So Cal Real Estate News

Blair and I are not big fans of our elected leaders’ decision to borrow billions from our grandkids to give most of us $600, but there are ways you can make something great of it. Getting an unexpected tax free check for, say $1,800 (family of 4) presents a unique, possibly once-in-a-lifetime opportunity. An opportunity we really shouldn’t blow.

Now that “the check’s in the mail,” here are some thoughts about how to get the most out of the windfall: My “top five” suggestions of things to do with all or part of your stimulus payment:

5. Use part of it to start a savings or investment program. Savings rates are pretty low right now, but there are bonuses for new accounts, if you look around. There are also programs like Sharebuilder.com for those wanting to automatically invest small amounts in stocks on a regular basis. Whether at a savings institution or a stock brokerage, don’t just open the account, but leverage your money by setting up some sort of monthly automatic debit program. Pay yourself first!

Ideally, you’ll have two savings accounts: One for emergencies, and one for long term investments like home ownership, rental real estate, retirement, or college. It’s just common sense to regularly set aside some money for a rainy day, and some more for long term goals. Keeping the two accounts separate, at least on paper, keeps pseudo-emergencies from eating up your future plans.

Saving is especially important now for any renters who would like to eventually own a home. Or those currently in foreclosure who want to buy again some day. Or homeowners with little equity who may want to move up. We meet lots of people who brag how they’re waiting for the housing market to crash further before they buy. Well, with today’s stricter lending standards, unless you’re a military veteran you’re probably going to need a down payment. A “future buyer” without a specific savings program is probably just fooling himself.

4. Get control of your debt and spending. Here we also think you can “leverage” your federal payment by using this as an opportunity to develop some good habits, like limiting your spending.

Our guaranteed “secret” to building wealth is to spend less than you make. Works every time. Pretty obvious, but it seems like lots of people don’t get it.

When Barb and I were first married, we found a simple but effective system to control spending. We put some of each paycheck into long and short term savings accounts and got cash for our discretionary spending, from food to clothes and entertainment. We divided the money into separate envelopes for each category, and stopped spending when the money was used up. If you have a monthly check and trouble pacing yourself, you can use four weekly envelopes for each category. It’s a known fact that people spend 15% to 40% more when using plastic. (Way more than that 1% rebate.) You could use some of your stimulus payment to set up an initial cash account, along with emergency reserves.

You could also use some to pay off or significantly pay down your highest interest credit card. In any case, we’d suggest cutting your credit cards up. It that’s too radical, you could cut up most and put one or two where they’re hard to get to, like a safe deposit box. Your eventual goal might be to carry only one credit card, and to pay it in full every month.

Many years ago when I was teaching at Bell High, a fellow teacher wrote a song based on his mother’s wise words about buying on credit:

3. Invest in yourself, your family, your coworkers, or your friends. Sign up for a seminar you’ve always wanted to take. Hire a personal trainer, mentor, or tutor. Join a gym, or Weight Watchers, or some club or organization that will help you grow mentally, physically, emotionally, socially, and/or spiritually.

“Buy time” that you’ll use for evaluation, growth, or education by taking some unpaid time off, hiring a gardener or housecleaner, etc. Take your spouse on a second honeymoon. Or take the kids and grandkids on a special weekend away. It doesn’t necessarily have to be expensive or far away: many of our favorite getaways are a couple hours away, some less than 40 minutes.

Again, you can try to leverage this sort of thing into a habit. A quarterly seminar, or day away from the office to think, read, pray, talk. Regular getaways with your important people. A book a month. Lifelong growth and learning. “Sharpening the saw.”

2. Give. When I first outlined this post, this was # 1 on my list, and maybe it should still be. Not just because of the good it does for others, but for the good it does to us. Among other things, giving breaks the power of money.

Make no mistake: Money is not a neutral tool, but it’s harmful, addictive power can be broken by giving it away. I greatly appreciate the wisdom of Quaker theologian, professor, and author Richard J. Foster. To get a taste of his thinking, you might want to check on the interview included on one website’s listing of Foster’s book, Freedom of Simplicity. (I like that book, but preferred Celebration of Discipline and my favorite, The Challenge of the Disciplined Life: Christian Reflections on Money, Sex, and Power.)

Again, the goal isn’t just a one-time gift, but developing a lifestyle of joyful generosity. As with savings, the easiest way is to set up a regular auto-debit, either for charities you know to be effective, or for a separate account you maintain solely for giving.

1. Multiply it by using it as “seed money.” The analogy is pretty obvious: the farmer multiplies his investment in seeds with each crop. We’ve mentioned this principal as “leveraging” that stimulus payment in each of our other four suggestions.

We multiply or leverage our money with our labor, time, and strategic thinking as well as with the combined contributions of others. There are truly infinite possibilities. Some may fail, but we can never attain true success without risking and experiencing failure.

Well, those are some of my (Dave’s) thoughts on ways to make the most of that stimulus check Uncle Sam’s sending out. Whether we agree with the concept or not, it does present a unique opportunity for personal, professional, and financial growth. With some thought, prayer, and discussion we can all use it wisely. I hope you do!

Tags: credit cards, economic stimulus payment, giving, home buying, investing, leverage, multiplication, saving, seed money, Southern California Real Estate

This entry was posted on Thursday, May 1st, 2008 at 2:21 pm and is filed under For Buyers, perspective. You can follow any responses to this entry through the RSS 2.0 feed. You can skip to the end and leave a response. Pinging is currently not allowed.