Wednesday, April 29, 2015

Mom is Selling Her House!

Fingers crossed that this works out, but as I write this, my mom has accepted an offer for her house. This is exciting and sad and scary. If all goes well, it will keep her from wasting all her income on maintaining a single family house. She spent thousands of dollars this past winter just on snow removal! But it does worry me a little about turning her biggest asset into cash, as cash has a way of slipping through my mother's fingers very quickly. At one point she talked about putting a lot of the proceeds in trust for me and my sister, but I am not sure if she still plans to do that. If she doesn't, I do worry that she'll start blowing a lot of cash on moving expenses, storage expenses, buying new stuff, decorating whatever new place she moves into, etc.
And it's sad to think that my childhood home won't be part of our family life anymore. It's the only home I ever knew, as I was only 9 months old when my parents bought the house. My father once said he had figured it would be a starter home, and that they'd someday move to a bigger house, but the day when he felt he could afford it never arrived.
But in some ways, the house I fondly remember is already gone. Since my father died, my mother has thrown out so many things and changed so much about the house. To me, it has barely a trace of personality or identity to it any more. It smells like floor polish, paint fumes and scented candles now, not like oriental rugs and books. It will be strange not to have a home base in my old town, though. I've always loved going back during the summer, when I could walk a half mile down to a beach where I could take an icy-cold swim, or just walk and sit and think. My mother might move back there someday, but in the near future, she'll move to my grandmother's house so she can help take care of her, and after that, she may end up wanting to live closer to my sister. My sister's house will be where I go when I say I'm going "home" to visit my family. I guess that's how it goes, this shifting over the years as you become less centered on your parents and more centered on the next generation. My niece and nephew are now their own little people, with such distinctive personalities. It hit me the other day that I only have a few more years before they vanish into the black hole of teenagerdom. I have to spend as much time as possible with them now while they are still kids, and then wait a while until they emerge into adulthood-- perhaps that is a bleak view, but I'm trying to prepare myself for a few years where they'll be uncommunicative and think I'm a big nerd rather than their fun, wacky aunt!
Here's the funny thing-- my mother copied both of the kids on her email to my sister and me about her house sale! I asked her why, especially as she was telling us not to tell anyone until the deal was done, and I thought the kids would be the most likely to blab. It turns out they watch some of those real estate TV shows, so they've been quite interested in my mother's whole process, and she trusts them not to tell.
Let's hope there is more news to tell soon!

Tuesday, April 21, 2015

Juice is My New Financial Kryptonite

What is it about juice that makes it so expensive sometimes?? I've always enjoyed fresh juices and smoothies made with fruits and vegetables, and they seem to be becoming more and more popular and widely available. There are green smoothie books all over the bestseller lists, and people are always talking about how great their Vitamix blenders are. You can buy all these fancy juices on Amazon, as well as various health food shops, Whole Foods, etc. and they are sometimes $10 a bottle! This is exactly the kind of thing where I'd normally dismiss it as a crazy fad designed to part stupid people from their money... but I guess I am one of those stupid people, because I often find myself spending the $10! I can't resist!

I'm not buying these juices every day. But it's gone from being maybe once every couple of months to once a month... to once a week... to sometimes multiple times a week! And as the weather gets warmer, a nice cool refreshing juice will seem more and more attractive.
Sometimes I go to a place where they make them fresh, and as I watch them stuffing a handful of spinach, a big carrot, a couple beets, and whatever else into the blender, I try to do the mental math of what it would cost to buy those vegetables. I don't have a good mental price list for fruits and vegetables, though. Or maybe I don't have a good sense of weight! When I buy apples at the supermarket, I'm often shocked at what it works out to per apple-- I've seen the per pound price, but I never think each apple will be that heavy.
I comfort myself that this particular extravagance is at least a healthy vice-- a $10 juice is still less than the cost of a pack of cigarettes, and less than the average glass of wine in many NYC restaurants.

What's your financial kryptonite?

Tuesday, April 14, 2015

Bonus Time

So my last post was about how tax time is usually a happy time of year... this goes hand in hand with bonus time, which is also usually a happy time of year. This year was a bit of an exception.
I have mostly had jobs that involve measurable performance in some aspects, so a bonus has often been a significant part of my compensation, sometimes more than I even expected! I always remember my first job in NYC, where my salary started at $25,000. I knew that some sort of bonus would accompany that, but I don't know how much I asked about how big it could be. I was coming from a job where a bonus meant maybe $1500-2000, so I didn't think of it as a make-or-break thing. So it was a fantastic surprise when I ended up making about $15,000 in bonus that first year, and all of it went straight into the bank. I've always tried to make ends meet on my base salary and put bonuses towards saving, it just seems easier to be disciplined that way.
Nowadays, my bonus tends to be about 15-20% of my total compensation, so it's still a good chunk of savings that I rely on to meet my overall goals. And this year, because I had done some things that went above and beyond in terms of my job performance, I was counting on a bigger than usual bonus. In fact, I had sort of been told, or it had been implied, that when I got only a so-so raise this year, it was because that was not the way my work was going to be recognized, but that I would see the payoff in my bonus.
My personal performance isn't the only thing that determines my bonus, so when I have this conversation with my boss, she usually hands me a piece of paper that shows the whole calculation. My eyes usually jump to the total, I smile, I thank my boss profusely, and that's pretty much it. But this time, my eyes went to the total, then dodged around a bit, then back to the total, then back and forth over all the math. While this happened, I was sort of zoning out on what my boss was saying and my face must have slowly dropped from a smile into a blank look into a frown. My total bonus was less than the prior year, and specifically the part that was about my individual performance was less than the prior year. I knew one part of the bonus might be down due to certain sales numbers that it would be based on, but I just could not comprehend how my personal number was less. I managed to gather my thoughts enough to say, I think gracefully, what was already written on my face-- that I was surprised and disappointed, because I had accomplished X, Y and Z, etc., that were a significant jump over what I'd done last year.
This all happened on a Friday and I spent the whole weekend in a funk. It wasn't so much the money itself-- it was that I felt insulted. I also felt demoralized. I had worked harder than I ever had in my life, and been amply praised for it, but if it wasn't going to be recognized with either a raise or an increased bonus, what was the point? Why was I working so hard? And though I am certainly not irreplaceable, why would my company send me this message at a point when it would be quite difficult for them if I were to leave? What were they thinking?
In the end, fortunately, it worked out. They reconsidered the bonus and gave me a couple thousand dollars more, so that in the end, my bonus was slightly larger than last year's. They said lots of nice things and I was able to feel more valued again. But the whole thing did leave a bit of a bad taste in my mouth. I probably haven't been a squeaky enough wheel about asking for bigger raises the last few years, so maybe I'm being taken for granted.
That said, I am always thankful that I have a job with a decent income, where I've gotten promoted and have interesting work to do-- life could be far worse! I was talking to a couple of people from another company recently-- one complained that she had found out that she was being paid a lot less than her male counterpart who did the exact same job, despite some pretty significant accomplishments on her part that the male co-worker didn't have. The other, a younger and more junior employee, had asked to be promoted when a spot above her opened up, and was disappointed to be told that no, they weren't going to hire someone for that spot, and no, she could not have a better title, and no, she could not have any more money either!
Ultimately, no matter how much you like your job, it's never all that great to work for someone other than yourself... and being self-employed is no piece of cake either! Retirement is starting to loom large in my imagination... but I still have at least 20 years or so before that will be an option... ugh!

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!