The Long-Term Bucket

Posted by Glenn Leach filed in Build Your Wealth
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“How do I fill up my Long-Term Bucket when I can’t even afford to pay my current bills? Shouldn’t I just wait awhile until I’m in better shape?”

I know that’s what you’re thinking. And it makes so much sense to wait, right? Logically, you should start paying off your bills and start building up your checking and savings accounts. And then when you have a bunch of money saved up, you can start investing in the stock market. Right?

Wrong, Wrong, Wrong…

In order to reach your retirement years in good enough financial shape to actually retire, you’ve got to start building your Long-Term Debt Paying Funds right now! You cannot wait until you are too old to work to start building up this account, and you will simply never start building this account if you wait until you have surplus funds in your Short-Term Bucket.

Short-Term funds are too easy to spend, too easy to access, too easy to for you to just buy something you need vs. trying to figure out a less-costly alternative (the reason you got into so much credit card debt in the first place was because it was too easy to access spending funds by whipping out a piece of plastic, and your Short-Term Bucket will empty just as easily as you go along).

Get Rich Quick?

Your Long-Term Bucket will also benefit from the advantage of “Time”. Having these investment vehicles open for longer periods of time will make them more valuable. If you don’t allow them the time they need to develop for you, then you will run into the frustration of chasing “Get Rich Quick” schemes – which almost always fail. Allow enough time, and you can get rick slowly, steadily, and safely.

We’ll look at some Long-Term Bucket vehicles in the next article – and once you read that article, you’ll begin to believe that this is actually something you can do. I know what your assumption is at this moment when I’m talking about “Long-Term Investment Tools”.

You assume that I’m immediately talking about “Go out and buy 100 shares of Microsoft and hold it for the long term…” But you would be seriously wrong in that assumption.

I Get Where You’re At Right Now!

Again, the type of person who found this website are not the independently wealthy individuals among us looking to me for investment tips or the next hot commodity scheme. The people reading this website info are people struggling with day to day living, too much debt, not enough savings, and worries about the future. I know who you are.

And for me to tell you to go open a brokerage account and start learning about the Price/Value ratios of company stocks, or maybe teach you the tricks of “Puts and Calls” really has no place in your world. That is just NOT what I’m going to be talking about.

Read on. This will be accessible to you and can help you get to the point – someday – where those other “investor” things are important to you. For now, we just need to get you started on a path that will lead to a better tomorrow. That’s my goal – I hope you’ll come along with me and get started building that better tomorrow.

Your Short-Term Bucket

Posted by Glenn Leach filed in Get Out of Debt
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We’ve talked about dividing up your future financial needs into 3 Buckets: Short-Term, Mid-Range, and Long-Term. Your assignment was to write out a list of expected financial obligations that will occur in the future, and then group these obligations into these 3 Buckets.

The goal for this assignment is to attempt to actually prepare for the future instead of constantly reacting to the present. Wouldn’t it be cool if when that car of yours needs replacing or your daughter needs braces that you actually have money set aside that you can pay cash for it rather than trying to figure out which of your wallet-full of credit cards has enough room on it?

By the way, having this plan in place and getting your Buckets fully filled is called “Financial Security” – and it’s very, very nice when you get there. And you CAN get there, regardless of where you are in your financial life right now.

Let’s Get the Short-Term Bucket Filled, Shall We?

Okay, your short-term Bucket, by definition, consists of any significant expenses coming up in the next year. Things like:

• Replacing a vehicle
• Dental procedures
• House repairs
• Down payment on a house?
• Vacation
• Season Tickets to your favorite sports team
• 6 months of salary (an absolute MUST!)

Put a dollar amount on these items – that’s your Short-Term Bucket list. I don’t care what you put on the list – it’s YOUR list – but we need a dollar amount to shoot for. Because that’s how we’ll know when the Bucket is full.

Maybe you currently have absolutely zero money in savings right now. That’s actually NOT unusual at all, so don’t beat yourself up. Well, okay, beat yourself up a little, but then get over it.

If you find you need some help getting started, check out some of these articles on this website: “Get $500 In The Bank Now!”, “How To Get $500 In The Bank – FAST!”, “Need Cash? Try an “Income Blitz””. These articles will link with other similar articles, and you can learn how to jumpstart your savings plan.

Getting Specific

Your savings vehicle for your Short-Term Bucket is going to consist of:

• Cash under the mattress (Hey, some people LIKE having cash around – and that’s okay. If you have it, it’s part of your Short-Term Bucket.)
• Savings & Checking Account
• Vacation Savings Account
• Money Market Account
• Short-Term Certificates of Deposit

These vehicles are readily available to you – easily accessible for those short-term needs – and NOT susceptible to market ups and downs. And this is where you get the money to pay for those Short-Term items on your list.

Time For Tough Love

You put a lot of “needs” on your short-term list, and the amount of money you have filling this Bucket isn’t going to cover all of them. Right? Like, maybe you “need” a new car, or you promised your kids a Wally World vacation this summer, and if you don’t renew your season tickets this year you’re going to lose your seats – forever!

Awww… Choices. Aren’t they fun? Are you going to keep spending money you don’t have? Or are you going to reach for “Financial Security”? That’s what you’re facing right now. If your Short-Term Bucket doesn’t supply your every Short-Term “Need”, you’ve got to cut down on what you think a “Need” is.

For example, you don’t NEED a NEW car – nobody does. What you NEED is transportation. You can find a cheap used car, you can ride mass transit, you can borrow Mom’s old Crown Victoria for awhile. The NEED is to be able to get back and forth – the DESIRE is to maintain some sort of “status” with the friends and co-workers. You simply may not be able to afford your DESIRES right now.

Fill the Short-Term Bucket, but do it without neglecting your other two Buckets. (See “How Do You Fill the 3 Buckets?”)

How Do You Fill the 3 Buckets?

Posted by Glenn Leach filed in Get Out of Debt
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You’ve written down your needs for your 3 Buckets and divided them up into your Short-Term Bucket, your Mid-Range Bucket, and your Long-Term Bucket. Now it’s time to fill the Buckets with assets – to pay for those future debts as they occur.

Again, I don’t care what you put on your lists – they are YOUR needs, not mine. You’ll just need to figure out a way to pay for them from your 3 Buckets as they occur. When you get to this point – where all your future needs are being funded as you go without incurring additional debt – you have reached “Financial Security” and life is good.

Divide Your “Extra Money” Into 3 Parts

Remember, half of your “extra money” is going towards debt reduction, and the other half is going towards savings and investment (or as we put it in a previous article – towards “future debt reduction”). I want you to divide the half that is going towards savings into 3 equal parts. This is going to seem crazy, but it works!

Take these 3 equal parts and put 1 part into your Short-Term Bucket, 1 part into your Mid-Range Bucket, and 1 part into your Long-Term Bucket. When you are first starting out, you may just have to put all of your “extra-money” into a savings account for a little while until you get this thing rolling a little bit. But just understand that the idea is to put a equal part each month into EACH bucket.

We have a separate article on our website here that talks in greater depth about each of our 3 Buckets. But I just wanted to take one article to give you an overall view of HOW you’re going to fill the buckets..

The 3 Buckets are Different Sizes

When you first start out, all 3 Buckets seen HUGE! How in the world are you going to get enough money into savings to pay for all your short-term needs this year? Let alone putting away enough money for college for the kids and retirement and world travel later on? Especially since you’re supposed to be dividing your “extra money” in to 3 parts and putting a little into each bucket equally?

Here’s a couple of keys to give you a glimmer of hope:

1. Because you have debt you’re trying to pay off, only HALF of your “extra money” is going towards these 3 Buckets. Once you get the debts paid off, you’ll have an “extra half” to add to your Buckets – doubling your savings! That’s huge! And because you’re not taking on more debt along the way, and you’re making better spending choices, and you’re earning more money – you’ll start having even more “extra money” to apply.
2. This system helps you prioritize your spending and sort out “needs” from “desires”. Maybe you have a short-term need to buy, but you don’t have enough in your Short-Term Bucket to pay for it. This system, if you can resist the temptation to take on more debt, will help you find alternatives to that “need”.

Maybe you have a child ready to start college this Fall, but you have no college savings. It would seem you would “need” to take out a student loan to pay for the college of her choice. Don’t want to let the kids suffer because of YOUR lack of foresight. But your kid doesn’t NEED to attend that college in the Fall. Instead of spending money you don’t have, opt for a Community College for a year or two (seriously, the classes are about the same and will transfer over at full credit) and this will allow you time to fill your Mid-Range Bucket to pay for the final years, AND it will teach your kid a valuable lesson about financial management.

You’ll put money into the 3 Buckets equally, but the 3 Buckets aren’t the same size. Your Short-Term Bucket is the smallest one – and you can make it even smaller by cutting back and making different choices as you go. Your Mid-Range Bucket is the next smallest one. And your Long-Term Bucket is the biggest one – so big it can never be filled completely.

Once you’ve filled the Short-Term Bucket, you’ll be able to start dividing your “extra money” into only 2 parts – half goes in the Mid-Range Bucket and half goes in the Long-Term Bucket. And then, once the Mid-Range Bucket is full, you get to put ALL your “extra money” into the Long-Term Bucket. This is a really good time in your financial life – all your short and mid goals are funded and you’re just building wealth for the future. Nice!

Set up your 3 Buckets TODAY! Don’t wait until you’re better off – do it NOW! Better off ain’t coming unless you take action on this right away. It’ll change your life because you’ll finally be in control!

The Future is NOW! A further explanation of Your 3 Financial Buckets

Posted by Glenn Leach filed in Get Out of Debt
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I always thought that saying was stupid. “The Future is Now!” That doesn’t make any sense. The future happens later, and right now you have creditors to pay. So you should take care of your old debt before considering the future, right? Those bills are sitting on your counter NOW! Those collectors are calling NOW! That other investing stuff comes later, right?

Absolutely wrong! The problem with this way of thinking is that it causes you to get defeated by upcoming obligations and financial “surprises”. You’re spending every dime you can spare on paying down debt, and then, BAM! You get hit with an unexpected car repair, an appliance that needs replacing, a medical emergency, etc. And you have no way of paying for it except to take on more debt. And all your hard work goes to waste – so why even bother…

A better approach is to understand that short-term expenses – those things happening in the next year – are going to happen in the next year. Your mid-term expenses – those things happening in the next 2-5 years – are going to happen in the next 2-5 years. Etc…

That’s Pretty Obvious…

Yes, it’s obvious. But those caught up in debt very often fail to believe it. You pay your extra money towards your debt, and your short-term expenses cause you to take on more debt this year. Then the mid-term expenses start hitting you, and you’re still reeling from the short-term expenses that you couldn’t afford.

And if you continue this cycle, pretty soon your long-term expenses are upon you, and you have absolutely no way to pay for them because you still have short-term and mid-term expenses that still aren’t paid for.

A Better Way of Thinking:

In the article, “The Half-n-Half Way to Improve Your Finances”, I suggested that you should begin dividing your “extra money” into two parts: Half-n-Half. (“Extra Money” is defined as money you save by reducing your spending, earning more money at work, or earning more money on-the-side.)

Use half of your “extra money” to pay down debt. Use the other half to fill your 3 Buckets. I’ll get in to more specifics on this in future articles. You still may be resisting the idea and it’ll be extremely easy to pull this savings out before it’s intended use comes around. But maybe it’ll be helpful to think of it this way:

Future Expenses = Future Debt

Your 3 Buckets are future expenses, i.e. future “debt”. So by setting aside half of your “extra money” to fund these future expenses, you’re not actually “Saving” anything. All you’re doing is paying off your future debt NOW. That “Future is NOW” thing kinda makes sense all of the sudden.

Again, half your “extra money” is paying down past debt and the other half is there to pay for future debt. So really, ALL your “extra money” is going towards debt this way. But the beauty of it is that your future debt will cost you far less this way, because you’ll be able to pay for it in cash without incurring a nickel’s worth of interest. And really, interest is the reason debt is so crippling and debilitating.

Your Financial Bucket List

Posted by Glenn Leach filed in Build Your Wealth
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In the page, “How To Build An Investment Portfolio”, we talked about creating a “Bucket List” for your financial goals. Specifically, you should group your financial goals into 3 Buckets, and then you’ll go about using these 3 Buckets to allocate your savings and investments.

To review what these 3 Buckets are, here they are again:

Divide your list of goals onto 3 lists – or Buckets. You should have a:

• Short-Term Bucket (things happening in the next year)
• Mid-Range Bucket (things happening in the next 2-5 years)
• Long-Term Bucket (more than 5 years away)

Filling Your Buckets

It’ll take us a few articles to get into specifics about what types of investment vehicles you should use for each type of Bucket. This article will give you a general overview of “how” to start filling the Buckets.

Remember that most of you who found this website probably got here as you searched for solutions to credit and debt problems, and you may not think these types of articles about saving and investing apply to you just yet. You’re thinking, “As soon as I pay off my current debts, I can start saving and investing for the future.” The problem is, the future happens BEFORE that.

Life is NOT going to stop and wait for you to get ready for it. There are no “time outs” or “hold on a second’s” in life. Whether or not you’re ready, it’s going to happen. Those things that are going to happen this next year – they’re going to happen this year. Nothing you can do about it – they’re coming.

So, are you going to be ready for them? Or are you going to be cursing and acting surprised when they do happen? Making your Bucket List and then Filling your Buckets is an absolutely practical and necessary thing for you to do. ESPECIALLY if you have debt you’re trying to pay off.

Anyone Can Create a Bucket List

So don’t think that because you’re so deep in debt that you shouldn’t start a savings plan, an investment plan, a plan for the future. It is BECAUSE you have so much debt that you need to be even more careful and smart with your money. Sick people go to the doctor to get a plan to get better. Healthy people don’t need a plan to get better – whatever they’ve been doing is working so far.

Thinking of your Bucket Lists in terms of your physical health is really a great idea. If you’re sick (in debt), you need urgent and immediate care to get over your sickness. Maybe some antibiotics, ointments, or other remedies to help you beat the current sickness will help. Healthy people don’t require such things – they don’t need help beating a temporary sickness.

But both sick and healthy people can do things to take care of their bodies better. Eating better, exercising, sleeping right, etc. You can always do things that can help maintain and enhance your physical health and help you live a longer life.

The things you are doing to pay off your old debts are like the antibiotics. You’re taking steps to defeat the illness and get you back to normal health. Filling your Buckets is like the things you can do to improve your overall health – the exercise and proper diet.

It’s Okay to do BOTH!

When you’re sick, it’s okay to do BOTH! While you try to defeat the illness, it’s okay to work on improving your overall health at the same time. If you’re not sick, you can devote your full attention towards becoming healthier.

So if you’re in debt, work on getting caught up AND work on putting yourself in position for a better financial future – all at the same time. If you’re not in debt, congratulations! You can use your Bucket Lists to create a great future for yourself – and ensure that you don’t end up with debt problems in the future.

Make your Bucket List and we’ll show you how to fill them here.

Are YOU Spending Wisely, or Emotionally?

Posted by Glenn Leach filed in Get Out of Debt
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In the article, “The Cost of Whistles”, I shared with you a story about how Benjamin Franklin once bought an overpriced whistle from a peddler at a fair, and regretted it all his life.

What Franklin was trying to teach us with this story was that purchases based on emotion – desire & want – are almost always bad purchases. Whenever you emotionally pass the point where you can no longer “walk away” from the purchase, you are going to make a bad decision.

Franklin knew in his head that the whistle was overpriced and not a good deal, but he became emotionally attached to it and couldn’t walk away – and he regretted the impulse buy for years. One of the wealthiest men in the world regretted buying an overpriced whistle as a kid. Why? It wasn’t the whistle that was bad, it was the loss of self-control that was bad.

The whistle story is a great example of how to evaluate everyday “minor” purchases – the ones you hardly notice yet are draining money from your wallet at an alarming rate. I’m sure the whistle didn’t cost Franklin very much all by itself, but the lesson it taught him about spending money wisely was priceless.

Elsewhere on this website, I gave you an assignment to locate your “Latte Factors” and eliminate these expenses from your daily spending. Why? Because, as Franklin once said, “Anything is costly, no matter what its price, if it purchases nothing of importance…”

Eliminate the leaks and the “purchases of nothing of importance” from your spending and you’ll be well on your way to the debt-free reality you long for. It is rare that debt problems are caused by lack of income. Instead, debt is caused by not spending the money you have wisely.

Are Credit/Debit Cards to Blame?

Is it too easy for you to spend money? Maybe you’ve simply lost the connection between income and out-go? Mentally, you may no longer see that purchases put on a piece of plastic are actual out-go’s of cash. You look in the wallet and see there’s not enough cash to complete the latte, the fast food, the “Honey, stop on your way home and pick up a few things from the grocery store and I don’t feel like cooking tonight” purchases, so Plastic to the rescue!

Swipe and forget – and the balance due on your credit card statement grows larger and/or the amount set aside in your checking account to pay the credit card bill grows smaller – and you didn’t even notice it. Does this describe you? Be honest. Are you reading these articles to find some miracle way to get out of debt?

“A CHECK??? Let me see if I can find a pen – Geesh…”

Maybe what you need to do is start making it harder to buy things. Keep the plastic at home. Start writing checks (nothing will dampen your spending habits faster that the pain of trying to buy things with a check these days with all them “friendly” merchants sneering at you and making such a show of letting you and everybody around you KNOW what a big jerk you are for trying to actually write a check, for GAWDS SAKE!) or paying actual “cash” for things.

Keep a twenty in your glove box for emergencies (and forgetting to fill the gas tank should NOT be an emergency – but it often is, so now you’ve got enough cash to get you home) and keep the plastic at home. Painful? Yeah. Embarrassing to have to tell your co-workers that you can’t go out to eat with them because you don’t have any way to pay for it? You bet. But if you’re truly serious about getting out of debt – an absolute necessity!

The Cost of Whistles – Living Successfully

Posted by Glenn Leach filed in Build Your Wealth
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I love reading old books and stories about early pioneers in business. I came across the following article in a little pocket-sized publication series from the 1940’s, titled “The Art of Living Successfully”.

I believe that “There is nothing new under the sun but there are lots of old things we don’t know”, as Ambrose Bierce once said (click the link for some great quotes and ideas at Amazon). So by studying the past, we can learn to live better in the present and set ourselves up for a better future.

Manage Debt by Spending Better

The hero in our story is Benjamin Franklin – one of the wealthiest and shrewdest businessmen who ever lived. And what I love most about Benjamin Franklin is that he earned the majority of his wealth by sharing with people how to become wealthy – my kind of guy! So, here’s the story. Enjoy!

Among the trinkets offered by a peddler at a fair was a whistle which caught the attention of young Benjamin, and which he coveted. He resisted the temptation for some time; eventually giving way he bought the whistle, paying a price in excess of its value.

In later years the memory of that transaction brought forth this sage observation:

“I conceive that a great part of the miseries of mankind are brought upon them by the false estimates they have made of the value of things, and by their giving too much for their whistles.”

This bit of wisdom holds good for today. A sense of values is essential to the proper conduct of business and personal affairs.

Overpriced pleasures and wasteful delights are to be counted among the costly whistles. Often their price is far out of proportion to the amount of permanent good they produce and contribute to human welfare. Anything is costly, no matter what its price, if it purchases nothing of importance or worth to human character and the power of personality.

If the price of our whistles are high and the use of the whistle small, the transaction is poor and the person poorer – today even as in the day of Benjamin Franklin.”

- from “The Art of Living Successfully” – April 1941

Easy as 3, 4, 5… All About Your 401K

Posted by Glenn Leach filed in Build Your Wealth
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Would you be interested in a way to save money that doesn’t cost you anything? I mean, if I started depositing money into a savings account for you, would you accept it? Of course you would…

So why aren’t you? What am I talking about? I am referring to your 401K (or 403B) program at work. Most companies today offer these programs, so if you’re working for a company right now, chances are you have the ability to sign up. Have you?

If not, you’re not alone. An extremely low percentage of employees who are eligible for these programs actually take advantage of them. The excuses are many, like you can’t afford to have anything deducted from your pay? Or you don’t plan on staying with this company for very long so why bother? Or how about, if it’s such a good deal why doesn’t my employer tell me how good it is? Let’s look at these excuses one by one:

1) I Can’t Afford It

Awhile back, while working at another company, I was involved in putting together the presentations for our annual Employee Benefits general meeting. We had all the biggies in the company there at the planning meeting, including the company’s attorney.

Our CFO (Chief Financial Officer) had prepared a PowerPoint to show the employees that explained the benefits of using the company’s 401K program. He had calculated that if each employee would contribute 3% of his/her income into the plan, there would be no noticeable change in the take home pay of each person. Because the contributions go in pre-tax, the tax savings and small company match actually offset almost perfectly the 3% deduction.

He was very excited about showing this slide show because it was like handing the employees free money – how cool is that? But our company attorney nixed the presentation and he never got to give it (see below). But I saw it. And I was shocked at the numbers. So, try it yourself by putting 3% of your pay into your 401K plan. Your paycheck will probably not drop at all and you’ll start getting free money that you are currently giving to the government.

2) Not Staying with the Company?

So what? The account is yours. If you leave the company, you can just keep your money in their account for up to 18 months, roll it over into an IRA, or roll it over into your new company’s plan. It’s your money, regardless if you keep working there or not.

3) Why doesn’t the employer tell me how good it is?

They can’t. It’s illegal for your company to “encourage” you to contribute to your 401K account. Remember that presentation that the CFO in #1 put together? He couldn’t show it to the employees because it could be viewed as coercive or intimidating, creating a hostile work environment (giving you free money is “intimidating” and you might sue – and would probably win.)

Why? Because companies benefit by having their employees in these plans, so they aren’t allowed to tell you to join. They may abuse the privilege. So they say as little as possible, other than – we have a plan if you want it.

So, sign up. Start with just 3%. Once you find out that 3% is do-able, go to 4%, then 5%, etc. Work your way up and you’ll create a nice pile of savings without having to change your spending habits to do it. It’s as easy as 3, 4, 5…

Whatever Happened to Buying the Ugliest House on the Block?

Posted by Glenn Leach filed in Mortgages and Real Estate
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One of my favorite authors is Andy Rooney. (For you under-40 youth out there, Andy Rooney is that amply-eye-browed curmudgeon who’d give those whiney-witty editorials at the end of “60 Minutes”. And for you under-30 types who learned about Ronald Reagan from your US History books in school, “60 Minutes” was once a well-respected CBS news show.)

In one of Andy Rooney’s books, he had a chapter about what’s wrong with American society (actually, that doesn’t narrow it down much because most all of what he wrote had something to do with what’s wrong with American society). But this particular chapter really hit me as being a “Wow, I never thought of it like that before.”

Boys Don’t Tinker Anymore

Rooney said that the reason our society is headed in the wrong direction and why our economy is in danger of collapsing someday is because “Boys don’t Tinker anymore”. He went on to describe growing up in an America still feeling the effects of the Great Depression in the 1930′s. When something broke, you fixed it. Nothing got thrown out until it couldn’t be held together any longer. Every town had a local fix-it shop, with clerks who actually knew how to fix things. Every garage was stocked with hand tools, clamps, vices, spare parts, and duct tape.

When something finally did need replacing, the old unusable item was given to the boy in the family who would tinker with it – maybe getting it to work again, maybe using the parts to make a go-cart or a rocket ship to Mars. Something broke and any eight year old boy with a Philips Head and glue could get it going again. “Assembly Required” meant “forget these directions” and feeling proud if you didn’t need all the parts to get it working.

Extra Parts = Extra Points!

But boys don’t tinker anymore today, Rooney points out. Something breaks, it gets tossed in the trash. Or it doesn’t break – it’s just old – so it gets replaced by the newer model anyway – because ya gotta keep up with the newest thing. Fix something? Are you kidding? We don’t fix things anymore. Don’t believe me? Quick, give me directions to the nearest fix-it shop.

Don’t Sell Me No Good Bargain!

This week, I read an article about First Time Homebuyers, and I immediately thought of Andy Rooney’s tinkering observation: The article said, “A recent survey found that first-time homebuyers’ expectations may be too high relative to their current financial buying power. Up to 81% of today’s first-time homebuyers consider move-in conditions very important, with only 7% looking to purchase homes they could buy at a lower price if they renovate themselves.” (Seriously? Only 7%???)

Whatever happened to the “buy the ugliest house in a great neighborhood” school of real estate investing? Put a little love and elbow grease into your ugly home purchase and watch it become something you love AND grow in value. Instead, we’re too impatient for that. The home has to be perfect before we move in. We spend more than we can afford. And all because we just don’t know how to tinker anymore. Andy Rooney wrote that book back in the 1980’s and warned of a doomed society with no tinkerers. Hmmm…

Huge Opportunity for Tinkerers!

It’s time to get back to smart investing, smart spending, smart home buying – so if you have “tinkering” skills, what a HUGE opportunity for you to buy a bargain! AND you’re only competing against 7% of the other first time homebuyers out there on those fixer-uppers. Let those other 93% fight over the new construction and perfect condition homes and pay too much for them. You can pretty much name your price on something less than perfect.

Should You Buy The “Ugliest House On The Block”?

Posted by Glenn Leach filed in Mortgages and Real Estate
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There are some nervous times going on in the financial markets right now. What we’re finding right now is a phenomena called “Flight to Quality” – where people are putting their money in the safest investments they can find. You’re not seeing wild speculation going on. Investors are just happy if they don’t lose money and they aren’t expecting big gains on anything they buy.

The housing market is the same way. For many years, it didn’t really matter what house you bought. Real estate values were going up so fast – you just needed to buy “something”, and if you didn’t like it – so what? Keep it for a little while, flip it for a profit, and buy what you really want later. Real estate was a no-lose investment. Buy it and it’ll be worth more tomorrow…

Real Estate “WAS” a No-Lose Investment

But times have changed, and there’s a “Flight to Quality” going on in real estate now too. Buyers are being much more selective about what they buy – which is the way it should have been all along. And the best “Flight to Quality” buying technique is the old “Buy the ugliest house on the block” strategy.

If you’ve got fix-it-up skills, you can still use real estate to make yourself wealthy. You get the ugly house in a good neighborhood, fix it up to the same quality level as the rest of the homes around you, and you’ve just created extra Quality – extra Value. This was an extremely common home buying and wealth-building strategy for many years in America, but is rarely used these days. So again, if you’ve got the skills, you have a HUGE advantage in real estate right now.

No Fix-Up Skills? No Problem…

Even if you don’t have the skills to do-it-yourself, there are terrific opportunities to pick up fixer-upper distressed properties at bargain prices and using rehab financing and construction loans to pay for contractors to do the work for you. Ask your lender about the FHA 203K Streamline Rehab Purchase loan (Whew! Big name). You can use an FHA loan to buy the home and finance an additional $35,000 in home repairs above the purchase price. Find a home that needs a little love, hire a contractor to make it good as new before you even move in, and you can end up having 10-20% equity in the home right off the bat. Very cool! And a GREAT way to buy a quality home at a bargain price – a great way to build wealth! (Not to mention helping to renew a neighborhood.)

Buy Low, Sell High – Some Things Never Change

So why don’t more people buy their home this way? Stay tuned for the next article titled “Whatever Happened to Buying the Ugliest House on the Block?” (after Christmas.) Just remember, real estate has helped build more fortunes in the country than anything else, and even during a downturn in the overall market – you can still find great bargains and build your wealth, if you buy low and sell high. Just make sure what you are buying low has good potential to be worth more later on.