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Teach money skills early, while they are still brilliant

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Closet OrganizeHow young is too young to start teaching organizational skills?  Is it important that kids just have their freedom?  What about cleaning their rooms?  What about finances?  The earlier, the better!

My wife has done an incredible job with our little girl who is 4.  Every day she has jobs that she needs to do.  And our little girl takes them very seriously.  She is compensated for her jobs — in pennies.  And she takes those very seriously, as well.  She is learning about work and about saving her pennies.  There is a Buddhist proverb that says

Give me a child until he is 7 years old.  After that, you can do with him as you wish.  Buddhist Proverb

I speak Japanese as a second language, and I speak well enough that I have worked as an interpreter.  日本語わかりますか。Somewhere in my studies, I read an interesting fact about language acquisition.  If a child learns a foreign language before age 14 (approximately), they will learn to speak the language without an accent.  If they learn the language after age 14, as I did with Japanese, they will speak with an accent.  While I am “fluent” in Japanese, I still speak with an accent.  I’m not native.

Little kids’ brains are brilliant!

There is something about their brains that literally absorbs everything.  It becomes a part of them.  It becomes native.

For me, I had a hard time keeping my room clean when I was 14.  Sadly, I still have a hard time with organizing my home and keeping my home in order!  It always amazes me to see some with abilities who are able to just naturally keep things organized.  It’s native to them.

Is organization something you can teach?  Absolutely.  Just like you can learn a language at any time of your life.  Knowing what I know about languages, I wonder if teaching organizational skills before age 14 results in a lifetime habit, a habit without accent.

Can you teach youngsters about saving?  Absolutely!  I firmly believe that this is very important.  You probably have friends or siblings who spent money like crazy when they were young, and they probably still do as adults.  Finance is a language.  It is a way of communicating.  And I bet, not unlike Japanese or English, skills learned before 14 are learned without an accent.

I hope so!  My wife is doing a great job with our little ones!

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Kitchens and baths? Not so fast! 6 other money saving ideas

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Beautiful KitchenEverybody know that Kitchens and Bathrooms make the biggest impact on a home’s value, right? Well, I agree with that, to an extent.  But here is a list of 6 other things to consider before overhauling kitchens and bathrooms. I’m an investor, and I buy foreclosures.  My brother and I have looked at thousands of homes, and we’ve bid on hundreds of homes.  I know the properties that other investors pick up, and I’ve seen what they do to make money.  In our business, selling quickly is the key.  Here are some of the keys we’ve seen most all investment properties have in common.

  1. New Paint.  When you walk into a home, clean, fresh paint makes a huge first impression.  If you paint yourself, it’s not all that expensive.  However, if you’re an amateur, like most of us are, it is really easy to completely ruin a home with a bad paint job.  Hire a professional to do it for you.  It will make a difference.
  2. New Carpet.  Just like paint, the smell of newly laid carpet is priceless.  Also, you are assured that there are no pet messes, no bacteria, etc.  Carpet is an excellent investment.
  3. Landscaping.  Curb appeal is vital in a home.  Buyers will subconsciously start making decisions about a home before the front door is even open.  Mow the lawn, green up the grass, clear the flowerbeds of weeds and rubbish.  For very little money, curb appeal can raise the value.
  4. Cleanliness.  This goes naturally with new paint and carpet.  But if paint and carpet are OK, then cleanliness goes a long way!
  5. Appliances.  Rather than putting a whole new kitchen in, you’ll be surprised at what a nice new range, microwave, dishwasher, and fridge can do.  Again, they’re worth the bang for the buck.
  6. Countertops.  If you’ve got old, chipped formica, get a bid for what new granite tops might cost.  New countertops can make a kitchen look new!
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A dollar a day really adds up, especially when you’re paying off your mortgage

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Piggy Bank $1Saving just $1 per day might not sound like a lot, but you might be surprised at how saving just $1 per day can really add up. In the book, Rick says that our biggest problem today is saving.  There is plenty of money out there.  The problem is, there are so many cool gadgets and gizmos that constantly tempt us to spend money.  If you can learn how to save, even just a little bit, you will be surprised. Let’s take a look at a very simple model that shows how money builds up.  There are a lot of benefits to saving money.  First. you’ll have the actual money savings in hand.  Look at how nicely saving $1 per day adds up.

$1/day → $7/week → $30/month → $365/year

That’s not too shabby!  But now let’s be Prudent.  Look at what happens to that money when you put it to work for you by paying off mortgage debt.

Paying Off Your Mortgage with just $1/day

Now let’s look at a practical example of paying off your mortgage early.  Landon and Kate are buying a home.  They will be getting a mortgage for $190,000 over 30 years.  Making extra payments to your mortgage is a fantastic way to save money.  Instead of just saving $1/day, let’s suppose that Landon and Kate decide to pay off their mortgage early with their savings.  Look what happens:

Calculator Landon and Kate

 

By simply paying an extra $30/month, Landon and Kate would save over 1.8 years of mortgage payments, and they would save a lot of interest as well. When it comes to your mortgage, saving just $1/day makes a very big difference.

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Getting your financial track hoe back on track: Thrift & Industry

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When it comes to improving your financial outlook, you might want to look at an excavator as a good example of how to move forward.  There are so many financial variables out there that can confuse.  I spent years in business school learning about discount rates, interest rates, annuities, debits, credits, taxes, etc.  In the confusing cloud of financial terms, if you dig to the foundation, there are two variables that everything else is built on.

ExcavatorI have done some work on mini excavators and they are amazing tools.  There are 2 basic handles that control the machine.  You sit in the seat, and there is no steering wheel.  There are just 2 handles.  The right handle controls the right track, and the left handle controls the left track.  If you want to move the machine forward, you push the two handles forward.  If you push the right handle more than the left, you will start turning to the left.  If you push only the right one forward, you will go in a circle.  If you pull the left handle back while pushing the right one forward, you’ll spin in a circle, going nowhere.

It’s the same model for finance.  You have 2 handles that you can control.  (Hopefully you can control them!)

  1. Thrift
  2. Industry

In the book, Rick tells Shawn about Thrift and Industry.  He says that if there is ever a financial question, he can flip a coin and decide between Thrift and Industry.  If the coin comes up ‘heads,’ that means you need to use your head and figure out how to spend less.  If it comes up tails, that means you need to get off your tail and get out there and work.  The 2nd variable is Industry.

Just like the track hoe, if you push both Thrift and Industry forward, you’ll start cruising forward.  And just like the track hoe, if you only push Industry forward, you’ll turn the other direction and will end up going in circles.  You can earn all the money in the world, but if you don’t exercise Thrift, you’ll never get anywhere with it.  Likewise, you can be the most thrifty, stingy person in the world, but if you don’t have any income generated, you’ll not go anywhere.

The 3rd and underlying variable is Prudence.  It’s important to be SMART about being industrious.  You can’t just work hard.  You need to work smart.  And likewise, you can’t just save hard, you need to learn how to save smart.

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Mortgage rates on the rise, what does “just” 1% mean?

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Historic mortgage jumped recently, but they seem to be steadying for now.  This report from the Washington Post shows that rates have risen from last summer’s all time lows of 3.62% for a 30 year fixed-rate to 4.51% in mid July 2013.  They have dipped a bit and are currently hovering at 4.4%.

So, what does 1% mean with interest?

Let’s suppose that you were to buy a home for $250,000 at 3.62%.  If you punch that into the calculator, you will see:

Calc 3.62 Interest Rate

Now, let’s add “just” 1% to this mortgage.

calc just 1 percent hike

 

The takeaway:

All other things equal, “just” 1% in mortgage rate increase could cost you money.  In this case, it would cost over $50,000.  That is, of course, if you keep the loan for 30 years.  Interest rates make a big difference.

 

 

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