Lazy Man and Money

Get Your Money Questions Answered At Moolanomy

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Every has questions about money every now and again. I hoped people might make use of the contact button under my logo, but it seems most would rather have a root canal. That’s fine. You still aren’t going to get away without getting your questions answered. Moolanomy Answers is here to make sure of that.

You might know Moolanomy from his very popular personal finance blog… or one of several hundred concurrent projects he runs. Those projects range from Personal Finance Buzz, a place to vote up your favorite personal finance posts, to Blogthority, a resource dedicated to all things blogging. To be brutally honest, his lack of Laziness bugged the poop right out of me. He is very much Bizarro Lazy Man. I got over this bitterness though. We are on the same team – trying to help people better manage their money to live well and be happy.

Getting back to Moolanomy Answers, you can either ask questions, or if you think you are Mr. Smarty Pants, give a shot at answering questions. By answering questions you’ll earn points. For a limited time the points could win you an iPod Shuffle. Help people out and get a chance at free music? That sounds like a win to me.

Reader Email: Help Me, I’ve Been Evicted!

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Every now and again, I get e-mails from readers asking for advice. I always stress that I’m licensed to give individual financial advice. However, I often opine with what steps I would take if I found myself in a similar situation.

This week’s e-mail comes from Candi (as always names have been changed for anonymity and to stimulate readers’ imaginations). I’ve paraphrased it to put a focus on the important information:

Hi, I briefly read some of your articles. I need financial help and don’t know if you can help. I have made poor financial choices in the past. I am in debt and can’t seem to get a helping hand.

  • I was a Prosper client in the past, but never was able to get funded. My credit score has dropped and therefore couldn’t continue w/Prosper.
  • I am married w/ three children and a baby due in a couple of months.
  • I have foreclosed on an investment property and gotten evicted on the home lived in. I have no home of my own to live in and I’m very stressed out about this.
  • I am now trying to get a home to live in, but because of my past history can’t even rent something. I was looking itno rent to own programs in my area and they want big down payments because of my eviction/foreclosure. I need $5,000-$8,000 for a down payment and would like to consolidate my debt.
  • My biggest debt is the family van w/ a balance of $17,000 and my husband’s work car w a balance of $1,800. Both monthly payments equal to $680
  • I have various other personal loans, totaling $5,000.

If someone could just fund me what I owed and let me borrow the down payment for my home, I know I can get back in track. Ideally I want to only worry about a house payment and repaying whoever can consolidate my debts. I have a stable job working for the state I live in. I worked there for nine years. My husband also has a stable job as a wheelchair/elevator installer. I am very trustworthy and though my credit history might say something else. Please let me know if any help is available.

This e-mail hit me like a ton of bricks. Though the desperation seems obvious here, the unedited e-mail was even more explicit.

Often times I write about why America needs to wake up financially, but I don’t typically have the pulse of the problems. They usually come to me in statistical form, not from a real person with a very real problem.

Here is my response to Candi (edited for “publishability”):

  • Transportation – How much is the family van worth now? What could you get if it were sold? I know you owe $17,000 on it, but perhaps if you talk to the dealership, you can trade it in for used Kia Sportage. If your current van is worth $14,000 to the dealer, perhaps you’ll only owe $3,000 plus the price of the Kia. I’m seeing a 1999 Kia Sportage on Ebay for $1,600. This would take the total cost of your family van from $17,000 to $4,600. If your husband’s work car is worth more than the $1,800 you might be able to sell it and buy a cheaper. If it’s worth $6,000, you can sell it, pay off the $1800 you owe on it and have $4200 left over, enough for the Sportage or a good chunk of down payment. If nothing else these two moves should help you look better to landlords. It shows that you are willing to make moves to turn things around. I think at that point, with two steady jobs, I think you could draft up a very convincing piece of paper of income and debts that may make you seem like a better person to rent to. Here are some hints to Save Money on Cars, but in your unique circumstance, I wouldn’t necessarily look to stick with the car you own.
  • Focus on the Basics – From the desperation and lack of home, I think Candi should focus on the basics like food, shelter, clothing, etc. Anything extra (like the cars) has to protect their income and that’s all.
  • Sell Anything Extra of Value – This is much like the above advice. If you are homeless, you won’t have a place for the stuff, so you might as well sell it. As George Carlin once said, “A house is just a pile of stuff with a cover on it – That’s what your house is, a place to keep your stuff while you go out and get – more stuff!” If you have less stuff, you can get a “smaller cover” which will be cheaper. It’s a financial win-win – you make money from your stuff and save money storing it.
  • Look for Outside Help (community/friends/employers) – Religious institutions can help in situations like this. Other times a friend can help. Perhaps one of your employers can front you some money for a place to live. You’ll then have to live on limited income for a bit, but if you reduce your monthly expenses, you could do okay.
  • Look to Eat Cheaply – There are a lot of cheap foods. A diet of beans and rice might not be ideal, but people have historically lived on much less. Just be sure to add a little fruit and maybe some cheap meats to get more nutrition. I know a lot of people who get a lot of expensive junk food.
  • Make a Game of It – It’s going to be tough with 3.8 children. When I was little, my mom used to include me in the bargain shopping. She’d have me on a treasure hunt to find coupons that could save money. I’m the first to admit that I was weird, but this was FUN. The best part was the receipt at the end that showed how much we saved. Using simple division to determine the percentage of savings, I had two scores (net and percentage savings) to try to beat the next time we went shopping. I got very good at math as an added bonus. One might also draw a similar parallel to some parenting tactics displayed in Life is Beautiful.
  • Day Care? – If you have three kids (and the fourth one coming), it may make sense not have a job and save on day-care expenses. I don’t know if you have this expense. If you are making $24,000 after-tax on your job and require a car, professional clothes, etc… and day care is costing you $20,000 it may make sense not to work.
  • Exercise (though check with your doctor since you are pregnant) – This sounds extremely bizarre. However, in the situation you are in, it’s
    easy to get depressed. Exercise is very good at making you feel better than yourself. Many times it’s free. Plus if you are eating cheap foods, exercising may help maintain your overall health – again check with your doctor. (This message was brought to you by Lazy Man and Health.)

So there you have it? Did I miss any obvious things? What would you recommend?

Chat Live With Lazy Man Today

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[Update: You’ll need to be a member of the site to join the chat. Sorry about that. I didn’t know this going in and don’t like it any more than you do. Perhaps you use Bug Me Not for quick access.]

For those of you who can’t get enough of my near daily postings, I’ll be serving up an hour of live chat today – from 7-8PM ET. I’m answering questions for Grab.com’s Live Monthly Chat. For more information you can see please check out this page. If you’d like to join the chat, click on this direct link. The direct link might not work since you have to sign up. It’s best to refer to these full instructions. It my first time experimenting with anything like this; I don’t know how successful it will be.

If you aren’t in your 40’s, that’s fine, simply come anyway – the page says it’s for all pages. I’ll be co-hosting with Jeremy of Generation X Finance. Since he is the expert, I’m going to defer any tough questions to him. I’ll be jumping on any easy pitches down the middle in an attempt to knock it out of the park. Also, I’m not a financial expert, I don’t even play one on TV. Just because I like to throw a football every now and again, it doesn’t mean that I’m going to be complete 26 of 28 passes in the AFC Divisional Game. Enough of the sports analogies. If your question is important to you, I suggest you see a professional.

Money Question: What Would you do with a Windfall? Part 4

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Money QuestionsThis is the final part of this Money Question series. If you missed it, catch part 1, part 2, and part 3. I asked several bloggers the following question:

Where is the single best place to invest a $50K after-tax windfall now? Assume the following: you don’t need the money for at least 10 years, you’ve already max out 401k and Roth IRAs. Pretend that the windfall came under a couple conditions… 1) You can only invest it in one area. 2) If your investment doesn’t make 6% a year you lose it all.

I had a purpose with the stipulations. I was hoping to coerce the bloggers into coming up with a typical investment that might be a bargain right now. In my opinion many investments are currently getting too “expensive” for their prices. I have no interest in many stocks and sectors as they are near the top of the market. Gold has had a huge run-up over the last few years. The dollar seems to be getting weaker every day. Median home prices in my area are 870K. That eliminates any real estate investment for me, because I already do the long distance landlord thing and I’d probably get out of that game if it wouldn’t cost me thousands of dollars. Commodity prices seem to be soaring by all accounts.

I had been teasing with the answer that I would give. I’d be tempted to invest with Prosper basically because there seems to be a lot of demand from overextended Americans. I’ve also done much better when I’ve reviewed my strategy over the last 6 months. However, I’m not quite that confident to put 50K to work in Prosper. When I originally planned the question, Pharmaceutical HOLDRS (symbol: PPH), was looking like a bargain. It’s had a run-up in the last couple of months, and it’s now looking expensive like many other companies. I then looked at Vanguard’s Healthcare ETF (symbol:VHT) and that looks more promising to me. It’s still up around 19.5% this year, so it doesn’t fit my bargain hunting criteria. They say the third try is the charm. I found Biotech Holders (Biotech HOLDRS:BBH). It’s up only around 2% this year, so there’s reason to believe that there’s to grow. Over the last three years it’s up 23% compared to the S&P500’s 42%. The clincher was it’s holdings – Amgen, Genzyme, I think these companies, and the sector in general, is well positioned for the next ten years.

Money Question: What Would you do with a Windfall? Part 3

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Money QuestionsYesterday, I published part 2 of What Would You Do With a Windfall. If you missed that, it might be worth clicking on that link back there to catch up. What did I ask the bloggers? Simply this:

Where is the single best place to invest a $50K after-tax windfall now? Assume the following: you don’t need the money for at least 10 years, you’ve already max out 401k and Roth IRAs. Pretend that the windfall came under a couple conditions (like Brewster’s Millions)… 1) You can only invest it in one area. 2) If your investment doesn’t make 6% a year you lose it all.

Sun from The Sun’s Financial Diary responded with the following two possibilities:

Right now, I don’t have any big plan (like owning my own business) in my mind, but if I could get a windfall of $50,000 or even $100,000, then I will use the money as part of the down payment to get a bigger house. Now that we have two children, our three-bedroom townhouse is kind of small. Though they can still share a room for a while (we have two daughters), we will have to buy a bigger one at some point and the extra money can definitely help. We’d love to get a single house with basement so the children can have space to play. Also, both my wife and I like to play table tennis a lot. We could setup a table in the basement for ourselves and that’s like dreams come true.

If there’s any money left after we buy the house, I plan to invest it for the future. Actually, I already have a target and that’s Vanguard Total Stock Market Fund (VTI). I don’t mind to invest in a lump sum as it’s almost impossible that the market will be down in the next 20 or 30 years. Thus, if the money is available, making a lump sum investment is the best choice for the long term. Also, since the fund covers the entire US stock market, I will get the maximum diversification with a single fund, which is also very cheap.

Sun, I think you might lose your home, due to the Brewster’s Million’s clause. However, if you can sell it off at the end of 10 years for the 6% a year gain, it could work out – leverage is an amazing thing. As for VTI, I own it and can’t recommend it highly enough. The only problem I have right now, is that I think the stock market (on a whole at least) is over-valued.

Golbguru of Money, Matter, and More Musings has a couple of ideas of his own.

Here are some of a few not-so-concrete thoughts I had since I started working on the question:

Option 1: I would love to use that money to start a *good* restaurant on campus (or very near to campus). A few semesters ago, we (me and some of my classmates) did some ground work (for a class) on what would be required to open a restaurant in our town ~ I would like to see some realization of those ideas. With the kind of numbers we played at the time, we estimated that we would break-even (with respect to the initial capital) in about 3 years ~ and the earning rate will increase more with increasing popularity (and increasing enrollment of new students). Plus, it’s a university town – students are busy – they tend to eat out a lot and that works in our favor.

Option 2: Invest it in energy in a sort of “hedging” manner – gasoline, sun, wind, hydrogen, and nuclear. Like Henry (from Binary Dollar mentions in his answer – the demand for energy is never going to head down – gasoline may be replaced by hydrogen in the time to come – but you will need something to keep those millions of cars running. I don’t know what kind of a returns this will give me…but since it’s an unexpected windfall, I would be willing to take risks with it.

Going from 50K to 100K would definitely make me think more – although I don’t think it will affect my choice much (if it were $1 million, that would certainly make me change my choices). The time factor will also matter a lot – technologies become old and new ones attract more attention – accordingly, I wouldn’t want to stay rigid on the energy investment options. I would stay in the broad “energy” field, but my options would depend on what’s hot at the time. With the restaurant, it doesn’t matter if the time frame is 10 years or 50 years – if it’s a good restaurant, it will be etched on people stomachs for ever. :)

The restaurant idea is pretty interesting. There are a lot of restaurants out there, so I’ve always discounted the idea. I figured the competition is too high and the audience is limited (by geography). The other side of the coin is that there are so many restaurants, they must be doing something right – right? As for the energy, I like the idea overall, but I’m glad you are willing to take some risks with it. That was the spirit of the exercise. I should have probably asked for more than 6%, but I didn’t want to limit too much and I wanted to eliminate the high interest savings accounts.

Let me know in the comments, what would you invest in? Can you guess what I would invest in? I’ll give a hint, it’s not Prosper (at least under these restrictions). Expect my answer later today… or Saturday.