Monday, February 16, 2015

Time to Adjust... Withholding, and Attitude!

Tax time is usually a happy time of year for me. The last few years, I've tended to get refunds. I know it's all a psychological game, because a big refund really means you were overpaying all year, and gave the government a free loan. If you owe money, it's like the government gave you a free loan... though interest rates are so low these days, it's pretty much a wash anyway. What is ultimately important is the net amount of tax you pay... so I try to remember that the refund isn't really like winning the lottery. But this year, although I wasn't expecting to get a big refund, I got none at all. Instead, I owed several thousand dollars!
It's my own fault-- my accountant told me to adjust my withholding last year and I just never got around to doing it. And now that I'm not a homeowner anymore, I don't have the big mortgage interest deduction that I used to have, and some of my other itemized deductions were lower. I also had more income and the net result is that I owed more tax. A lot more than I thought I would. My total taxes paid will be a lot more than last year.
The good news is that I am not paying it a minute before it's due on April 15. And hopefully in the meantime I'll have gotten a decent bonus that will more than replace that outflow. And I already adjusted the allowances on my W-4 in hopes that I won't have this problem again next year!

Next on the to-do list is some serious thinking and planning about what makes sense for Sweetie and me and our tax situation as individuals and as a couple. Sweetie owns real estate but doesn't have a job right now. I have a job, but don't own any real estate, so one option is for me to buy a share of Sweetie's apartment. Another option is getting married! Neither of these is anything to take lightly... We shall see...


Wednesday, February 11, 2015

Selling My Apartment, Part 2

I found a very nice broker and we were immediately in agreement about the listing price for my apartment. It was more than what I'd agreed to with my friends, and left me some room to negotiate down a bit and pay a 6% fee and still come out with close to the same net. The broker took lovely photos, did a couple of open houses, and the offers rolled in, fast! I forget the sequence of all the various offers playing out-- we juggled around the various pros and cons of a few for several days-- there were some investors who offered a little low and didn't want to come up to match higher offers. There was an offer above asking price but we were worried we'd have trouble with the bank's appraisal coming in too low later. I ended up accepting an offer at asking price where the sellers said they'd waive the mortgage contingency. This could have been a good thing, as they had plenty of cash, but they did want to finance the purchase, and before the contract was ever signed, they backed out because, guess what, they couldn't get a mortgage! But meanwhile, another offer had come in for asking price, from an all cash buyer. My excellent and slightly sneaky broker told them there was a contract about to be signed, but that I'd back out of the other deal if they upped their offer to $5k over ask-- and they did, with the only contingency being that they wanted to close fast. That was fine with me, so finally, after several failed attempts, the deal was done. A few weeks later, I walked out of my lawyer's office after the closing with several checks totaling over $180k-- my equity after paying off my outstanding mortgage balance plus a nice profit.

The whole experience happened quite quickly, so I never really got to the point of panicking too much about the failed transactions. But it did leave me feeling profoundly relieved after the sale was done-- not only had my apartment become a financial and logistical burden because I wasn't really using it, it had also become a source of stress as I realized there were some maintenance issues in the building that I hadn't really noticed, and if not actual irregularities, the potential for some irregularities in how the building was being managed. The buyer's inspector found a little mold in the basement, but otherwise seemed to think the building was in decent enough shape physically, which I was happy about, as I'd had my issues with leaks at the very beginning and worried there could be other problems. So I was glad to be done with it by the time I moved out.

A couple other observations: I tried to sell most of my furniture, without much success-- people on Craigslist can be really flaky! I ended up giving a lot of stuff away to friends' children, either in or just out of college-- in exchange I got a nice bottle of wine and a lot of goodwill and appreciation, which was fine with me! I also found it very difficult to donate stuff-- only one charity who offered pickups even bothered to return my call, and when they got my voicemail that one time, they never called back again or answered any of my calls or emails. I ended up paying Junkluggers to haul away lots of stuff and donate it (they provided a receipt so I could deduct the value on my tax return).

I was also somewhat surprised that many of my potential buyers were parents buying apartments for their children. I mean, I know this must happen a lot in NYC, but it was still kind of annoying to have  the reality of it in my face. I guess I thought of my apartment as being the kind of place that was accessible to a middle-class first time home buyer, a young couple or a single person like me-- it was small, a bit further out in Brooklyn than a lot of people wanted to live, and just not somewhere I would have pictured a rich kid living. But I guess it's just a sign of how things have been changing in NYC in general that even my not-that-fabulous neighborhood is all that relatively wealthy people can afford-- the super-rich are pushing the merely affluent into neighborhoods that used to be more middle-class, and everyone feels the effects.

But I'm out of that game now-- for the moment, I'm a renter, as I pay Sweetie each month to cover my share of our bills. At some point, we may make some arrangements so that I'll actually have a mortgage in my name again... but that is a story for another post!

Monday, February 09, 2015

Selling My Apartment

I realized I never wrote in much detail about selling my apartment, and it's now been over a year since that happened!
As a refresher, I had owned the apartment for a couple of years when I met Sweetie. Once Sweetie came along, I gradually started to spend less and less time there, to the point where I was almost never home and kept a lot of things at Sweetie's place. This made me a bit sad, as buying my own home had been a milestone for me, financially and emotionally-- it felt great to have that independence. But as Sweetie and I gradually got to the point of being committed to each other and wanting to live together, it began to seem very indulgent to hang onto this extra apartment that I was basically using for storage. Yet I found it a bit difficult to take any action to change things until a situation fell into my lap-- a friend of a friend needed a place to stay temporarily. It started out as just being for a couple of months, which seemed like the perfect chance to test the waters and make a little money. It worked out well, and turned into a full year arrangement, and during that time, I didn't really miss having my own space. It was actually a relief not to have to visit it weekly to check on things. But being a landlord brought a few other headaches-- somehow having to repair the heat or the toilet seemed a bit more annoying when I was doing it for someone other than myself! Although I realized I could make a decent profit as a landlord, I decided to try to sell the place when my tenants told me they'd be moving out.

From doing some research about the market, things seemed pretty good. And I had actually already had an offer from an interested party, an investor who already owned another unit in the building. I emailed him to see if he was still interested, and he was-- until he couldn't get a mortgage. I figured it wasn't that surprising that banks might not want too many units in the building to be owned by an absentee landlord, so I didn't think too much of it, and took the next step, which was asking my Facebook friends if anyone wanted to buy an apartment!
I kind of knew the "for sale by owner" thing could bring some headaches, but it also seemed worth a try. I was sure that my apartment would sell for more than I'd paid, but I worried that a 6% fee might eat up a lot of the profit. So I was happy when I immediately had some interest from some college friends who I hadn't been in close touch with in recent years. I had all the worries you'd expect about mixing friendship and business, but it also seemed like the friendship was at arm's length enough that it wouldn't cause any big problems. There was a bit of negotiation, but we pretty quickly agreed to what seemed like a fair price, and got our lawyers talking.

And then... they couldn't get a mortgage either. This started to worry me a bit-- their finances were good but they weren't rolling in dough (or they wouldn't have wanted my apartment anyway!). It wasn't that they couldn't qualify for a mortgage, it was that there was an issue with the building. Because I'd changed my address on my taxes, I'd tipped the owner-occupancy rate under 50%, and in the climate of recent years with banks being so much more cautious after the financial crisis, this and a couple other quirks of the building seemed to make it challenging. It was a bit of a surprise, as some another unit in the building had just sold and those new buyers had managed to get a mortgage. But now that 2 potential buyers had bitten the dust, I decided it was time to get a broker involved....

Stay tuned for part 2 of this post later this week!


Monday, February 02, 2015

Telling Children About How Much Money You Make

Great article in the New York Times: Why You Should Tell Your Children How Much You Make, by Ron Lieber.

" When Scott Parker wanted his six offspring to know more about the value of money, he decided to do something that many parents would consider radical: show them exactly what he earned. One day, he stopped by his local Wells Fargo branch in Encinitas, Calif., and asked to withdraw his entire monthly salary in cash. In singles. It took 24 hours for the tellers to round up that many bills, so he returned the next day and took away the $100 stacks in a canvas bag. His oldest son, Daniel, who was 15 at the time, remembers the moment his father walked into the house and dumped the $10,000 or so on a table. “It looked like he had robbed a bank,” he said. After a pause to let it all sink in, Mr. Parker began peeling off bills. He told them about taxes, set aside money for a tithe to their church and made a big pile for the house payment. The singles piled up for soccer and scouting and hamburger night. By the end, there wasn’t much left over. “I was trying to make as big of an impact as I could, and I definitely had their attention,” he said recently."
That might not be the exact method most people would use to get the message across, but I"m sure it was effective!

I've written a lot on this site about how my parents took pretty much the opposite approach-- my father earned the money and controlled how it was spent. He was very secretive about it-- money wasn't something that was to be discussed in specific terms about how much anyone had or made. All he ever said was that we couldn't afford this or that and that my mother should spend less on things like decorating and clothes. And yet, when the time came to spend money on things HE valued, like education and music, there was money to be spent. So while I generally knew that we were neither rich nor poor, but some in-between thing known sometimes as "middle-class" and sometimes as "very fortunate," there was a lot of doubt about finances. My mother's reaction to that was to think my father was a stingy hoarder who must surely have lots of money that he just didn't want to spend. 

Honesty and openness is a much better policy, though in my case, it came too little and too late, and ultimately even when I thought my mother had a full understanding of the finances, she still made poor choices. One might say that her own childhood influenced her-- did her parents tell her how much money they made and had? Probably not, but if they had, they would have told her that they made very little, and had little or no savings for most of her life. That will teach a child a very different lesson than if their parents have the more middle-class and up finances of the people profiled in Lieber's article.
 The article is excerpted from his new book, The Opposite of Spoiled: Raising Kids Who Are Grounded, Generous, and Smart About Money. I don't have kids of my own, but I know some parents who could probably use this book!

 

Monday, January 05, 2015

Happy New Year!

I can't believe it's 2015, and 3 months have gone by since I last posted. Resolution #1 is to get back in the habit of writing more! I fixed some problems with the site template that had been bothering me for a while, so maybe that will encourage me to stop by more often. So what's new? Here's a few broad strokes. My mom has her house on the market. After a few months, she hasn't had any bites. She missed the best time of year last spring when families would have had a chance to close the deal in time to get their kids in the local school by the start of the fall. Also, the house is probably overpriced. It's a strange market with not too many good comps in her price range, but I think what it comes down to is that it's a small, crummy house even if it's been nicely decorated and has a big yard. It's not the kind of house families want nowadays. So I am trying not to say "I told you so" about all my mom's renovations that she swore would increase the value of the house. She probably would have been better off selling it as a tear-down. But she has at least gotten a few years of enjoyment out of the work she's had done. And from what I could tell from snooping around on my last visit, she isn't running up any credit card debt yet, though I worry that will start to happen soon since I think most of the savings are gone. I continue to save my own pennies and did pretty well this year. I first hit the million dollar net worth milestone back in June and despite fluctuations in the stock market, have managed to keep my net worth at or above that level every month since except for one, when it dipped to $999,827 in September. As of the end of 2014, my net worth was $1,027,750. One interesting thing I noticed was that I made more from dividends and capital gains distributions from investments this year than I was making in salary about 15 years ago-- around $50,000! And my net savings for the year were over $90,000. I spent more in some areas than the previous year (food), but cut back in others (travel). But it's hard to gauge my spending accurately against previous years because Sweetie and I keep adjusting how we share expenses. I'm paying for Sweetie's health insurance now too. Sweetie hasn't worked in over a year and is just living off savings. It's fine for now, and it's been more of a voluntary sabbatical than actually trying and failing to find a job, but that will most likely change in the coming year-- by which I mean I hope it changes to employment, rather than a desperate and unsuccessful search for employment! I've been happy to support my Sweetie in this endeavor and we are extremely fortunate in not having to have made too many lifestyle adjustments, at least not yet, but I must confess I kind of preferred how it was before when we felt even more secure and relaxed about the occasional luxury! It will be interesting to see how things go once Sweetie gets serious about looking for a new job... There's so much more to write about-- thoughts about my own job history, the economy, friends and family, books I've read, catching up on long-past things like selling my condo! I will try to tackle them soon. But in the meantime, I am grateful to everyone who continues to check in here, and I feel incredibly fortunate that my own financial story continues to be a happy one despite so much difficulty in the world around me.

Saturday, September 27, 2014

Spending in a Fog

I went to Home Depot the other day to buy a plant as a gift for someone. I figured I could find something inexpensive but cheerful there. But I have been very leery of Home Depot since hearing about their credit card data breach, and the questionable cyber-security practices that led up to it, so I went there fully intending to pay cash for whatever I bought, and wondered if I would see other customers doing the same. 

I browsed the plant section a bit, and took note of various prices, but then started to focus more on the kind of care the plants needed and whether the leaves were in good shape. I ended up deciding to buy a plant for myself in addition to the gift, and headed for the register. As I waited to pay, I did see people using credit cards, surprisingly, but I was then distracted from my observations by a lady in front of me who asked where I had found my plants. I told her, and then she asked how much they cost. I felt so stupid having to admit that I had no idea! I knew the range of costs for plants I had considered was about $10 up to $40, and was pretty sure I hadn't picked the $40 ones, but other than that, I was stumped. There is something very embarrassing to me about being perceived as someone who would just obliviously spend money with no sense of the value of things, so I was just mortified. When I paid, it turned out that my total was about $42 for two plants, which was more than I had been expecting. 
 
Sometimes there can be a bit of embarrassment to asking how much something costs-- that snobby "if you have to ask, you can't afford it" thing. And then there's the opposite experience, which I had in an airport recently-- I bought a small bottle of water and the cashier said "those are $4.25, do you still want it?" Again I had been oblivious, and suddenly that seemed an outrageous price for water! And I guess the cashier asked because she was used to people being outraged. But when I said "which water brand is cheapest," and she told me it was only about 25 cents less, it didn't seem worth walking back across the store to make the switch. Apparently water sales are the only thing that keeps airport stores in business these days, and if you want to stay well-hydrated you'll just have to deal with some degree of outrage! ( or bring your own bottle to fill if you can find a fountain.)

Ah psychology...

Wednesday, September 03, 2014

Quicken for Mac 2015

Finally, Quicken has released an update for Mac users! This is meant to be a full version to replace Quicken for Mac 2007, with more functionality than Quicken Essentials for Mac. Unfortunately, it sounds like Intuit has failed once again to keep Mac users happy. The new software is getting pretty terrible reviews on Amazon. And it's not cheap! $74.95! Even against my better judgment, I was curious to try it because it will sync with a new Quicken iphone app, but I'd be resigning myself to more manual data entry because the Quicken for Mac 2015 doesn't allow import of QIF files, which is all that some of my accounts offer for downloading transactions.

As long-time readers of this site may remember, being able to enter transactions in a PDA or smartphone and sync with a desktop app has always been a big priority for me. It's a big part of how I track my finances, and I think tracking my finances down to the last penny is a big part of how I stay on track with my savings goals. I used to use a few different Palm apps, including Pocket Quicken. When I moved to the iPhone, I started using PocketMoney, which was the only app I could find that would "sync" with Quicken. I say that in quotation marks because the process is not a one-click sync, it's a rather complicated back and forth process, where you transfer a QIF file of recent transactions from iPhone to desktop, and then transfer a full restore of your updated accounts, transactions and balances back to the iPhone via another QIF file. But even if a bit time-consuming, it worked quite well... until now.

I finally upgraded my iPhone OS to iOS7. I had to be dragged kicking and screaming, because I preferred the look of iOS6 and was afraid a new OS would slow down my phone, but eventually, so many of my apps started to be incompatible that I figured I might as well do it. Fortunately my phone is working fine, but PocketMoney is now much more prone to crashing and has some weird issues, such as the keyboard covering fields where you'd want to read what you're typing. It still functions, though it's somewhat annoying to have to scroll to where you can see what you're entering. And the crashes make me worry that I'll lose data. Unfortunately the original developer of PocketMoney died a while ago, and his successors at the company don't seem to be keeping the software up to date. It's a shame, as there still doesn't seem to be any real alternative for my situation!

It's a shame-- I was all excited about a new version of Quicken, and then so disappointed when I saw the scathing reviews. Check it out on Amazon.