Listen Money Matters - Free your inner financial badass. This is not your father's boring personal finance show.

Real estate investing has become a bit of a theme at LMM lately. Today we’re joined by Jefferson Lilly to discuss mobile home park investing. You might be considering investing in real estate, but you’re probably thinking of buying single family homes or perhaps a duplex. But maybe you should consider investing in a mobile home park. Our guest today explains why. Supply Is Shrinking We are building more of every kind of housing except trailer parks. A lot of places have a NIMBY attitude towards trailer parks, they’re dirty, the people who live in them are criminals. So, many towns are changing zoning laws and building requirements to prevent more parks from being built. Because of these change and some parks being plowed under altogether, the supply is decreasing at a rate of about 1% a year. The people getting kicked out of parks that are closing have to go somewhere and because of the shrinking demand, remaining parks can command higher rent for their space. What Is A Mobile Home? The mobile home industry expanded after World War II. Despite the name, “mobile” home, the homes aren’t meant to move around a lot the way an RV is. Most homes come straight from the manufacturer to the park. A lot is meant to be more or less a permanent home for a trailer. The home is tied down, but it’s not on a foundation, rather it’s up on blocks with skirting around the bottom. Most people who live in mobile homes own them. This is great for an investor because none of the maintenance for things like roofs and toilets is the investor’s responsibility. Jefferson prefers to invest in parks where every home is owned by the resident. If that’s not the case, they will arrange a rent-to-own agreement. People tend to take better care of their own things than someone else’s so again; this puts less burden on the investor. Property Owner Responsibility The owner is responsible for things like road, sewer, and lawn maintenance. The owner just owns the park in most cases, not the homes. For every $1 in rent, the owner keeps about .70, giving them about a 30% expense load which covers everything, including taxes and maintenance. For an apartment or single home landlord, that split is around 50/50. To buy a home and get it market ready costs about $20,000 and it will rent for around $700, grossing close to 4%. You can make money buying and renting the homes, but owning the park is more lucrative and less hassle. Jefferson buys most of his parks in the Midwest, places like Tulsa and Dayton, where he can get a cap rate of around 10%. Parks in California, where he’s based, have a cap rate of closer to 5%. Cap rate is the yield. If you buy a park in California that makes $50,000, it will cost you $1 million. In the Midwest, a park earning $50,000 will only cost you $500,000.  Leveraging Jefferson typically borrows 75% loan to value. On a $2 million property, $500,000 is the downpayment, and $1.5 million is borrowed. Many banks won’t go below 80% loan to value, though. Some properties could be bought for cash, but the company is borrowing at around 5% for 20-25 years. That means they’re investing it in the deal at 10%. That $2 million property, with $500,000 in equity, earns 10%, or $50,000. The amount borrowed was $1.5 million at 5% interest but earn 10%. Even after paying some principle, there will still be about $100,000 in cash flow from the borrowed money plus $50,000 in cash flow from the down payment, so earning back $150,000 on a $500,000 investment. That gets you to a 30% cash on cash rate of return.  If they had paid up front, the return would only be about 10%. I Have $1000 If this is all sounding good, but you don’t have enough money to buy a whole park, there are ways to get involved.

Natali Morris mentioned her real estate investments and we wanted to learn more. Today Clayton Morris joins us to explain real estate wholesaling. We were intrigued when Natali talked about buying a rental property for $10,000 and wanted to understand the process. Today her husband Clayton is here to give us more detail. Clayton started doing wholesale real estate investing as a side thing. When friends and family heard how well he was doing, they started asking for advice. And then friends of friends of friends. At that point, Clayton decided to start a business to help others take advantage of this investment strategy. Analysis Paralysis Have you ever wanted to do something and started researching it? And the more you learned, the less able you felt to actually do it? That’s analysis paralysis. There is nothing wrong with educating yourself before making a decision but unless you eventually take the plunge, all you’ve done is waste a lot of time. Fundamental Principles Of Real Estate Investing Part of the reason for the housing crisis is that people were ignoring certain rules. Banks were giving mortgages to people who didn’t have jobs! They have out $800,000 mortgages to people making working class money. And then acted surprised when it all blew up. In his book The Millionaire Real Estate Investor, Gary Keller describes some of these principles; don’t over-leverage yourself, make sure you are getting at least $100 over what you pay to the bank every month and, expect a minimum 12% return on investment when buying a house free and clear. It’s important to do the math and proper research when choosing an investment property. There are many things to consider when evaluating a potential investment but the number one measure is to be sure it is cash flow positive. You can create an epic spreadsheet or use tools like Simple Wealth to help you calculate cash flow, appreciation and make data-driven decisions. Fear Of Money Did you grow up hearing things like “Money doesn’t grow on trees,” “We’re not the Rockefellers.” There is a lot of stigma around money and many people never realize that you can earn more money than just what you get in your paycheck. Clayton grew up in such a family and it took him a long time to lose that fear. He’s come a long way. He plans to eventually own 300 properties and a goal for 2016 is to buy two a month! Wholesale Real Estate Investing The kind of homes you buy when you’re buying wholesale are not on MLS. The first property Clayton bought this way was a lucky bit of fate. His neighbor died and her home needed a lot of work. Her family did not live locally and didn’t feel like getting the house to a point where a real estate agent would show it. Clayton offered to buy the home as is and the family was happy to be rid of it. These are the only kinds of properties he invests in now, mostly three bedroom one or two baths, single-family homes. This isn’t house flipping. This is buy and hold investing. The homes are not rehabbed and then sold, they’re rehabbed and then rented. If you flip a house, you will be hit with a huge capital gains bill, 35%. Sending direct mail inquiries to absentee and inherited property owners is one way to find properties. It sounds morbid but you can troll the obits and contact the family of the deceased. You can also contact estate lawyers who may be willing to pass your information on to clients.

It’s the time of year to reflect on the past twelve months and set goals for the new year. What does figure skating have to do with it? Tune in to find out. At LMM we prefer the word “goals” to “resolution.” Resolution has almost come to mean failure in three weeks time. We think framing our resolutions as goals will help us reach them. Sometimes you just have to trick your brain! Why January 1? You can see the appeal. Everyone likes a clean slate and the slate is never cleaner than it is on January 1. But what if you woke up with a hangover and despite resolving to eat more healthfully, you order breakfast from McDonald’s? Are you going to wait 364 days to try again? Of course not. You don’t have to wait for a certain day to change a habit. Year End Review Rather than making the same old tired resolutions, which at a certain point become traditions, look back at the year that just passed. What would you have liked to do better? What did you not manage to get to at all that you still want to pursue? If you did achieve some goals, what helped you to do so? By looking back at this things, we can better craft goals for the new year and put systems in place to help us reach them. Day, Week, Month If the goals are too vague, “save money,” lose weight,” they are hard to track and hard to work towards. Each day, week, and month should have things to do in order to reach the end goal. If you want to save money, how much money? If you want to save $1000 to start an emergency fund, you can have a daily goal of not buying coffee on your way to work. You can have a weekly goal of bringing lunch from home just three of five days a week (because you want some wiggle room or you’ll get sick of it and give up). You can have a monthly goal of cutting your grocery bill by 20%. Any goal you set for yourself should have a timeline and a deadline. Marking off time in smaller chunks like day, week, and month helps you to move forward and track your progress. If you get to the end of the day, week, or month, and haven’t achieved what you set out to, you can reassess before much larger chunks of time have passed so you’re not content with giving up and waiting for that clean slate of January 1 to come around again. Priority(ies) Priority: “Something that is more important than other things and that needs to be done or dealt with first.” That definition makes perfect sense. A priority is the most important thing. So how can you have more than one? You can’t but somehow, we all do. And that’s why so many of us fail to achieve our priority because we spread our focus across multiple priorities. This year make it a goal to do almost nothing. But do a small number of things that matter. Those two statements might seem contradictory, but not as contradictory as having more than one priority. Some Goals Can Be Fun! Not all of your goals have to be a slog. Saving money and losing weight, while wonderful things to do that will reward you in many ways for many years, are not really very fun things to do. So pick at least one goal that is fun to do. For Thomas, it was to have more fun after work. A lot of us can probably relate to this. You come home from work and make dinner, tidy up, pay bills, watch TV. Except for making dinner, for some of us at least, none of those things are fun. So Thomas signed up and paid for, an ice skating class. A goal like this can kill a few birds; the original of doing more fun stuff after work, because another friend has signed up, Thomas gets to spend more time socializing, and skating is good exercise, although I know he was already doing pretty well in that area. If you can find a way to wrap up a few goals into one, you’ll get more done in less time. No Is A Complete Sentence

Want to level up your life? Steve Kamb from Nerd Fitness joins us to discuss turning your life into a game. We’ve discussed the ways being physically fit and financially fit are similar. Steve Kamb learned that when he started Nerd Fitness. His health improved alongside his finances. He turned his life into a video game with himself as the protagonist. Now he’s written a book on how we can do that too, Level Up Your Life. Nerd Fitness Steve was working a sales job he hated and wasn’t very good at when he saw Tim Ferris’s book, The Four Hour Work Week. In the book, Ferris details how to start a very small company that solves a problem that a lot of people have. Steve was becoming increasingly interested in fitness and if there is a problem a lot of people have, (aside from money problems. LMM will handle those) it’s being unfit and unhealthy. As with any good side hustle, you need to find a niche. There are a lot of fitness sites out there. There aren’t a lot of fitness sites geared toward people who love video games. Steve bought his domain at Hostgator and sat on it for a year. He didn’t know the first thing about building a website. After a new job, Steve decided to make the leap and start really working on Nerd Fitness. He quit his job with about eight weeks of runway money and 3,000 subscribers. He wrote an e-book that sold enough copies to keep the lights on and he worked a series of odd jobs to fill in the gaps. He was right to make the leap. Within six months, the site was generating $2-3 a month. Motivation Is Not Enough The problem with motivation and willpower is that they’re fleeting. We’re all motivated in the new year to save money, lose weight, quit smoking. We all have the willpower to resist the cookies in the beginning. How motivated are you in February? How many cookies did you eat in March? Steve advocates putting systems in place that will help you succeed. He wanted to spend less time watching television and more time working on the site, so he got rid of cable. He would eat the entire bag of chips in one sitting so he stopped buying chips. People are lazy, we really are! Of course, you can leave the house at 9:00 pm to procure the chips, but you probably won’t. No motivation or discipline needed for this strategy. You have a system in place that supports your goals. Anti-Fragile Antifragile by Nassim Taleb teaches that not all chaos is bad. There are three types of things; fragile things that break when you drop them, sturdy things that survive the fall intact, and antigragile things that get stronger from the impact. Steve applied this to fitness. Throwing the unexpected, the chaos, at your body strengthens it and makes it grow. The same theory can help improve your life too. Pushing yourself beyond your comfort zone makes you a stronger, better person. Steve drew up a list of things he wanted to accomplish, a bucket list and published it so his readers would help keep him accountable. He made conquering the list a game. Every time he crossed something off, he awarded himself points and moved to the next thing on the list. Success Through Habits Thomas is a big believer in the power of habit too.

Look at your family, just sitting there costing you money. Slackers should be making you money, pulling their weight! We found a way to do it. We will show you how to turn your family into a profitable business with Natali Morris. Incorporate Your Family The tax system is not set up to benefit the individual; it’s set up to benefit businesses because businesses drive the economy. That’s why eleven companies on the S&P 500 who made profits last year paid less in income tax than you. How much less? Well, they paid nothing.  If you want to get in on that, incorporate. Set up an LLC, S-Corp, whatever is the most appropriate for your situation. What if you don’t have a business? Well, you might and not realize it. Do you babysit, clean houses, mow lawns? Because if you do, you set up and LLC or S-Corp. No? Well, start! And incorporate your hobby, side hustle. However, you term it, as a business. Remember what Adam Carroll told us in last week’s episode? The two most significant expenses in life are taxes and interest. Incorporating your family is one way to maximize those tax savings. Teach Kids About Money Children have established their ideas and habits about money by the age of seven! So the earlier you start teaching them about money, the better. For the most part, many of us can afford to give our kids almost anything they want, at least when their they’re little. We can afford the stuffed animals and the action figures. That’s why it’s important to put a system in place to help them understand what money is and how it works. Natali gives her children an allowance but not in the traditional sense. Each kid has responsibilities that come with being part of a family; keeping communal areas and their own rooms clean. Taking care of their possessions. If she wants them to do work for her, washing her car, for example, they are paid for those kinds of things. The kids also have real jobs, things like helping Mom scan and then shred documents, that pay them from the family’s LLC, and they pay taxes on those earnings. Because the money is taxed, it’s eligible for an IRA, and that’s where it goes. The IRA’s are Roth which means they only pay taxes on them during the years they contribute. The children are given three, clear glass jars. The clear part is important; it lets kids see the money accumulating, something they won’t get using a traditional “piggy bank. “The jars are “give,” “save,” and “spend.” The kids can buy whatever they want with the spend jar money, even if Mom knows they’ll lose interest in five minutes. It teaches that once the money is spent, it’s gone, so make it count. Self Directed IRA A self-directed IRA is a retirement account that gives you control over your investment choices. You’re not limited to stocks, bonds, or mutual funds. This allows you to invest in alternative assets like real estate, limited partnerships, and gold through your self-directed retirement account. These IRA’s are more work than the average IRA, but the advantages can outweigh that for some. Natali buys rental property through her IRA, the proceeds come back into it and all expenses, property management fees, repairs, utilities, are paid out of it.

Adam Carroll joins us to discuss how to actually save thousands on your mortgage with home equity lines of credit. When we interviewed Adam for our new Rich Tips series, he mentioned how he is paying off his mortgage years ahead of schedule and saving thousands of dollars in interest. We were intrigued and asked him to join us to explain his strategy in greater detail. What Is A Home Equity Line Of Credit? A home equity line of credit, HELOC, is “An open ended line of credit extended to a homeowner that uses the borrower’s home as collateral. Once a maximum loan balance is established, the homeowner may draw on the line of credit at his or her discretion. Interest is charged on a predetermined variable rate, which is usually based on prevailing prime rates.” Most institutions will lend up to about 90% of loan to value. Strategy Adam has an ingenious use for his HELOC and you can use his strategy too. The HELOC is used as a checking account. All of your income is deposited into it and all of your expenses are paid out of it. Depositing your paycheck into the HELOC acts like a payment so you aren’t adding a monthly payment. The money left over at the end of the month gets sent to the mortgage. What this does is send a massive payment to your mortgage each month. The trick to make this work though is that you have to make more than you spend. Let’s look at an example: You bought a home for $100,000 with a $20,000 down payment. You can immediately take out a HELOC for $10,000. You then put that toward your mortgage. In order for this to work though, you must make more than you spend. You make $5,000, spend $4,000 and have $1,000 left. That $1,000 goes into the HELOC until it’s paid off, so for ten months. Let’s say your interest rate is 5%. So that’s $500 over 12 months, $41.33 the first month in interest but when the income goes in, you’re paying a little less each month because you’re slowly paying the loan down with that $1,000 a month. Rather than taking ten months to pay off, it takes around 7. And because your mortgage went from $80,000 to $70,000, you will pay less interest not just over ten months but over the entire life of the loan. What If You Don’t Own A Home? You can still use a similar strategy if you don’t own a home. You can get a personal line of credit, PLOC. A PLOC is “A loan that you use like a credit card account that you access without using a card. Instead, you write special checks or request a transfer to your checking account by phone or online. You have a credit limit, receive a monthly bill, make at least a minimum payment, pay interest based on your outstanding balance, and possibly pay a fee each time you use the account.  PLOC are unsecured, unlike HELOCs, which are backed by a mortgage on your home. PLOCs are offered by banks and credit unions and usually require that you also have a checking account with the same institution.” PLOCs have their drawbacks. The interest rate is higher than a HELOC and the interest is not tax deductible. But if you have high-interest debt and don’t own a home, they can be beneficial. What Keeps Us In Debt It’s the way we bank and borrow. Taking out a 30 year mortgage is just SOP in the United States. Amortization is the process of paying off a debt, like a mortgage over time with regular payments. An amortization schedule is a table detailing each periodic payment on an that loan. We borrowed $80,000 to buy our home above. With a 30 year mortgage at 3.5%, you will pay $50,000 in interest when it’s all over! Your first mortgage payment will be $359,

Roger Whitney is the retirement answer man. He’s going to tell us about one of his favorite books and some of the tools he loves. Roger shares his budgeting strategy and tells us his secret to a happy marriage. And Roger hits us with a rich tip that is outside the box. “Success is nothing more than a few simple disciplines practiced everyday.” Jim Rohn The Big Leap is about how to overcome the unconscious limits we put on ourselves. Roger like all of us has his fair share. Nozbe is what Roger calls the hipster version of Omni Focus. It’s a productivity app that he uses to prioritize and manage tasks. Roger has a special offer for the LMM Community. Text “3 talks” to the number 33444 and Roger will send you the three money conversations every couple should have.  

Ace Chapman joins us to explain how to buy a business. Something he’s been doing for sixteen years and it’s made him a millionaire. Ace was on the usual college path when the opportunity to buy a business fell into his lap. He was playing with an online stock simulator that crashed a lot and found the company unresponsive. He reached out with an offer to help, merely hoping for an internship. Instead, he was offered the chance to buy the business for $70,000. Ace had just $3,000. What he also had was no idea how such transactions usually work so he asked if the sellers would finance half of the deal. They agreed!  Ace got some money from a similarly entrepreneurial minded friend and financed the rest of credit cards. Ace grew the product from 10,000 members to 250,000. He turned down seven-figure offers to sell but lost it all in the first dot-com bust. But he had a school of hard knocks bestowed MBA and decided to buy businesses was what he wanted to do. Due Diligence Ace had a big advantage when he bought that first business; he had been a long time user of the product so he knew it well. He had spoken to many of its other customers to find out what they did and did not like about the product. It’s not a requirement but it will certainly give you a leg up when it comes time to take over running the business. Why Are They Selling? If this business is so great, why are the owners looking to get out? It could be one of a million reasons; a divorce, failing health, boredom and the desire to move onto the next thing. As the Boomers start thinking of retirement, there will be a lot of established businesses on the market. Don’t Start From Scratch Many people don’t really give much thought to buying an already existing business. Starting your own business is something that is woven into the American Dream and we all think we could be the next Bill Gates. But the stark truth is that about half of new businesses fail within five years. So why not let someone else do the hard work and pour in the capital that the early years of a new business require? Where To Find An Opportunity You aren’t very likely to walk into a business and see a for sale sign in the window. There are some sites that have listings like bizbuysell, but the large majority of businesses for sale don’t advertise that way. You can advertise though, that you’re looking for a business to buy. Let them come to you. So you have to hunt around for something to buy. Because some businesses are sold due to things like death and divorce, attorneys who handle divorces and estates are a good resource to find an opportunity. The sellers in these situations may be highly motivated which can net you a bargain. Attend events related to the industry you’re interested in, meetups, conferences, seminars and use them as an opportunity to network. The pay off may not be immediate; Ace once bought a business that he had sent a letter to the owners of four years after he sent it. But the owners kept the letter and when they were ready to sell, Ace is the person they called. The lesson is to have a long-term view. The Valuation The formula Ace uses when deciding what a business is worth is to multiply the net monthly earnings by two. He likes to employee opportunistic due diligence to find a way to buy at two times but within a few months, increases the revenue by four times. There are a few things to look for that can make this possible, the business has a hidden asset, a unique opportunity or can be part of a joint venture with someone else in his network of clients.  Face Of Business

Our listener Eric has made an appearance in the past to school us on bonds. Today he’s back to teach us about inflation. What Is Inflation? Economic concepts can be broken down into the micro and the macro. Micro looks at the smaller picture concerning the behaviors of individual consumers and businesses. Macro is the study of the economy as a whole and where inflation falls. Inflation is one economic concept that most of us see on a regular basis. It’s the purchasing power of your money, the general increase of the cost of goods and services over a specified period of time. Your dollar that is worth X today will not be worth X five years from now. Consumer Price Index One of the best measures of inflation is consumer price index. CPI measures changes in price of a set of consumer goods and services purchased by households. There are eight major groups that include the costs of things like cereal, rent, dresses, gas, prescription drugs, televisions, college tuition and funeral expenses. The Big Mac index was founded as an informal way to compare purchasing power between different currencies but has been expanded to include the amount of time someone has to work in order to buy a Big Mac. Demand Pull Inflation In most cases, we want inflation to increase, but not too steeply. Controlled inflation can erode the cost of debt. Good inflation is known as demand pull inflation and happens during periods of economic growth and increased income. Consumer demand increases. Wartime is a good example. Who buys a lot during wartime? The government and it buys from the private sector. When a big order comes in to Lockheed Martin, the company hires more workers. More people have money and they too, spend money in the private sector buying cars and homes and electronics. Cost Push Inflation Cost push inflation is the “bad” kind of inflation. A good example would be when there is a drought. There is less food available which causes price increases. The producer has to make money but they have less product to sell. So what do they do? They raise the price. The ongoing drought in California and the water restrictions being imposed because of it, are going to make rice more expensive. California is the country’s second biggest rice producer(who knew!) and will grow 25% less than last year. So your sushi is going to get more expensive. Federal Funds Target Rate The federal funds target rate is “the interest rate at which a depository institution lends funds maintained at the Federal Reserve to another depository institution overnight.” The higher the federal funds rate, the more expensive it is to borrow money. The Federal Open Market Committee meets eight times per year to set key interest rates. Stagnant Wages Inflation has been low, but our wages have been stagnant for decades. After adjusting for inflation, today’s average hourly wage has just about the same purchasing power as it did in 1979. Productivity and Gross Domestic Product have increased, but wages for the average worker have not. This stagnation is one of the reasons the Fed has been reluctant to raise rates. Deflation Deflation is a drop in consumer prices and measured using the CPI. This sounds like a good thing for consumers but is a sign of a long term decrease in demand and signals that a recession is probably already happening. Manufacturers and sellers of goods start cutting prices and if this goes on long enough, it also means they will cut employee wages or even go out of business entirely. Disinflation Disinflation is the slow down in the rate of inflation.

Today we interview Bobby Monks and Justin Jaffy about their book, Uninvested and understanding the pitfalls of Wall Street. Bobby Monks calls himself a “chronic entrepreneur” and as such, understands the dirty dealings happening on Wall Street and how they effect the average investor. Justin was new to the subject of finance but a journalist who wanted to know more. Together with a third author, Bree LaCasse, they wrote Uninvested: How Wall Street Hijacks Your Money and How to Fight Back. The Book To the average person, investing seems like this complicated thing that no lay person can possibly understand. So they hand their money over to a “financial advisor.” The authors wanted to demystify investing for the average investor using simple language. They spent four years interviewing people like Barney Frank, Jack Bogle, Carl Icahn, mutual and hedge fund managers. Financial Advisors There are 450,000 people providing financial services in the United States and 90% of them are sales people. Just 10% are registered investment advisors. What’s wrong with that? When you go to a car dealership, 100% of the people are sales people. The difference is that you know the person trying to sell you a car is a sales person. The standards for most of these advisers is low. They are under no obligation to put the best interests of their clients first and many of them don’t. Their priority is making money for the company they work for. There is a lot of confusion among consumers about who is and who is not a sales person in the realm of financial advisors. Financial advice that is skewed by a conflict of interest costs investors $17 billion a year. If you were a paranoid person it might be enough to make you think the industry has been deliberately set up this way. The Fiduciary Standard The fiduciary standard was established as part of the Investment Advisors Act of 1940. Investment advisors are regulated and required to put client interests above their own. Investment brokers are only held to a standard of “suitability.” Under this standard, a broker can look at two funds which are similar but still recommend the more costly one that will also give him or her a higher commission. Brokers are paid based on the dollar amount of assets they manage so there isn’t necessarily any incentive to recommend the best investments, just to get the highest amount of assets under management. They often still get paid even if they lose you money. Isn’t More Expensive Better? If one financial advisor is more expensive than the others, doesn’t that mean he or she is better, smarter, more educated? Not in this case but it’s a common fallacy. None of these people can predict the future and past experience does not indicate future experience. The more fees you pay, the less money you have. Generally, the lower the fee, the better the performance of your portfolio. The Retirement System Many workers used to have a defined benefit system, a pension basically, that paid a certain amount of income for life after retirement. The system went bankrupt and had to be bailed out by the government. That system has largely been replaced by the one we have now, which relies heavily on 401k’s and IRA’s. But it’s expensive to manage a 401k and you’re paying for that. The average fee is over 2%. That doesn’t sound like much does it, a 2% fee? Consider this; if you have $25,000 invested over 35 years with an average yield of 7% and a fee of just 1%, that will cost you $65,000. The fees are often obscured because people tend to focus on the employer match and the tax advantages. Index Funds And Individual Stocks The best way to increase the chances of a good return over time is to pay the lowest fees possible. The lowest fee way to invest is to buy individua...

Today we interview Joan Sotkin of Prosperity Place, who approaches money in a holistic way. Because listen, emotion matters when it comes to money. Joan’s Story Joan comes from a family of compulsive debtors. She was born in 1940, a time when women’s roles were pretty prescribed. Joan got married and started on the prescribed path. She became a teacher but didn’t like teaching any more than she liked being married. She felt out of place. Looking for something else, she started studying what she terms, “woo woo stuff,” like astrology and healing crystals. In the 1980’s she began selling crystals and minerals for healing and meditation and was making great money. In 2015 money, she was bringing in $50,000 a month! And then she went bankrupt. Joan didn’t know how to manage cash flow. Her father died and she has since learned that people often deal with a big trauma by overspending. Her field started to grow and she didn’t know how to compete. Eventually, the business closed. Early Adopter In 1995 Joan discovered online business and taught herself how to build websites. A year later she moved to Santa Fe with $200 and whatever possessions fit in her car. In 1997 she started Prosperity Place. It’s a place for her to teach people what she learned from her mistakes and successes. Joan was an early podcaster too. She started podcasting in 2005. When Word Press came out she started building websites for other people. Insanity Defined Joan found that old saying, “Insanity is doing the same thing over and over and expecting a different result” to be true. She sees people acting out emotions through business and financial decisions over and over. You have to get in touch with your emotions in order to sustain success. We can know intellectually what to do but it still has to be done by a person (us) and a person can get in the way of doing it. Money And Emotion Our thoughts, beliefs, and emotions are what form our decisions. If you’ve had emotional issues in childhood, they sometimes manifest themselves in the decisions we make. If certain needs aren’t met, we feel deprived. If there is abuse or neglect, there is a feeling of being trapped in a situation. These emotions have to be expressed one way or another. That way can be healthy or it can be unhealthy. If your “story” is always ending the same way and you don’t like the ending, you can change it. Worrying about the future doesn’t help the future. Life doesn’t happen to you, it happens to you. Stress As A Motivator Does stressing over a situation motivate you to work harder? In that case, stress can seem like a beneficial thing. If you weren’t stressing so much, you would sit around playing video games instead of working toward a goal that will allow the stress to be alleviated. Being chronically stressed can cause adrenal fatigue which can lead to chronic disease. Making decisions based on fear can lead to poor decisions. You Are Not Required To Worry Do you feel as though if you don’t worry, you’ll fail? Some people who are very afraid to fly feel this way. Through the entire flight, they concentrate on the plane not crashing. When it doesn’t, they’re convinced that it was their worry that kept that plane aloft. They believe worry makes things happen or can prevent things from happening. Worrying is a waste of time. It’s creating a future that does not exist. You’re making it up! This doesn’t mean you stumble blithely along through life with no plan. But there is a difference between anxiety and concern. Whenever Joan starts worrying about money, she says to herself, “A large sum of money from an unexpected source.” Because that is as likely to happen as any doomsday scenario she could come up with thro...

You may have a budget but what if you have a big life change? Move cities, have a baby, buy a home. Budgeting for a lifestyle change can make or break you. You got the new job in a new place, your family grows, you need to care for a parent. Your old budget won’t do. A New Place What if your new job involves a big change of location? Moving from the suburbs to a city for example. Will you still need a car? Will there be a place to park your car? Maybe, but it might not be free and if it is free, you’ll likely be competing for lots of other people for the spot. Not many attached garages in the big city. What is the cost of living like compared to your current location? You might be getting a $20,000 jump in income but in the right (or wrong) city, that can be gone just paying deposits and broker fees. City-Data is a great resource to help compare the cost of living between cities. The Best Laid Plans Hopefully you’ve planned when to start your family but accidents happen. What if that happened to you? Would you be financially prepared? One of the biggest considerations before having a kid is day care costs. Prices fluctuate widely and sometimes the cost is so expensive, it actually makes more financial sense for one parent to stay home. A family situation that is harder to predict is that of your parents. None of us want to think about our parents aging and getting ill but it happens and you might have to step in. How much money do they have set aside? Would they want to live with you, stay in their own home, move to an assisted living facility? Who will make medical decisions if they cannot? Have these discussion with your parents before any of this happens. Buying A Home You found a $100,000 home and you have $20,000 to put down, great 20%! No, not great to the bank. They don’t want you to be cleaned out making the down payment. You won’t be able to pay the mortgage or the taxes. You might want to do some renovations so you can put your own stamp on the place. You moved from a studio to a house. Your futon and bean bag chair will look pretty lonely in a 2,000 square foot place. Twenty percent is not enough. Start A Business You have a killer idea and you long to quit slaving away for the man and want to start your own thing. Great! How much run way money do you have? What are the start up costs? Is your spouse on board or will they freak out if there isn’t a regular pay check coming in? How will you pay for insurance now that you no longer have it through your employer? Get A Baseline Where is your money going now? Before you make any big changes or decisions, you need to know this. If you had to cut to make room for something else, what could you sacrifice? Some things become such an ingrained habit, that you don’t notice anymore just how expensive they are (booze). Not everything has to be completely axed, some things could just be reduced (booze). Think back to your past. There was probably, hopefully, a time, when you spent less money than you do now but were still happy. Now think how much more you’re spending currently. Does the level of happiness correlate to the greater amount of money you’re spending? Probably not. It certainly costs more to be an adult than it does to be a college student but if your costs have sky rocketed, it’s unlikely that all of that money is going to fixed costs. A lot of it may be going to lifestyle upgrades, a bigger place, better car, nice clothes. The longer you can live like a student while earning like an adult, the further ahead you will be for the rest of your life.  How Much Do You Cut? Let’s say you make $50,000. Use a base of 60%, so $30,000 after taxes and savings. Divide the $30,000 by twelve months to get $2,500.

Learning how to negotiate is not just a nice to have skill – it’s critical. Everything from your salary to your purchases to even your relationship requires it. Here we break it down for you and give you the knowledge you need to hit the ground running. Perhaps the most important thing you need to understand is that most successful negotiations come with skill and practice, not force. We’re not going to show you how to strong arm your opponent or debate them into submission. Instead we’ve created an epic resource with everything you need to know to get what you want and walk away from the table with everyone happy. Podcast Episode Want to learn but would rather do it during your morning drive or while you’re working? Give this episode a listen, it’s pretty awesome. (show note links are at the very bottom of the article) Negotiation Vs Bartering Before we jump into it we think it’s important to discuss the difference between negotiation and bartering. There tends to be a lot of confusion around the two. It comes down to knowing your goal and having the right approach. Negotiation: This is not about winning. It’s about achieving your goal or objective. It’s not an argument but a constructive discussion. Since success is measured by achieving your goal or objective it’s then easy to eliminate certain approaches immediately. We’ll get into them later in the article. Bartering: This is also not about winning. It’s about exchanging your commodity or service for something of comparable value with a minimum effort or time commitment.  Right off the bat we’ve taken two big departures from negotiation. You don’t want to work too hard or spend too much time here. If you have a fruit stand at a fair you may barter with potential buyers. However, if you’re selling (or buying) a car you’re negotiating. Bartering is about value where as negotiation is about something much larger. The 7 Core Negotiation Tactics There are a few key things you need to keep in mind for a successful negotiation. While some may seem immediately obvious we really encourage you to read deeper. Because negotiation is about achieving a win-win situation and not a win-lose situation it’s really important to keep these core principles in mind – and refine them over time. If you ignore following a strong approach you’re at best opening yourself up to a less than optimal deal and at worse looking at no deal at all. Come Prepared You might have heard the saying “Don’t bring a knife to a gun fight.” Well, the same idea applies here. You’re not going to go to a car dealership and purchase a car originally having no idea how much it costs or what its positives/negative attributes are. The same applies to all negotiations. If you’re looking to get a raise, do you know how much other people with your skill set and background get paid? We talk about price anchors in the episode and this is a great place to use them. Head over to sites like Glassdoor or Payscale and do your research. Site’s like Indeed.com will also show you a data-driven aggregate of what they’ve seen people make for the position you have (or want). Use resources like these to ground yourself in reality, improve the chances of your success and logic for how you’ve approached your position. Remember, you’re looking for a win-win outcome. For a negotiation that’s a bit more nuanced like a big purchase you need to understand the value you’re getting, the main features as well as the weaknesses.

Have you ever thought about starting a Kickstarter campaign? We interview Chez Brungraber about how she did it for her travel bag. It takes some doing to get people to give you money for something that doesn’t yet exist. Chez tells us how she did it. Kickstarter is a place to get funding for a product that is still a prototype or a project that hasn’t been completed. The first rule is to have a product that you believe in. Once you have that, you have to get the word out, friends, family, bloggers, media. You have to keep your backers updated with how the project is progressing and when they can expect it to be complete. Chez’s company makes money but not enough to make large capital investments in things like new products. And it doesn’t make enough for a bank loan. That’s why she chose to fund this way. You have to hit your funding goal in order to receive the money towards your project. That sense of urgency helps to reach the goal. Most campaigns over $10,000 fail on Kickstarter so don’t ask for an insane amount of money. Keep in mind too that Kickstarter will take a percentage of your earnings, so factor that in. Once the goal is reached, you can set a “stretch goal.” Extra features that will be added to the existing product as higher funding goals are met. Chez recommends making sure you know what your stretches will be before starting the campaign. She had three days to come up with her first. Kickstarter isn’t a place for free money. Chez took four months to craft her initial campaign and more time to change it for her stretch goals. Make sure you have your basics set up, you’re incorporated, have a business bank account, you can’t deposit that money into your checking account! There are tax implications too. Kickstarter can be a great place for small businesses to get funding but do your research before starting a campaign. Show Notes Pumpking: A pumpkin beer from Southern Tier. Kickstarter: Chez’s new campaign for her travel bag. Gobigear.com: Here you can find more of Chez’s awesome gear LMM Community: Join the money revolution!  

  We haven’t done a Five Questions for awhile! We’re back to answer your questions about minimum wage, lending money and debt. We get a lot of questions and if one of you is wondering, more of you are wondering. How can you get by on minimum wage? Well, first of all, you have to live in a place like Iowa where the cost of living is very low. You also need to take advantage of any social programs you might be eligible for, low income housing, food assistance, reduced cost utilities. Work as many extra hours as you can to save up enough for a $1000 emergency fund. Next, try to build a marketable skill using all the free resources you can find, the library, the internet, Coursera, Khan Academy. A minimum wage job should be something you have while you build additional skills toward getting a better paying job. Apply to jobs you’re not qualified for. It may not always work but it only has to work once. At the very least you may get some interview experience. How do you know what tax bracket you’ll be in when you retire so you can choose the best IRA? When you retire, you won’t be earning money, or earning less, so the money withdrawn will be taxed at a lower rate. Unless, you have a separate revenue stream, like rental income. In that case, you might be earning more than when you worked. So it depends on your idea of retirement. Golfing all day or running a small property empire. If you’re going to relax, go traditional. If you’re going to earn, go Roth. Should we wipe out our savings to pay off student loans and then focus on retirement savings? Take the money in the savings account that isn’t earning interest, except for 3-6 months of expenses, and put that towards the loans. As for your investment money, the interest rate on your loans is low so leave that money where it is. What should we do with retirement plans from old jobs? Roll them over to avoid administration fees. How can you help manage parent and sibling debt? Just handing over a chunk of money is usually not a good idea. Agree to help with the caveat that the family member shows you how they plan to get out of debt and the steps they’ll take not to get into debt again. Thanks everyone. If you want to get an answer to your questions fast, come join us in the Community. Show Notes Allagash Dubbel Reserve: A malty, Belgian ale. LMM Community: Come join the money revolution!