The pain is only temporary! But how temporary?

If you’ve been anywhere near the news, whether on television, online, or social media, you have likely noticed the precipitous fall of the stock market over the last few days. Coronavirus fears are taking hold in the minds of investors, who are running for shelter, or perhaps a face mask. I have seen my retirement savings take a bit of a hit over the last several days after a seemingly long run of positive growth.

In addition to the stock market slide this week, my house seems to have dropped about $20,000 in value since last summer, according to Zillow and Trulia. Their pricing conclusion seems to be well-founded, as people have been accepting lower prices over the winter months, while a mile away, homes continue to sell for higher prices. I’ll talk more on that later, but all-in-all, it’s a bit discouraging to see my net worth decline so much after working diligently to grow my wealth.

Over the last year, my mom and I have chatted quite a bit about what we thought the economy would do.  This was mostly based on the talking heads on television, and we predicted 2020 would be the year things corrected.  Albeit, we didn’t predict the coronavirus would be a root-cause.  I do, however, think the selling is a bit irrational.  While the Coronavirus is potentially a big threat on a global scale, it’s less likely that the disease will disrupt our economy to the point earnings will slide, people will start losing jobs, and the self-fulfilling prophecy of an economic decline will take place.  Instead, I think this is a blip on the radar and unless some other negative economic news comes out, we will see this fade into history and stock prices will increase in the near term.  In other words, if you’ve been waiting to get into the stock market, now is a good time to invest some cash and earn some returns over the next several months.

As mentioned earlier, I am seeing a 5% price decrease on my home.  In my neighborhood, several pieces of land have started being developed into “multi-family” housing, or apartments.  At first glance, this may seem to devalue properties, but in all actuality, the apartments being built are for people with higher incomes.  Probably incomes similar to some of the homeowners in the area considering some bought at the low point from 2009-2011.  These new apartments come with heft rents of $1,400 for a decent sized one-bedroom unit.  I think that once built, people will again get used to a new apartment complex instead of a weedy cow field and prices will fall in line with those areas a mile away.

So, is it time to run for the exits and click the “sell” button? I really don’t think so, but I do not claim to have a crystal ball and see the future. What do you think? Leave your thoughts on whether 2020 will be a declining year for the stock markets, housing, the economy, or both.

Saving For The Big Things: If I can do it, you can, too!

As I sit in my living room, listening to John William’s composition, the Main Theme from the 1980’s film E.T. The Extra Terrestrial, I instantly gravitate to the bass line since I’m a seasoned tuba player of nearly three decades (gulp!). A tuba was the first big adult purchase I saved up and made during my high school days. It was the main reason I got my first job. I got that first paycheck and allotted $25 for gas and fast food (it was 1996 and gas was about a buck a gallon and the legendary 29 cent hamburger at McDonald’s was a real thing). I had focus. Focus on my goal to have the best playing tuba I could afford so I could make Honor band and All-State band. At 16, I felt the confidence of having a new horn would get me there. In less than six months, I had saved $3,500 making $5.25 an hour and I had my new horn!

Fast-forward in life and this focus got lost along the way from age 18 to 24. I had a career and stable paycheck by the time I was 20, but the focus was gone. Income was split up a bunch of different ways between rent, eating out, gasoline had tripled or quadrupled from those high school days, and although I earned nearly three times per hour what I did in high school, I was in debt and never able to accomplish much besides keeping my bills current. At the time, I just bought into the mentality that “the little guy just can’t get ahead.” Then something clicked a few months after turning 25.

I stopped making excuses for my poor spending habits and stopped accepting the high interest rates on my plethora of department store cards and low limit major credit cards. I took a leap of faith and sent a paper credit card application out to a credit union associated with my employer with whom I had a paltry $25 savings account. I also sent a letter asking the loan officer to please consider my change in attitude and transfer my balances from all of my high-rate cards, and promised to close them if the balances were transferred. I included a list with balance, account numbers and addresses for a total of $3,500, same as the cost of the tuba. A couple weeks later, I received a letter from the credit union with Xerox copies of checks sent out on my behalf to pay off all those cards and consolidate the debt.

I was dumbfounded. Sending that letter actually worked! In the past, I just received denial letters, so I had given up hope for a few years. My faith was restored and I decided to pay off that card as fast a possible. This started my habits in the direction of savings. I put every little $10 or $20 bit of found money at the debt.

A few months later, I moved back to Reno to be with my then significant other, and we started planning to buy a new house. Between us, we had a pretty decent income, but not much savings. We knew we needed to get a good down payment going, and fast! We were constantly driving around looking at houses with for sale signs in the front. We would talk about what we could do with each house we looked at from the car. Although we didn’t have a particular house picked out, we had a vision of what our life would be like in our own little piece of heaven. That was our motivation.

Goals are great, but why are you working towards something? Once you have a reason for sacrificing for your next big purchase, set your savings goal and work backwards, mathematically, and determine how fast you can get there. If you need to have a certain amount saved by a certain date, divide that out by the number of pay periods and see if you can save that much and keep up on your other bills. If not, what other side jobs can you do? Is your new goal worth selling some old stuff? Sites such as eBay, Craigslist, and other social media let you list from your smart phone in minutes.

So next time you have a lofty savings goal, don’t despair! Put a motivating reason behind your actions you can think of when you are making a sacrifice such as eating leftovers instead of ordering pizza or making due with last summer’s wardrobe. Sock away any found money from bonuses or birthday gifts! Find some side work, even if it’s just adhoc. I used to mow lawns and landscape yards on my days off for extra cash. Be creative and you can meet your goals year after year.

How do you stay motivated and what side jobs do you do? Leave me a comment explaining how you reach your savings goals.

Stick to Your Plan, Control Yourself, and We All Make Mistakes

I love building things around the house.  Home improvement projects can become addictive.  Once I start on one project, I start thinking about the next one while working on the current one.  Last spring, this was just the case.  After paying off all of my credit card debt since being divorced, I decided that it was time to stop being tight with money and make some home improvements for my enjoyment with the future in mind.  I wandered into Home Depot one cold, dreary, February Sunday and noticed a sign near the entrance boasting “up to 20% off counter tops”, and so it begins.

As I get older, I have learned to understand my impulses.  When I was in my 20’s, I would just do what I wanted, without thinking much about how I was going to get there unless it was a really big purchase, like a car or house. Nowadays, I tend to tell myself:  STOP!  I ask myself questions like:

  • Do I have the cash to cover this want?
  • How will I feel about spending $x,xxx six months after the purchase?
  • Would it feel better to have that money in my savings account?
  • Are there more important goals in my life and is this congruent with my goals?
  • What are my true motivations for wanting to make this purchase?

These are some of the questions that keep me out of financial trouble more often than not. Being able to identify these behavioral patterns in myself has allowed me to get ahead, which I measure by looking at my increasing net worth and my quality of life (not to mention increased sanity!).  I have the same tendencies, but I react to them differently. 

I admit that I am a spender, but the feeling of security gained from having a big pile of cash in the bank is a big reason why I don’t just buy what I want, when I want.  I can remember being 23 years old and always broke.  On payday, I paid all of my bills, which left me with almost no cash, but I did have available credit on my cards and was able to eat and buy gas on that.  Then something would go wrong and my life would become stressful.  This stress radiated into my career and my personal relationships.  I didn’t realize it then, but I felt out of control.  The lack of control was causing chaos not only in my financial life, but in all other areas.  I couldn’t sleep well when I was wondering how I would fix my car and get to work to keep up this rat race. 

Fast-forward about three years and I was advancing my career and financially.  I was ready to purchase a house with my significant other.  It was 2007.  Home prices were decreasing.  This seemed like the best time to buy since we had been in such a hot market.  The joke was on us!  Within a year of closing on the brand new house, prices dropped over $100K on our block from what we had purchased it for. I was, and still am, a firm believer that individuals should do what is ethical, even if the popular thing to do is not.  Many of those people kept their jobs and income and dumped their underwater homes rather that weather the economic storm. 

We stuck with it, paid our mortgage, and things are pretty good today.  It worked out and I’m moving on and up.  The moral of the story is to stick to your big plan.  Don’t let fads or impulses throw you off track. If you do, get back on track! Everyone will have obstacles with money, health, careers, and more.  You can plan for these obstacles and make incremental choices every day to move you closer to, or further from, those goals.