Advanced Personal Finance

Two things recently happened that made me further lament the consumerist state of the world.

Brooke at Dollar Frugal quoted an old man she’d seen on the news who was buying crap for his grandson just ‘because.’ Brooke didn’t like that at all, and I can’t say I disagree. Buying stuff just to buy it seems to be a serious American affliction (though I’m quite sure others do it, too).

Second, and more disturbing to me, was something we saw at Toys-R-Us. We’d gone there to use a gift card given to our little girl. Now for those of your without kids who have no reason to be in Toys-R-Us (or any baby/kid store for that matter), there is a great deal of superfluous crap sold there. An astonishing amount, really.

What I saw there yesterday, though, took the cake. Then it took the cake and smashed it under a steam roller.

You can buy a baby bath spa.

That’s right. A little bath tub for your baby that provides the relaxation of thousands of tiny bubbles popping on your baby’s soft little butt.

Baby bath spa. Seriously, I think that’s one of the signs of the apocalypse.

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We’re in the process of selling and buying a house (well, two houses, but you know what I mean). The selling piece is essentially over, since we sold our house in a day. Now we’re on to the buying a new house phase.

I never thought I’d be writing something like this, but using a full-service realtor has really paid off on both ends of the transaction. Obviously, we’re super pleased that our house sold as quickly as it did. I can’t say that was entirely, or even mostly the realtor’s doing, but she has been very helpful. She guided us in the pricing of our house, which was obviously key to selling it so quickly.

Using a realtor has been great so far on the buy side, as well. Just for some background, the house we’re in right now was our first. We’d lived in the area for a couple of years, though, so we knew which communities were for us and which weren’t. In other words, we had pretty good local knowledge.

Now we’re moving to a new state and don’t have that kind of geographic information. We don’t know which towns are preferable for a family like ours. We’ve relied heavily on the realtor we’re working with to provide that information and she’s been great. She’s asked pertinent questions about our situation, likes and dislikes, and our lifestyle. It really is more than price of the house.

I really underestimated the value of that kind of local information. When we first started the process, I thought maybe we’d try buying on our own and hiring a real estate attorney to assist us. My ever-wise wife, however, thought that wasn’t the way to go. Thankfully, I listened and she was right of course (Hi, Honey!).

There have been a couple of times now when we saw listings for houses that seemed perfect for us. When we mentioned them to our realtor, she let us know gently that maybe those weren’t the areas for us. Were it not for our realtor, we may have made a major mistake.

We travel to the new location this weekend to meet the realtor in person and look at places. It’s not going to be a drawn-out affair, since we need to move in a couple of months. We’re looking to make an offer during this trip. Wish us luck!

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We’re in the midst of adjusting our family budget to account for some major changes that will be happening over the next couple of months. In the process, everything is getting looked at, including savings. Just like anybody, we have lots of things competing for our dollars. We save a pretty sizable portion of our income right now:

• Retirement
• College
• Short-term savings for known expenses
• Taxable index mutual fund

Since everything is being evaluated, the topic of saving for retirement versus college came up. This should be an easy one. Everything you read says save for your own retirement first and college funds come somewhere lower down on the list. It’s in any personal finance book or blog. Easy.

Only it’s not so easy if your a parent.

Any way you look at it, saving for yourself first seems like putting yourself in front of your kids. And something happens to your mind when a child arrives. You become incapable of putting yourself before your offspring. What’s a positive genetically speaking can be a serious negative financially speaking.

So we’re at a decision point. Which gets reduced and by how much? First, the changes to the budget will be temporary. Second, they may not be necessary at all if things fall right.  As things stand right now, though, it looks like they’ll each take a hit.  We’ll be saving a little less in each of our children’s college funds and a little less for retirement.  It goes against all the personal finance advice I’ve read, but it’s the right decision for us.

Now let’s cross our fingers and hope it won’t be necessary…

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A few days ago, we signed a contract to sell our house.

It had been on the MLS for one day.

The selling price was greater than we listed it for.

I fully realize this story may seem unbelievable and some readers will simply say I’m lying. I am not.

Others will say I live in a special part of the country immune from the current housing fiasco. I do not.

Our Story

We bought our first house about eight years ago. It was a routine transaction in that the house wasn’t a fixer-upper, we used a conventional loan, and all the rest. We paid somewhat less than the listing price without incentives. Interestingly, we bought the house after it had been listed only two days.

Since buying the house, we’ve not done any major remodeling save the finishing of the basement to add some extra space. It’s a new-ish house (less than 15 years old) and about average for our neighborhood.

I recently decided to take a new job where I had some flexibility in where we could live. Taking a page from Free Money Finance’s book, we’ve decided to move to a lower cost of living locale. That meant we needed to sell our house. It goes without saying that this is about the absolute worse time to be selling a house. It’s the dead of winter. The market is in the toilet. The economy looks like it’s headed into recession. We’d have to be out of our minds. Yet we did it.

How We Sold In One Day

Since we bought our house, we’ve roughly doubled our money.  As a result, we weren’t looking to squeeze every last hundred dollars out of the place.  We also are not one of the many families who refuse to accept that the sales price of your house a year ago isn’t the sales price today.  Had we sold then, we likely would have been able to increase the price 10%.  But we’re not selling a year ago, we’re selling today.

I think that’s the mistake many people trying to sell houses are making, by the way.  It sucks to lose 10% on anything especially something as emotional as a house.  But wishing for something won’t make it happen.  You have to accept current market conditions.  I think the failure to do so is why there is a 10 month supply of houses on the market.

So going into this, we had two key things in mind:

1. We were selling at a bad time.  The market is down, ergo the value of our house is down.  We’re ok with that.  We have to be.
2. We’re not trying to get the absolute maximum price for the house.

With those two things in mind, we, with guidance from our realtor, priced the house at what the market would bear.  It’s that simple.  We thought like buyers and priced in such a way that the house was attractive to them.  As our realtor pointed out, what’s selling houses right now is price.  Not goofy gimmicks like throwing in a big-screen TV or trip to Paris.  Not putting the MLS listing in ALL CAPS.  Just price the house so it will sell.

Did we leave money on the table?  Possibly.  Who knows.  But who cares?  We’ve doubled our money on the place and we’re moving to a lower cost of living city.   Oh, and by the way, we’re now going to be buyers in this crappy market.

I don’t want this to be a ‘I’m so smart’ read.  I’m not so smart.  This is the first house we’ve ever sold, so maybe we left money on the table, like I said.  But you know what a good transaction looks like?  The sellers think they got a good deal and the buyers think they got a good deal.  And we think we got a good deal.

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I’m a big admirer of investing legend John Bogle. Whenever I see an interview of him, I read it. Fortune had one recently and there was one question and answer I’d like to highlight.

The immediate concern for most investors is the subprime market, but over the long term what do you see as the biggest challenges facing the U.S. economy? - BEN LERMAN, CHICAGO

Externally, we are faced with $1.5 trillion already poured into Iraq and Afghanistan. So you have enormous expenditures in a corner of the world that is important to us, but it is very unwise to think we can bring democracy to a place that doesn’t share our values. There are also the challenges from low-cost production in China and India.

At home, we have a tremendous future financial problem with the federal deficit. We’ll have to take action on Social Security someday. Government spending has gotten to the point where we will have to either cut spending or raise taxes. Another problem is this deadlocked Congress. And I see the quality and caliber of our presidential nominees, and I am not impressed. It raises the question of whether this country is even able to run itself anymore.

Although he doesn’t get into it, he does nail the future problems of the U.S. The federal deficit in general and unfunded Social Security and Medicare liabilities in particular are the 800 pound gorilla in the room nobody wants to acknowledge.

And his last statement is killer: “It raises the question of whether this country is even able to run itself anymore.” Wow. Powerful stuff.

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