ThanksGIVING

With only a week from Thanksgiving day and about a month until Christmas my thoughts instinctively go towards the things I am thankful for and gift giving. I have been thinking about being satisfied with your means and living intentionally for a while now. I may have even talked to you about it once or twice but I thought I would explore it on paper a little today.

So what is living intentionally? Well, it is a lot of things and I am sure each one of you has a definition that you might subscribe to. Ultimately, for me I think it comes down to simply living in a way that allows you to impact your family, friends and community. For me living intentionally also has a lot to do with personal finance and working toward being debt free.

Being debt free is certainly not the be-all or end-all in life, but it definitely provides a path toward being able to live the life that you want. Dave Ramsey describes the path toward being debt free as “living like no-one else, so that later you can live like no-one else.” Obviously when you are working through your debt, it sometimes gets kind of hard to remember what you are working towards.

I am pretty much immersed in these ideas all day, so I have a tendency to forget to explain to my wife with the reasons we are doing different things with our finances. I guess I take it for granted. The other day she said, “so what is the point of all this debt free business anyway?” – That question kind of stopped me  in my tracks.

I thought, “What have I done!! If I can’t convince my wife that this is a good idea, can I convince anyone?!” And then I realized that it was actually a pretty darn good question. What is the point of being debt free?

Is it so you can horde away a bunch of cash and swim in a giant vault like Scroog McDuck?

No, I don’t think so – that might be cool for a day, but lets get real. What I think it comes down to are two things, peace and giving. I think the peace part is fairly straight forward. If you don't have debt looming over you, it is pretty darn easy to relax and do what you want - that’s peace!

Giving is not complicated in theory but in reality, it is. What makes it complicated is that giving is not just something you should start when you “get rich”, it’s really for everyone.

You see, “rich” is a state of mind and if you wait for it to hit you… well, you might be waiting for a while. No matter how much money you make or how big your net worth is, if you are not satisfied with your lifestyle you will just keep looking for more.

I know I have been on the receiving end of someone who was really generous – more than one person actually. I don’t know if any of those givers would call themselves rich, but they certainly made an impact on me. I am sure many of you have a cause that you can relate to or something that you have always said you would like to help out. Maybe it is research for a medical issue, a religious organization, a children's home or maybe you just want to help out an individual person. You should give now! But just think how much more you could give in the future.

I think Dave Ramsey would say, the point of being debt free is so you can give like no one else.

Just think how cool it would be to leave a $100 tip to a waitress working on a holiday, or to anonymously help out that family in need at your church by writing a big fat check. Those are the things that you can really do if you don't have any debt hanging around. This is what gets me excited about reaching financial independence, how about you?

Keeping the House from Owning Us

My wife and I recently purchased a house here in Omaha. Consequently, I have been thinking a lot lately about real estate and all the costs associated with being a home owner. Just thinking about the things we will have to do to this home… I can already see the reasons why some weary homeowners head to an apartment lifestyle skipping.

So how can we keep the house we are excited to own from owning us?

I am approaching it with a three step philosophy:

1. Remember what you bought.
2. Know what it costs.
3. Keep your horizon in check.

Remember What You Bought

It often happens in small business that an individual starts a company or buys a franchise and essentially bought themselves a job. Truly successful entrepreneurs never buy a job – they buy investments. A job is the daily grind, the rat race, hand-to-mouth – the profits from the business are your paycheck and there is nothing left for re-investment into the business. An investment is current income plus growing revenues and eventually a cash cow that doesn’t require the owner to be in the trenches every day.

A house is similar. Too often people buy a "place to live rather than an investment. Let me be clear, I am not saying that personal residences are a source of income or should be treated as such. I think we all have seen that a mind set like that spells disaster circa 2008-2009.

An entrepreneur recognizes that an investment requires capital and work but they expect to build something meaningful – otherwise they would just go get a job working eight to five. When we are talking about a house it’s important to remember that the work you are doing on the property should be improving its value or improving your satisfaction with the space. A house is not just an asset that will hopefully be worth something when you sell it (2% growth per year is a decent estimate) it is an expression of who you are. If you aren’t into that, an apartment or condo might be a better fit for you and that is okay.

Know What It Costs

As a homeowner you have to remember that the down payment and closing cost were just the beginning of your cash outlay. Even if you bought a brand new home  there will still be things that need kept up or even break down. Here is a nice rule of thumb: a homeowner should plan to save an extra amount each month for “fix-it” expenses. This should be 1.5% of the value of your home annually. So if you own a home that is worth $150,000 then you should save at least $188 per month.

Even if you don’t use the money you saved in a given year, keep saving! You might have a couple good years but then you might have to replace the roof – good news you have been saving for that, no need for a home equity loan. A house requires up-keep and up-keep requires a few dollars. 

Keep Your Horizon In Check

A house is a long term commitment and the real benefits only come over time. Perhaps in the late 1990’s and mid 2000’s you could buy a house in California and it would appreciate 40% in two years but that bubble popped. As a home owner you have to be willing to stay in the house for an extended period of time. It’s just the way it is. If you want to move around and experience different lifestyles you should probably rent.

I am definitely writing to myself today. I am certainly no expert on being a homeowner but I have had an opportunity to observe quite a bit. What about you - How do you keep your home from owning you? Do you do something special to help keep your perspective as a home owner in check?