Don’t Feed the Alligators

A Personal Finance Blog from a Small-Scale Landlord’s Perspective

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Little Feet

photo figure credit: MITBeta

As I exclaimed here, Daughter #2 was born at home last weekend.  This was a joyous experience for everyone involved, from ScrapperMom herself, to the doting midwives, to ScrapperMom’s parents, to me.  We’ve learned a number of lessons that we will take to heart the next time we have a baby.  Some of these involve the homebirth itself, some relate to parenting in general, some are financial and others aren’t. With that, this post will have its off topic points, but should contain enough finance related bits to keep everyone else interested.

ScrapperMom and I decided early in the pregnancy of Daughter #2 that she would try to give birth at home.  (Please let me know in the comments if you would like to know why we made this decision, and if there’s enough interest I will try to put together a concise, coherent post on the topic.)  Daughter #2 arrived about 9 days earlier than she was expected. Which leads me to lesson 1:

  •  Babies can come at any time. So be prepared.

A number of the problems that we have encountered in the first week of our daughter’s life can be directly attributed to lack of preparedness.

Example 1: ScrapperMom has been cooking extra food at nearly every meal she has prepared in the last month and freezing the extra.  This has left us with a freezer full of food that will help us eat well, frugally, and without much preparation time in the coming weeks.  The problem is that it takes several hours or days to thaw something out to eat.  So during her labor and following the birth, we kept running to the take-out menus to figure out where our next meal was going to come from.  Over $70 was spent, to feed all of the people here, on take-out food on the day our daughter was born.   (Thanks to my parents and in-laws for covering much of this cost.)  My mother-in-law hit upon a great idea the next day when she went out and bought a couple of pounds of cold cuts, rolls, chips, etc. — enough to last a few days and satisfy a number of mouths that came through the house during that time

Example 2: The car seat was not in the car yet.  In my scramble to put the seat in the car before we had to take the baby to the pediatrician’s office, I could not find a metal bracket that was required for the installation.  We have two bases for the car seat, and each has a place to store the missing bracket.  We need the bracket for only one of our cars, yet both of them were missing.  I considered running to Toys R Us to buy a new base for $25.  I figured that I could take the bracket out of the new base until I found one of ours and then return the base for a refund.  This is, perhaps, not the most ethical way to do things, but it was pragmatic.  Eventually I found one of the brackets on the floor of the car that didn’t need it and I was able to install the seat.

Example 3: When giving our daughter her first bath, we could not find the scrubby brush that we used on Daughter #1 at that age.  Nor could we find an infant sized towel.  All of these things were in a closest that ScrapperMom had planned to go through and clean this week, before the baby was due.  Since baby came early, I found myself standing there holding a reasonably clean, wet, crying newborn who I eventually wrapped in a couple of receiving blankets to dry her.

This lesson can be extrapolated to many areas of our lives, especially personal finance. Are you prepared? Do you have an emergency fund? Life insurance? Disability insurance?

Lesson #2:

  • You have to look out for yourself first.

Over the days immediately following the birth, I found myself playing host to everyone from the midwives to family and friends. Because the birth was in our house, I went into host mode. I realized only after the fact that they were all there for us, not the other way around. When people were in our house, I neglected many of the things that I should have been doing: laundry, dishes, toddler naps, doggie care, etc. I should have been more careful about not letting guests interrupt what needed to get done, because this just bunched all of these chores into a shorter period of time later (and left us with a surly 2 year old). Better yet, I should have asked these people to help me get these things done so that I could make sure that we all got enough rest after a busy few days.

We must also look out for ourselves when it comes to personal finance. No one cares more about your money than you do. We must manage our own retirement accounts, we must fund retirement accounts before college funds, we must be responsible for our own finances because no one else is going to do it for us.

I have several more lessons that we have learned that I will share in another post soon. Do you have any experience with home births or comments or questions about ours? We’d like to hear about it in the Comments section below.

11.24.2008
fall scene

Creative Commons License photo figure credit: controltheweb

We had a slight altercation this week with the neighbors. As I sat to eat breakfast I looked out to the sound of leaf blowing. I was somewhat astonished that my neighbor (a renter of the house next door) was blowing the leaves from his side yard into my driveway. Now I may have not noticed this new pile of leaves if not for the fact that we had cleaned up the whole back, side yard and driveway over the weekend and had filled about 15 leaf bags. Trusting in the decency of humanity I made the assumption that he was putting the leaves there for ease of picking them up after he was finished. Plus with a toddler covered in syrup I was in no position to run out and approach him about the situation and what his plans were.

Fast forward a few days. The leaves sit where they were blown, in our driveway. The landlord for the property is parked in the driveway. I run out to have a word with him. I calmly explain that his tenant had blown leaves into our driveway and I did not appreciate that since I had already cleaned all my leaves and the leaves in his side yard were his responsibility. He proceeded to tell me (remember I am 8 months pregnant) that they were my leaves because they fell off my tree and it was only fair that I picked them up. He also told me that he is a very busy man (aren’t we all) and didn’t have time for fall maintenance. I told him it is not my fault that leaves from a tree in my yard fall into his yard. Unfortunately that is how leaves work. My mother-in-law knows this all too well. The winds are never kind to her and leaves often end up piling up in her yard regardless of where they fell from.

I thought this whole conversation was mind boggling and was at a total loss for words. He even offered me some leaf bags so that I could pick them up myself. How nice…

Of course MITBeta was not very happy with this outcome and being the diplomat that he is went back out to have a word with our neighbor’s landlord.  As I watched from the window I saw them chatting for a while and then I noticed them picking up the leaves together. It took them about 10 minutes total and MITBeta reported back to me that the landlord had apologized to me for our earlier conversation.

What do you readers think? We feel that raking leaves is an unfortunate but necessary evil of having glorious shade. It’s Murphy’s Law that he who has no trees will have all the leaves blow into his yard. But I’m pretty sure the leaf code suggests that I do not need to go get those leaves from my neighbor’s yard. We like trees and will suffer with fall clean-up because we are too frugal to pay someone to do it for us, whether I’m pregnant or not. How about you? Do you loathe raking? If you own properties, do you use a landscaping company to clean your properties?

If you liked this article, you may be interested in seeing some related articles:


10.22.2008
Sunset

Creative Commons License photo figure credit: notsogoodphotography

Well I suppose I thought our jobs were untouchable despite the bad economy. In retrospect this is exactly why it is important to closely monitor your finances and have an emergency fund available in tough times. I found out this week that my boss is really struggling to find work for me and in the last few weeks, for himself as well. The work has been great for almost 2 years and it has given me the opportunity to see my little girl grow and change every day, as a stay at home, work at home mom.

But now I am faced with a decision. My boss met with me last week and shared the bad news. He gave me three options:

  • I can continue to be on his payroll without the current guarantee of 20 hrs/wk. This could mean that although he may be able to give me up to 20 hrs, in the current economy 0/wk may be more likely for the foreseeable future.
  • I can become a contract employee. If he has work and I need/want to work, I can. If not, there are no worries or obligations for either of us. This will also mean a higher hourly rate due to the fact that he won’t have to pay payroll taxes. It also means that I can look elsewhere for other contract work.
  • The third option is to be laid off and collect unemployment benefits.

So I took a look at how the unemployment benefits would break down for me. I’m in a unique situation in that I make a good hourly rate, despite only working 20 hrs/wk, but still wasn’t sure what that would mean for me since I only work part time. As MITBeta has said in the past, we can meet all our financial obligations on his income, but without some contribution from me, it is difficult to save and pay down debt aggressively.

Here is what I came up with in regards to our State’s unemployment insurance benefits.  I am assuming I made $40/hr for the last quarter and $35/hr in the previous three quarters.  You basically earn up to 50% of your weekly rate up to the maximum benefit of $628/wk. They take your highest two quarters over the last year to figure out the weekly rate. Using my hourly rate of both $35/hr (this was while I was receiving health benefits) and $40/hr (after we switched to MITBeta’s health plan), I came up with about $750/wk. You are eligible for 30 times that amount as your benefit credit or about $11,250 in my case. Assuming 50% of that weekly rate to be $375/wk that comes out to 30 weeks of benefits.

I think I am also eligible for an additional $25 for our daughter. So the total benefit would be around $400/wk or around $340 if we had state and federal taxes taken out.

They allow you to work up to a 1/3 of your benefit rate. So for me that would be around $125/wk. I am in the process of talking with my former employer about working for them as a contract employee. They may or may not be able to give me anywhere from 5-20 hrs/wk. If I could get an hourly rate of $40/hr from them I would only be able to work 2-3 hrs before I became ineligible for benefits. You can get partial benefits, but obviously at this point we’d need to weigh the cost of my time to keep up with the job search requirements of unemployment insurance.  Given the fact that I am 7 months pregnant I am not really looking for a full time commitment, but just a chance to try working for another company from home to see how it would work. If it works well it would allow me some flexibility after the baby is born and give me more options in a downturn economy. Although both companies are in construction, the sectors they service are vastly different and are affected by the economy in different ways.

What do you think? Have you been laid off and have you filed for unemployment benefits? Are you an employer that has had to lay off an employee? Let us know about your experience in the Comments Section.

10.03.2008
Tivo

Creative Commons License photo figure credit: billaday

While on vacation, ScrapperMom and I discovered a curious thing. We were watching a children’s TV show to keep daughter #1 busy and suddenly the show stopped and changed to voices and images that encouraged us to buy a bunch of stuff that we don’t need. Amazed by such a brazen attempt to sell me something, I asked our host about it who informed us that what we were watching were “commercials”.

Ah yes!  Commercials!  I had forgotten that such things still exist.  You see, ScrapperMom and I purchased a Tivo back in 2003, and for the last 5 and a half years have been commercial free.  And it has been wonderful.  After watching way too many of these while on vacation, I had forgotten how insidious and manipulative they could be, and am glad that our daughter is still too young to be enticed by a toy dog that can roll over by itself, or a princess on a horse that can walk by itself.

I am often asked by friends, coworkers, and family if I have seen a certain commercial that may be funny or entertaining in some way.  “No,” I usually say, “we don’t watch commercials.”  Originally our disdain for commercials was simply practical: commercials account for 27% of total network TV time.  We quickly found that with Tivo we could watch 30 minutes of TV in 22 minutes. We filled the saved 8 minutes with more interesting things, like reading, blogging, etc.

Having seen so many commercials during vacation, however, it has become abundantly clear to me that having Tivo saves us money.  Exposure to advertisement makes you aware of things that you didn’t know you needed.  It’s hard not to keep up with the Joneses when you are constantly bombarded with indications that you are too fat, too thin, too ugly, too short, too bald, don’t drive a good enough car, deserve a great vacation, etc.  But life is not that bad when you don’t have all these unreal standards against which to measure yourself.

Tivo is near the top of our top 10 list of must have gadgets, and it’s nice to see that after having it for so many years, we are still realizing new value in it.

My Worst Nightmare

Creative Commons License photo figure credit: tinyfroglet

In Part I one this story, I told the story of how we came to own our current home, how we financed it, and how we found ourselves upside-down on our mortgage.

The original loan on our house had a clause that said that we could not refinance or pay off the loan for at least 6 months.  Recognizing that we got a rather lousy interest rate because of our lack of documentation, as well as the fact that we would have to refinance anyway, we went ahead and refinanced as soon as we could.  Just about 6 months and a day after we signed our original home loans, we signed two more loans — one for 80% of the value, our first mortgage, and one for 10% of the value, our 2nd mortgage.  Because it was only 6 months into the original mortgage, the appraised value of the house did not change.  Both of these mortgages are 30 year fixed loans with decent interest rates.

In the time since we refinanced, rates came down considerably, and we tried to refinance again into a lower rate.  The appraisal that we got in the process was the first strong clue for us that trouble was brewing: the appraised value was about 10% lower than what we paid, despite the fact that we had undertaken substantial exterior cosmetic improvements (curb appeal).  We were unable to finance into the very low rates that we available a little over a year ago since we now owe more than the property is worth.

Having unknowingly saved ourselves from the current mortgage crisis, we also did the smart thing and consolidated the 3 credit cards that I talked about in Part I into one card.  Every few months or so, I get a set of checks from my Chase Platinum card with offers for 0% interest for a year, 3.99% for 2 years, or 4.99% for the life of the balance.  We opted for the 4.99% deal.  Since half of the improvements made with the money on this card are for a legitimate business expense, we can deduct half of the interest payments on our taxes, which further reduces the effective interest rate.  In the time since we completed this balance transfer, we have paid down 3/4 of the original balance.  Because the interest rate is so low at this point, and half tax deductible, we have slowed our aggressive pay down of this account in favor of building up some savings.

So while we are not in any trouble with respect to continuing to make our mortgage payments or servicing the debt or our improvements, we are still in a pickle.  We are looking down the road at the needs we have for housing, especially in light of our growing family, and are not all that pleased with the options we have available:

  • We can sell our house, but we would have to come up with between $30,000 and $40,000 to cover the difference between what we owe and what the house is worth.  This would wipe out our savings, and we would be just about starting over financially.  We would have to find a place to rent as well while we save money towards the down payment on a new house.
  • We can buy a single family house now, and keep our two family, renting both units.  The trouble with this option is that it would also wipe out our savings, putting us in a precarious situation if any emergencies come up.  Another problem with this plan is that the market rents for our two units is less than the combined mortgage, insurance, and utility rates we would have to pay out each month.  This is what makes the property an Alligator.  Each month we will have to feed it hundreds of dollars to keep it afloat.  This could actually be seen as a really great investment, a forced savings plan of sorts, since we will eventually get this money back when we sell the house.
  • The default option here is to keep doing what we’re doing.  That’s fine for now, but we live in a 2 bedroom apartment, and depending on the gender of our next child, may only work out for a short period of time.  The real downside to this plan is that we may miss out on some great real estate deals as the market bottoms out.  Under this plan, we can save for a new house over the next several years.  However, there is still the issue of the 2nd option above.  With any luck, rents will rise over the next several years to offset the continuous payments we will have to make into the house, but we can’t bank on that.

We made two major mistakes along the way with the purchase of this house. We bought an over-valued asset at the height of a market bubble. We failed to adequately assess the income versus expenses for a rental property. In our defense, we bought the house for the reason stated in Part I: to be able to afford to live in the area we wanted, close to other family and in a decent neighborhood. But in retrospect it was an investment that will not provide the returns that we could have achieved using other investment vehicles.

What would you do?  Do you see options that I haven’t seen?  Are you feeding an alligator? Let me know what you think in the Comments section below, or click here if you’re reading via an RSS reader or by email.