Today's the Day!-

Today my real estate agent and I are going to look at six investment properties--several duplexes and one six-unit apartment building, with 100% occupancy. I haven't the faintest idea of what I'm doing--I'm relying on her chutzpah and experience to lead the way--but at some point I have to stop talking about REI and start doing something about it. I don't have any money except for the equity ($100K) in my condo and about 15K in cash. "Feel the fear and do it anyway" is my motto for the day. This is a baby step of sorts. I don't plan to do anything but look, listen, and learn as much as I can on this outing. More later!

My Net Worth

I'm going to formally begin keeping track of my net worth. After running the basic numbers (Assets minus liabilities), my net worth is $151, 004.47. Considering where I was a few years ago, that's quite an improvement, though it's just a small step toward my goal of having a comfortable retirement. The majority is due to home equity, and my realtor friend said that current analysts predict a 6-12% appreciation rate in California. I'm not sure if that's association hubris, but it seems about right to me. Once I have the Jetta and the school loan paid off, that will add $594.04 per month to my bottom line.

Unfortunately, October is going to put a drain on my finances with some additional expenses I don't normally have. My property taxes are due ($1395, bi-annually); I have vacation expenses ($1,000; however, plane tickets, parking fees have already been paid); My dog will have to be housed in a kennel for 10 days ($500!); Plus, I had a root canal done. I haven't gotten the bill yet, but I've budgeted about $500 for this emergency procedure because dental insurance will only pay a portion of it. When November blows in, I anticipate my bank balance will plummet by $7,000! All of this will be paid with cash. In earlier days, I would have whipped out a variety of cards to pay these expenses (aside from the property taxes) and then worked like crazy to pay them off.

Now, I'm thinking of selling my condo and buying a duplex. I've run the numbers with my real estate agent, and she thinks I shouldn't be so conservative (codeword for fear). We're looking at a property this weekend--but it's in a bad part of town that's at least enjoying some redevelopment. It's a two-unit building and I would take the 3bdrm unit and rent out the 4 bdrm unit. The asking price is $638K! Not sure if this would be a good way to go as a way of increasing net worth, as there's an element of risk involved. I've been reading lots of blogs on REI for education and inspiration. Quite frankly though, it scares the bejesus out of me.

Where have I been all my life?

It's humbling to think that I might have to take up dumpster diving about the same time that I turn 62, or worse wear one of those paper hats that fast food employees have to wear. They always say fear is a great motivator, and fearing retirement rather than looking forward to it like I do, sure woke me up quick. I decided I had to do something, and while it's highly unlikely I'll retire with a huge nest egg, I'm doing all I can to catch up so that I can retire with at least some financial dignity.

So, in a Sunday-morning reflective moment of "shoulda, woulda, coulda," the one thing that I would recommend to a young person just starting out is to save and invest 10 percent of income. When you see the numbers on compound interest, you'll be amazed!

My parents never saved a dime, and they payed dearly for it during their retirement years. I can't be too harsh. They really didn't have the money to save. They were raising six kids and both of them worked menial jobs--he a truck driver, she a waitress. Looking back on it, it's a miracle that we had as much as we did. My mom is still alive and lives with my sister and her husband, and although I send Mom about $500 a month to supplement her $772 Social Security check, she feels financially abandoned--and well, pissed off with how my dad left her. After my dad died about 10 years ago, she sold their only assest--a three bedroom house that she received $74,000 for, which she has already spent. They paid $21,00 for the house in 1971.

While I'm thinking of financial legacies, I like Suze Orman's show, but her credo that "Self worth equals net worth" doesn't really apply to my situation. I have a high regard for myself--with all due modesty--but I'm pretty much broke. If you reverse the logic to "Net worth equals self worth"--well, any self-respecting person would see the folly with believing that.

I will credit Orman for leading me to seriously think about credit card debt, and I'm relieved not to have any at the moment. The most I've "carried" (interesting term, isn't it?) at one time was $4800 on three different cards. With some backbone and diligence, I payed them off last year, and while I still charge things on plastic, I pay it off pronto, sometimes within a few days, thanks to online banking.

Happy Spicy Frugal Brunch: (Apologies to the gourmet purists out there)
1 big ass tortilla, burrito size $.17 (bought on sale 10/$1.69)
2 scrambled eggs cooked with a fistful of fresh spinach $.36 (one bag, four servings @ .99; 1.5 dozen eggs @$1.29)
1 tablespoon minced garlic
1 teaspoon red pepper flakes
4 Tbls. Feta cheese .25 (3lbs@ $3.99, bought on sale and packaged 1/2 increments and frozen)
Roll it all up like a burrito
4 oz. water mixed with 4 oz. fresh grapefruit juice (.12)
Total: $.90

I was dreading doing this, but I ran one of those Net Wortch calculators. Counting the equity in my condo, I have a net worth of $164,346. That's far better than where I was two years ago, when I was virtually penniless, exept for a $21K retirement account left over from a previous job. The downside? A good portion of my net worth is tied up in equity.

How I Bought My First House (Condo)

Sometimes I can't believe that I'm a living breathing home owner with a 5.5 fixed rate 30-year mortgage. Of any "smart" financial move, getting into this condo was probably the best thing I've ever done for myself financially.

And it all happened pretty much by coincedence and synchronicity. Before I landed in a condo, I had been living in a 2bd/bth house with a nice garden and a huge garage in San Francisco's Mission District for nearly 12 years. The rent was insanely low--$1250, but when the owners had a financial set back they wanted to move back in. Frantic, I began to look for other housing and was shocked to see how much a comparable place would go--nearly double what I was paying. At the time, I was also freelancing, so income was spotty at times; however, I had a sizeable emergency fund. Plus, I had a pet, so my choices were beginning to look limiting.

But, one day I was cruising on the real estate section of craigslist.org, and saw a post from a real estate agent with a marketing spin that hit everyone one of my emotional buttons. "Are you sick of paying rent?" " Do you want to own your own home?" "My name is Betty and I can get you into your first house no money down!" Of course, I was hooked, and I sent a reply.

Within 24 hours, she called me and asked some preliminary questions, and hooked me up with a mortgage broker. After a few phone calls, and about a week later, I was in the broker's office submitting paperwork--it was all very scary, and it seemed surreal. Bottom line: she could work out a deal, preapprove a loan, and at the end of the meeting, she said..."Now, go shopping."

I was dazed. I had no idea what I was looking for--my only requirement was not to pay rent. I looked at a few places, and I didn't like them at all. Most were "ant-hill" condos, and I hated the sterile, hotel feeling of most of them. I asked my agent if we could go looking in a more "urban" area, and we came over to Oakland, CA--just a short drive across the Bay Bridge. Within two weeks, I was putting an offer for the place I'm in now, and while this isn't my dream home, at least it's home ownership in an area where I thought I had been priced out of for the rest of my working life. For anyone who knows, the Bay Area is one of the most expensive areas in the country.

My first mortgage was an 80/20 loan to avoid PMI. It consisted of a ARM 3/1 at 6.2 percent, with a HELOC piggy back loan, also adjustable. My interest rate was higher than the going rate because I had to state income rather than provide "documented" income. My payments were $1100 total, not counting HOA fees ($155. mo), and property taxes, about $2700 per year. Once Greenspan started ratcheting up the interest rates, the payments on my HELOC loan started increasing, and I started freaking out. (The $180 interest only soon was $250) I quickly refinanced to my current 5.5 loan (combing the first and second mortgage) with an online broker. I also took out 10K additional to do some home repairs, which I've yet to do. I took 7K of that money and invested it while the other 3K was for a bathroom upgrade.

Had I come over here and rented this place, I probably wouldn't pay more than $895 for it. However, I think it's been a wise move financially--if only because of the appreciation. Plus, I"m not throwing money into a black hole. The money I am paying is working for me, not to pay someone else's mortgage. As luck would have it, my condo has appreciated in value, so my net worth has also increased. Would I do it again? Absolutely! The only thing I would change would be my loan package. Because I didn't know anything, I was at the mercy of my mortgage broker, and while she got me into this place, I do believe I could've gotten a better deal, had I been more savvy. I didn't realise you could say "No, I want a better deal than that." Now, I know.

What got me into this place was a reasonably high FICO score (760), not much debt (a car loan, a school loan, and not much credit card debt) and a reserve that showed I could pay six months of mortgage payments. I would later need this reserve when I lost one of my primary contracts.

On Frugal Shopping

When I go grocery shopping, it's akin to going on a hunt. And I love the thrill of serendipity and the moment of "Eureka!" when I know I've found a good deal. At the moment my favorite store for grocery shopping is Grocery Outlet, and the one I go to is located in downtown Oakland, near where I live. When i tell people where I shop for groceries, they usually say..."Is that the dented can store over on Broadway?"

I'm not an elitist person, but I was horrified on my first visit. Most of the shoppers were grossly overweight and they looked poor. Stretch pants and scruffy shoes. I also noticed that there were few white folks pushing carts. Most of the clientele are either African American, Chinese, or Mexican. The overall vibe is economically disadvantaged, fixed income, welfare, "nickel and dimed," and were it not for my "higher calling," ("willed budgeting") the place would've necessitated a supplemental dosage of Prozac. Five years ago, I was shopping in the most expensive "upscale" grocery stores, and it wasn't uncommon for me to drop $125 for a weekend of gourmet vittles, and that was for two people.

I usually go on Sunday mornings between 10 and 11. The place isn't very busy then, so there aren't long lines to contend with or jostling with other customers. I suspect most of the regular shoppers are in church or still asleep, so the place is less the beehive it usually is, except for the occasional homeless person; a few elderly souls, apparently on fixed incomes, and who buy packages of $.99 bologna, cheese, canned fruit; or tattooed and pierced bohemian types.

Shopping there is an in-your-face reminder that either lots of people out there can't afford much for a basic necessity like food, or who like me, like to bleed every ounce of blood from the dollars we earn. I suspect it's more that former than the latter.

When you shop there, you need patience to separate the good from the bad. I read labels so if something is cheap, but it's loaded with sodium (more than 18%) or saturated fat (more than 25%), I don't buy it. What's the point of saving money on food if it's going to give you a coronary five years down the road? My baselines are: inexpensive and healthy.

Typically I spend about $30 a week for groceries--and that's usually enough for breakfast, lunch, and dinner. (I supplement this shopping with trips to Alberstons and Safeway to check out the week's "loss leaders" like boneless chicken breasts for $1.88lb). Overall, I spend about $150 per month for groceries. At some point, I'll get more granualar and find out in detail what I'm buying.

I went to cooking school, so my palate can be demanding. Still, I manage to find good deals. A $7.99 handmade goat cheese and wild mushroom pizza is marked down to $2.99. Pork tenderloins ($4.99) at "buy one, get one free." 1.5 dozen eggs for $.99. Organic yogurt, nearing its expiration date, is $1.49 for the quart size. Bags of prewashed spinach are $.99. Protein Bars (good for a snack) .25 each (regularly $1.79). the most delicious apple puff pastries, which you bake in the oven, are $3.99 for eight--you can't make them that cheap.

On a recent Grocery Outlet trip I found a 4lb box of Quaker Oatmeal for $2.99!. It had a small box cut on the top, and when I looked the two large bags were still sealed. When I took it to the cashier I pointed this "flaw"out, and she gave me .50 off, so this ended up costing me $2.49. Don't ask me why I did this--I did it more as an experiment than anything else, just to see what the reaction would be. The cashier was accommodating, and was like..."okay, it's flawed, i'll give you extra off."

Now, I love oatmeal--i'ts really good for you--and it should be on everyone's shopping list if you're on a budget, but I don't buy it until it's on sale, and then I stock up. I calculated the "per serving," ratio, and it ended being .03 per serving. Not bad for a breakfast item. Typically, this brand and size is $4.29 at Safeway or Albertsons--and I got two of them--so that ended up being a great deal. Once you start really looking at the prices of things, you'll be better prepared to evaluate a sale item.

In my spendthrift days, it wasn't unusal for me to have a double latte and bagel slathered with cream cheese ($4.75), as I darted off to my job as a magazine editor. Or, worse going to a restaurant and dropping $10! I could still do this, but I don't want to waste my money this way.

I have lots more to say about this subject, as grocery shopping is one of the areas where you can have a big impact on your budget, if you're willing to take a Zen approach, make a few concessions and sacrifices. I haven't graduated to using coupons--Grocery Outlet doesn't accept them, and most of the coupon items are already overpriced, so I wouldn't buy them anyway.

Well, here I am.

My first blog ever. How did I get here? Well, that's a long and winding story. Let's just say a variety of factors led me here, the chief one being that at 50, I was suddenly staring retirement in the face, and it didn't look very pretty. In fact, nearing retirement looked pretty damned grim.

I hadn't saved very much money (25K in a 401k) during my working years (hard to believe, isn't it?), was unemployed for much of last year, and on the verge of selling a condo I had purchased a year earlier because I had spent nearly every nickel of my savings--at the time $15,000 during a period of about eight months. Having an emergency fund like all the financial gurus recommend surely helped me soldier through this setback.

Mind you, I didn't fritter away this money--I used it to make debt payments, like my mortgage, car payment, a student loan (more on that later), credit card payments, and general living expenses. I decided that I really needed to get my finances in order. To be frank, I'm embarrassed to be where I am--51, but on a mission not to retire old and financially feeble and broke. I can't do anything about "old," but I can do something about the financially feeble part.

So, the goal of this blog is to keep me accountable to my finances. Share my thoughts. I've given myself 15 years to get this right. It's not a lot of time, but I'm going to retire with at least some kind of comfortable nest egg, with financial dignity. I don't want to end up like my parents, who struggled by with ONLY social security (more on this later). It's going to take work, but doing nothing is no longer an option. I know there must be others out there who are in a simalar situation, so perhaps I can help with these postings. Feel free to chime in and post.

Now, the nitty gritty. Where am I? Here's a snapshot. Right now, I'm reducing debt and saving! My FICO score is 800. Who cares? I won't be using debt anymore to finance anything beyond real estate.

Here's what I've accomplished in the last year.

I've eliminated all of my credit card debt (about 5K). I still charge, but I pay them off EVERY month. At some point, I will cut them all up.

Saved 15K, of which 10K is invested in stocks. 5K of this is emergency cash.

My 401k currently has about 35K (scary, huh?), and I contribute 8% of my pre-tax salary (69K), with a company match of 3%.

I still owe 4K on a 2000 Jetta. I've ramped up the payment schedule on this, and I hope to have it payed off by May 2006. Woo-hoo!

I'm still a slave to U.S. Department of Education in the form of a 1,800 on a student loan (more on that later) that I've had for 10 years. I went back to college later in life and completed my degree--one of the smartest things I ever did. This 1,800 is what's left of 12K that I've been paying for more than 10 years! I don't resent this debt, as it really changed the direction of my life. Depending on my tax refund this year, I'll wipe this one out. Woo-hoo!

My condo (a one b/b ditty, located in a bucolic neighborhood in Oakland CA) cost me 192K, and according to current comps in the 'hood it could fetch about $299K. Although buying this condo put me in a precarious financial situation during the first year, it's been a good investment, and probably my best financial move. I'll give the deets on this purchase at a later time, cuz it wasn't a cut and dried deal.