All Financial Matters

Advantages of Renting over Selling

Sometimes a home doesn’t sell. You may have done everything correctly but the market was not favorable to you at that time. Don’t give up on the property altogether. When you need to leave a home, consider renting out the property as opposed to further efforts to sell.

Being a landlord is a scary proposition for many people. They think of a greasy individual who won’t fix anything but bangs on your door incessantly for the rent. Not all landlords are like that. Many are friendly, responsible people who respect their tenants. You can also become a landlord when you rent out your former residence.

Rental property creates cash flow. We want the cash to flow in to us and not out to the bank, but that is determined by the amount of the rent. Monthly rent prices should ideally cover the mortgage payment and any incidentals. If it doesn’t fully cover, try to get it as close as possible. Being responsible for $100 a month as opposed to the total mortgage cost is a better situation for you even if you start in a negative cash flow situation.

As a landlord, you could be receiving payments from a tenant without having to deal with a single leaky toilet. Landlords are responsible for repairs on the property, but you can hire a property management company to do that for you. The management company would screen tenants, execute repair orders, and collect the monthly rent. If you are moving to another state this is a great option.

Rental property is considered to be a real estate investment. As an investor, the government extends several tax breaks to you. For one, you can subtract a certain amount of money for depreciation of your home. This is a paper deduction since homes actually appreciate over time. The deduction is for the wear and tear on a home.

Landlords can claim depreciation for appliances in the home. This can be done in a lump sum or taken out over a number of years. Any depreciation amount lowers the taxable income. It is possible to claim enough deductions to claim a net loss on the property even though you are getting money every month from your tenants.

Renting out one home could be the beginning of a new opportunity for you. As a real estate investor, your properties make you money. Tax laws say that you can use money made from one property to invest in another and defer paying taxes on that profit.

When you sell, the deal is done and you are subject to capital gains taxes. Renting allows you to put off capital gains until you sell, if you ever do. Renting is not a bad proposition for someone who needs to move away and hasn’t been able to sell their home.

Thrifty versus Scrooge

Which one of those words describes you? Does your family look to see if you are around before picking up a penny off the floor? Or, do they embrace your ideas for ways to save a buck? There is a fine line between being frugal and being a miser when it comes to saving money.

Money matters can make us crazy. Counting every penny is not how most of us want to live. Well, that’s the next step for an overzealous spendthrift who takes money matters to the extreme. The term “thrifty” used to pertain to old ladies who shopped at the five and dime for their clothes or visited the flea market. Nowadays, it is chic to shop for the least expensive clothing. It is even acceptable to go to thrift and consignment shops to find wonderful bargains.

Despite what’s in fashion, being thrifty can save your family money. Learning to save is a valuable lesson for the younger members of the household. A family environment is the best place to learn to handle money responsibly.

Do you have loose change around the house? Put it into a jar. Each person can have their own jar. Change can add up quickly. My father empties his pockets each night and places the change into a jar. When one is filled up he starts another one. When the money was taken to one of those change counters in the grocery store he had over $600! I’m not saying that everyone will have that much, but there is the potential for a little pocket change when you need it most.

Saving money doesn’t have to be a depressing thing. Kids don’t have to wear hand-me-downs and you don’t have to eat leftovers for a week unless you want to. As long as you observe the basics, there is no need to be a miser about money.

Resist the urge to think about money every minute of the day. What usually happens when you first encounter the idea of saving money and creating a budget is that you get penny-pinching fever. It starts in your brain and quickly spreads to every part of your body. Around every corner is a dollar waiting to be squeezed to the last breath. The family is afraid to ask for anything because they’ll get “the speech” or “the scowl”.

To save money, start by changing one thing at a time. You could cook dinner each night instead of going out. Save outings for special occasions or as a reward for saving money all month. Just be sure to budget in for that meal!

Don’t let money hold you prisoner. It is okay to spend it. Following a budget teaches you to spend it more wisely than you did before. You can live comfortably while saving for the future.

Sticking to a Personal Budget

You have taken the time to create a budget. It has been a trying task, but you did it. Now, you must stick to it. That budget looks good on paper, but it won’t help if we don’t change our spending habits. Here are a few ways that even the biggest budget hater can stick to one.

1. Think before you spend. Having plastic in our pocket stops us from thinking sometimes. We see something we want and we act like Betty and Wilma in The Flintstones: “Charge it!” Before we know it, we have dipped into the bill money. Once it’s gone, there’s no way to get it back until next month.

2. Put your credit cards away. Once they are paid off, hide them. If you carry them in your purse you will use them. It is okay to keep them since you never know when an emergency will come up, but out of sight will lead to out of mind.

3. Forget about that raise. We are all guilty of planning on our next purchase as soon as the ink dries on the paper. Instead of using that money, put it away in a savings account. It is an added bonus for doing a good job at work. Let it grow a little away from greedy fingers.

4. Put away that tax refund. Each year I used to count on the tax refund to get myself out of debt once again. The problem was that I got right back into debt and needed to be bailed out again. Treat tax money like a raise or a bonus — keep it hidden.

5. Withdraw money from the ATM once a week. If you know that you will need cash in your pocket, go to the bank once and get enough to last. When it is gone, that’s it. Resist the urge to go back again for more.

6. Learn how to grocery shop. This seems like an easy task but there really is an art to getting enough food to last, especially with children. Cut coupons out of the Sunday paper. Stock up on essentials like toilet paper, laundry detergent, soap, and the like when there is a sale. Buy common food staples in bulk. Buy meat from the butcher and have it cut up for free.

7. Re-negotiate insurance rates and utility plans. Every three years or so it is good to see which gets you lower rates – your current insurance carriers or another.

Sticking to a personal budget takes time and we all slide back into old habits now and again. The point is to get right back in the saddle and keep on going. You will reach your debt-free future.