net Worth" or "Annual Realized Household Income"!!! Ack!

I'll admit it ... I spent some time doing web searches to see if I could find out exactly what Dr. Stanley meant, and I even tried to find an Email address for Dr. Stanley himself so I could write and ask! I had no luck.

So ... I must come up with my own definitions. You are all welcome to chime in with your own opinions.

- Financial Assets: YES (of course)
- Real Estate, Including Primary Residence: I decided YES (tho' I realize this is open to debate). For one thing, TMM mentions the value of respondents homes many times, so I assume Dr. Stanley included it. For another thing, I personally believe a home is an investment as well as a place to live and enjoy.
- Cars: I'm on the fence, leaning towards yes. Cars are easy to set a value using KBB, are fairly easy to sell, and since we don't drive expensive cars it's not going to have a huge impact on our equation one way or the other.
- Other Household Items: I decided NO, tho' I know an argument can be made for including them. For one thing, too hard to set a value and not easy to sell. For another, we don't have collectibles or expensive possesions, and the only antiques we have are family heirlooms that we will never sell.
- The Dog: Tho' he is absolutely priceless to me, I decided not to include him. Smile

WHAT IS INCLUDED IN "ANNUAL REALIZED HOUSEHOLD INCOME"? [If you are still reading, you may want to go pour yourself a cup of coffee to keep from dozing off...] Keep in mind that we are self-employed, which complicates matters a bit:
- When your income varies quite a bit from year to year, you can't just look at last year's income. You need to take an average over several years to have a realistic picture. But how many years? 3? 5? 7? I haven't decided yet.
- I decided to start with the AGI (adjusted gross income) on our tax returns and start from there.
- Next, I feel certain that we need to add in our contributions to our tax-deferred savings plans (Keogh, IRAs, etc.)
- Tax-Exempt Earnings on Municipal Bond Fund: Should they be included? I think yes, and I think they should be included at their TEY (Taxable Equivalent Yield). But I'm sure others would have a different opinion with good justifications.
- Earnings on Tax-Deferred Savings Plans (the above-mentioned Keogh, IRAs, etc): Do you include your earnings on these????? I have no idea!!! They are part of the net worth, so perhaps the earnings on them should be included? But do you then have to try to guess the taxes you will end up paying on them down the road? This one is very tricky, and it does matter, since we have maxed these out for a long, long time (they make up a sizable portion of our net worth). Help!

Once I've figured out exactly how I am going to do the calculations, I will let you know where we are now and how we plan to get to BA by age 60.

PF Creeping in to my Dreams

April 24th, 2007 at 09:25 am

Last night I dreamed I pulled in to the gas station to fill up and the price was $6.50 per gallon! Everyone at the station stood around chatting and comparing gas prices at different stations.
Bizarre ...

$20 Challenge Garden Update

April 22nd, 2007 at 10:02 am

I transplanted the herb starts outside a few days ago ... They looked so healthy and vibrant when they were inside in the little egg cups .... But they look like scrawny little pathetic weeds in the great big planters! Smile

Some of the rainbow chard seeds that I sowed directly outside have sprouted! Yee haw!

I'm waiting for the grape tomato starts to get a bit bigger before transplanting ... On most of them I can see the 2nd pair of leaves peeking out.

Overall, I'm just amazed that things are actually growing and that I haven't killed everything off (yet).

How to ... Prepare financially to start your own business

April 20th, 2007 at 05:18 pm

Quitting your job and starting your own business is a real adventure: exciting and scary at the same time. You are voluntarily giving up your regular paycheck and benefits in exchange for the freedom of being your own boss, the opportunity to pursue work you love, and the possibility of financial ruin if you don’t prepare properly.

Seven years ago my husband left his job and started his own business; but before he did that, we planned, prepared, and sacrificed for three years to make sure we were ready to withstand the loss of his paycheck. The following suggestions are based on what worked for us.

1. Do a “trial run” to make sure you really want to do that type of work and that you are suited to running your own business: If you are thinking of starting a business in a field unrelated to your current job, you could moonlight at a 2nd job in your area of interest. If you are thinking of starting a business in your current field (as was the case with my husband), it can be a bit trickier because you have to make sure you are not violating your current employer’s policies. We started up a small “test” company that we ran evenings and weekends, but made sure that it was different enough from his salaried work that there was no conflict of interest. We did not make a lot money at that venture, but we it was a great opportunity to learn about licensing a business, bookkeeping, state and federal taxes, etc.

2. Cut back on your expenses wherever you can: I’m talking about major lifestyle changes, not just cutting back a bit here and there. Make sure you are ready to live on much less (or perhaps zero) income for awhile. To make sure we could live on just one income (mine), we sold our condo and moved in to the least expensive apartment we could stomach. We went from a cute condo in a nice neighborhood to an apartment complex where the police visited fairly regularly (not on friendly visits, mind you) and where I spent 2 full days cleaning before we moved in even though the place was allegedly move-in ready. Thinking back on it, I realize what a huge sacrifice we made. At the time we were actually happy to be doing it because we were keeping our eye on the long-term goal. [I am happy to say that after 4 years of apartment life, we were able to move on and buy ourselves a nice house.]

3. Make a plan and then save, save, save: Avoid borrowing money or using your credit cards if at all possible. Calculate how much money you estimate you will need to get your business started and keep it running for 6 months to two years (however long you think it will take you to see a profit), and then add at least 20% to that number to cover any unexpected expenses. In addition, make sure you have a very generous emergency fund established for your personal expenses. In our case, we waited until we had saved up my husband’s start-up money plus enough to support our reduced lifestyle for a year, and then he got the green light to give notice at his job.

4. Spend your start-up money wisely: For each purchase, ask yourself very seriously if your business will really benefit from having a top-quality, high-cost item. The answer will sometimes be yes, sometimes no. Don’t be afraid to spend money where it will really help your bottom line. But if a purchase is more about what you like or your vanity, you have to tell yourself no. For my husband’s business it made sense to buy a nice new all-in-one machine (fax, printer, scanner) so we bought it. However, for a desk all he really needed was something sturdy that he could sit at, so we rescued a freebie desk that was going to be thrown away. [Later, when I was preparing to start my own business and when my husband had seen several years of business success, he bought himself a handsome cherry wood desk and handed the dumpster freebie down to me.]

If you dream of owning your own business or are already planning to go out on your own, I wish you all the luck in the world! If you are willing to take the time to plan and prepare, and if you are willing to make some sacrifices to get your business started, you can do it and you will be happy that you did it!

Awww Shoot - $5 Bank Charge

April 19th, 2007 at 03:35 pm

I don't use debit cards or ATMs. I don't like them. I think they are budget busters.

When we opened our checking account a few years back, a debit card automatically came with the account. I told the bank I didn't need it, but they said I would need it to sign up for on-line banking. Once I was signed up, I could go ahead and destroy the card (which I did).

Then earlier in the year our bank improved the security for on-line banking, requiring that you register any new computers by entering your debit card number. Of course improved security is a very good thing, but I wasn't able to access my account after switching computers because the bank's system no longer recognized my computer and I did not have my debit card info to re-register. I had to order a new debit card and was charged a $5 "New Card Fee." Arrgggh!

Lesson Learned: From now on, debit cards and the like go to the safety deposit box in case I need them some day, and only get destroyed when the account is closed.

$20 Challenge Balance: NEGATIVE $10.89!

April 14th, 2007 at 10:17 am

How on earth does someone have a NEGATIVE balance on their $20 challenge? Read on to find out ...

For my 2007 $20 challenge, I have challenged myself to take $20 cash to start up my first-ever vegetable garden. Once I start harvesting, I will add the value of what I grow based on what it would cost if I bought it at the store.

I started herbs & grape tomato seeds inside, and planted rainbow chard seeds directly outside. [I may also plant some lettuce blend seeds ... still trying to make up my mind.] I scrounged up as many found containers as I could; since my last update I got six 5-gallon pails through Freecycle which I think will be good for the tomatoes.

I'm doing all container gardening because I'm a newbie and it forces me to keep this small-scale and because I'm in a rental house so that limits my options. [I don't think my friend / landlord would be thrilled if I tore up his yard!]

What I realized since my last update was that I did not have nearly enough
potting soil to plant all of my starts! I had bought a huge bag at Costco and thought it would be enough ... but I was wrong, wrong, wrong! Go ahead and laugh you experienced gardeners ... I do realize it was a total newbie mistake. Smile

So, I thought long and hard about what I would do. I came up with a couple options such as:
- Add more cash to my challenge money [For example, I am now doing Pinecone surveys and have made $15 already this year. I could have added that money to my challenge and used it to buy more soil.]
- Just plant as many starts as I could with the soil I had and consider those my "$20 Challenge Plants" --- Then buy some more soil out of my pocket, keep them separate, and consider them the "non-challenge plants."
- Give away the extra starts and just not bother with them at all.

I thought about this dilema for several days. I really wanted to make my decision in the spirit of my original challenge to myself which was: "How would a new vegetable gardening entrepreneur start up a little gardening 'business' with only $20 in cash?" So I decided to do what so many small-time entrepreneurs have done when they find themselves strapped for cash but still believing in themselves and their product: I decided to figuratively "whip out the credit card and charge it!" So, I bought a 2nd big bag of soil which put me over the $20 amount, and I am now charging myself interest at the rate of 8.66% until I have harvested enough veggies to get out of the red. Hence, the NEGATIVE $10.89 balance on my $20 challenge. That number is just going to get worse until I actually harvest something, and if my crops fail, I may bankrupt my challenge. [So, it really is like starting a little business!]

Now, if you're interested, here are a couple points for clarification:
1. The 8.66% rate is the average rate on my credit cards. I am not actually carrying a balance on my cards (I pay them off in full every month) so I am not actually paying any interest on that soil, but because I want to "keep it real," I decided to charge myself interest.

2. I really am a small business owner, as is my husband. I am definitely not advocating "whipping out the credit card and charging it" as a way to start up a business!!! But I do realize that is what many folks who start businesses have to do. I most strongly advise that if you really want to start up a business you do your darndest to not only come up with the start-up cash and enough to keep the business going for as long as you think it will take to see a profit, but that you also have many many months of living expenses and a generous emergency fund set aside before you actually go out on your own. [Maybe someday I'll write an entry about the years of planning, preparing, and sacrificing my husband and I did before taking the plunge and going out on our own ...]

Well ... Here's hoping for good weather until my next update!

Took a brief detour on the relocation road

April 4th, 2007 at 06:54 pm

March pre-relocation sales were very lackluster ($72 for a few things on Craigslist and Half.com) and I am feeling too lazy to calculate interest right now, so I'll post sales results for March & April together. Selling stuff wasn't a priority this month.

I did do a huge paper purge of my business files. DH was a way for a couple weeks so it was a good time to do that. [We share one computer that is in my "office" and the inevitable mess that comes from sorting plus the shredder running is a big distraction for him, so it's better to do that while he's away.]

Also did some sorting and gathering of stuff for our big garage sale in May.

I'm also winnowing our possessions by not replacing things when they wear out or run out; instead, I'm making due with alternatives. [For example, when my long underwear got so full of holes that they no longer provided warmth, I started wearing pajama bottoms under my pants. Smile I figure I won't need long underwear in Texas!]

The biggest thing that happened was that we took a brief detour by making an offer on a house in our area that is in pre-foreclosure. We did not get the house, but we are keeping an eye on it and if it goes to foreclosure auction we may bid on it. Even tho' we are moving ahead with our plans to relocate, we are also keeping all of our options open. If a "nest were to fall from a tree" (in other words, if we were able to get a screaming deal on a preforeclosure in our area), we would take it.