Managing Money

If you can’t pay all your bills each month, you need to look at both your income and your spending.  If you can increase your income, that might fix your problem.  But if you cannot increase your income, you need to cut spending.

You also need a cash reserve for emergencies and expected maintenance. This can include auto repairs and tires, but might also include repairs or replacement of roofs, HVAC units and appliances.

If you purchased and own a home, you probably have a mortgage loan. The 15 year mortgages or mortgages that allow you to pay extra are the best, because they reduce the amount you will pay in interest. You will also be able to pay it off early and reduce your monthly living expanses.

You probably don’t pay cash for your cars and need to finance them.  You should try to pay off cars in 3 years or have a strategy to lower your driving expenses. We brought Prius Hybrid cars in 2005 to get 60 mpg. We saved 60% on gas because we tripled our mpg. The Prius also lasts over 300,000 miles. The Prius pretty much pays for itself.

Buying “toys” for the family is not usually a good investment, but if you use them and they didn’t cost much, they can be a good deal.  In 1975, we moved to Salina Kansas and I bought a large, open-bow boat for $4800. We kept the boat in our driveway and trailered it to the nearby reservoirs. We took our 6 kids boating and camping almost every weekend. We sold the boat in 1983 for $3000 to a guy who wanted to restore it.  Our expenses were limited to gas and maintenance. The kids still talk about all the fun they had on these camping trips.

Saving for retirement is another thing everybody needs to do.  401k stock accounts are the best place now to have your money invested.  During high inflation periods, fixed income accounts are the best. Fixed income accounts invest in mortgages, so it is “debt” investing. I pooled my savings in accounts to lend money and collect interest.  I kept my $5800 TIAA balance in a fixed income account 1975 when I left my job at Washington University and by 2011 it was worth $90,000. Inflation had kept fixed income earning from 7% to 12%.  I joined a 401k plan in 1986 and had the maximum deducted. At the time, fixed income was earning 10%. The balance got to $ 46,000.  When I started my consulting practice in 1993, I rolled over my 401k and opened a SEP stock account in the Vanguard Index 500 and contributed the maximum until 2011. I still have that SEP account.

Home ownership is a big part of financial planning. When we got married in 1964, we didn’t want to rent, so we moved in with my mom.  We had a daughter in 1965 and went house hunting.

In 1966, we bought a 4 bedroom ranch with a basement on an acre lot in a subdivision in the exurbs for $700 down and we assumed a $16,000 loan at 4%. It was a foreclosure. Our monthly house payment of $150. It was a “fixer-upper”, so we put in central air, installed new doors, poured a patio and a bypass driveway pad, fixed up the yard, planted trees and shrubs and put in a garden in the back of the lot.  At the time, new homes were going for $30,000, so I started off cheap.  We sold that home in 1975 for 36,000. We paid off the remaining mortgage for $12,000 and carried away $24,000. We were in this home for 9 years.

On the Income side, I was able to work and play band jobs on the weekends, so my wife didn’t have to work and could be home with the kids. We moved my mom in with us in 1966 and rented her house to the same guy for the next 9 years. We moved her back to her house in 1975. My house was next door to my brother and his wife and 4 kids, so my mom was close to all of her grandkids. My mom worked as an Accountant until about 1973. When we moved to Kansas, she moved back to her home across the street from her sister and brothers and enjoyed chauffeuring herself and 3 other old ladies to church every morning. She had saved her rent money all those years and was able to retire with no worries about money.

We moved to Salina Kansas in 1975 and bought a home for $55,000. We put $20,000 down and got a $35,000 mortgage at 6%. Our house payment was $300 per month.  We sold this home in 1983 for $85,000 and took over $50,000 out. We were in this home for 8 years

We moved to Atlanta Georgia in 1983 and bought a home for $137,000 and got a $100,000 mortgage at 13%. We refinanced back to 10% and then 7% with a 15 year loan. We paid this off in 2003.  Our home is now worth over $500,000.  We recouped every dollar we ever paid on house payments and upgrades from 1966 to 2003 including interest. We’ve been in this home for 35 years.

We kept our real estate fee expenses low by keeping our homes for as long as we lived in those areas. We kept our cars for 10 years. Most of our vacations were spent with family. We were “handy”, so we always did all of our own maintenance and renovation work.

In 1983, when we moved to Dunwoody Georgia, my wife enrolled in Dental Hygiene school. She had been a Certified Dental Assistant and Lab Tech and when Hygiene programs were being offered she got the bug to be a Hygienist.  She graduated in 1986 and we saw a $25,000 rise in household income overnight. This was just in time to help get our 6 kids through college. They all had student jobs and we bought them used cars and together we got them all graduated with no student loans to pay off.

In 1988, we started paying for weddings. We gave the kids a budget of $5,000 and they stuck to it. The last wedding was in 2003 and it cost a lot more.

We worked together as a family to ensure that all would be self-supporting. We always believed that the family was the basic economic unit of the US economy and we proved it.

Norb Leahy, Dunwoody GA Tea Party Leader