I'm not a fan of the sales comparison or realtor CMA...heck, I am a realtor. I love discounted cash flow analysis (income approach) to gauge investment value, but the reality is that for single-family residences (SFR) this just doesn't cut it.
Home buyers may think of themselves as investors, but they typically pay premiums to investment value. Most SFR equivalent cash flows are insufficient to justify market values.
Similarly, the cost approach is not quite realistic for SFR either. This is mainly used for new and unique properties, such as sports complexes, marinas, etc., and for good reason. The older the structure on the property the more difficult this approach becomes.
When it comes down to it the investment axiom of "an asset's value is whatever someone is willing to pay for it," holds true. You can derive whatever figure you want through whatever method you want, but when you list the property a prospective buyer only cares about relative advantage within his localized area of interest...if he can find the same property qualities next door for less money, he'll take that over a cleverly contrived asking price.
You made a great point, though, in that an anomalous occurance of a panicked neighbor selling for way below market does not necessarily mean the market, itself, has suddenly crashed.
Maybe the "get a degree and get a better job" rule worked in the 70s but now you have to have the right degree, tons of experience even before you graduate and know a lot of people in the right area or you get a McJob!
English majors major in Starbucks. Want to get a real job? Sciences, Math, Engineering, and medical is where the money is at.
Additionally, the best and closet estimate you can get is from a Realtor. A GOOD Realtor has the knowledge of the local market, the houses on the market and their specific condition such as upgrades, locations, days on market, seller motivation, when the house came on market; they know about supply and demand, what the buyers want now, ...etc.
They know about what houses are sold for what value and why.
They don't just take the numbers and crunch them, they actually know about the houses!
They are the best source and they will come out and do a market analysis for you for FREE. Great way to find the best estimate for your house.
Oh, you should get some recommendations and find great Realtors.
I recently found myself with the new lifestyle of money and free time and have had a rough time with it. I leased a townhouse for 2200 a month and now realize that was a dumb move even before moving in. I bought the stuff poor people buy when they have extra money instead of focusing on saving and actually going outdoors with the 8 hours I now have free. The one thing Im glad I did was buy a fake rolex to see how long before Id get tired of it and it was about a week when I realized its pointless to wear a watch since I dont need to know what time it is anyway. Its all advertising and craving what you think rich is supposed to feel like but the day I had 20k in checking I knew what fools middle class folks get taken for.
if a twenty-year old in 2008 gets a reasonably well-paying job makes sure to save 10,000 per year, and continues for the next forty years at average 5% after-inflation returns on investment, he or she will have 1.2 million at the age of 60 (this is in today's dollars, not 2068 dollars).
If, at the age of forty, due to improved career prospects, he or she increases her savings to 20,000 per year up to the age of 60, she will have 1.9 million in 2008 dollars.
Along the way, she can choose all kinds of options that many people can't--she can buy a business, commercial property, feel more freedom to do what is most interesting to her because of the backup of having that cash available. Thus, it may be easier for her to pick work on her terms, and because it interests her, as opposed to just to make ends meet.
It's not that unreachable. Over time, it's quite attainable. It's just that many/most people aren't even aware that it's a possibility so they don't see what steps they could take (within reach) that would get them there.
Wow- clearly I read a different article than some of the above commentators because I didn't come across any "fat-shaming" or hating.
This is in fact an observational article, maybe the author is guilty of some generalisations but as someone who works in health research I have to agree with most of them.
Thanks for the article Carrie- I enjoyed it.
I think one reason Bach might have used 10% in his books is because it sounds nice and, for a good 10 years, it seemed like a normal investment return. Also, that way he can motivate people by telling them they can accumulate a million bucks (That's in 2048 (the year) dollars, which are only worth about 33 cents each, by the way) by cutting out coffee visits. Even if it's not completely realistic, it's reasonable of him to do since a lot of people don't "do" compound interest and don't know present versus future values. If it gets people motivated to make a positive change in their lives, I say great. Wiser and more knowledgeable heads (like Warren Buffett) know that there's no way for most people to average anything close to 10% per year. Try maybe 6 percent. And those are pre-inflation numbers. Then take out inflation at 3% a year and the numbers look a lot less impressive to the uneducated eye. So Bach just dangles the obvious numbers in front of people. That's all right in my mind if it helps them get off their butts and improve their financial stability and future.
Essentially, some of us are we're arguing over whether you're going to get 900,000 or 400,000 by cutting out coffee breaks. Well, either one of them is a lot more than zero, which is your other option. Even if you state it correctly, in inflation adjusted terms,(and few pop finance writers seem to want to do that) and the 400,000 in 2048 dollars turns out to be worth $133,000 in 2008 dollars, I suspect you'd rather have that than nothing.
It's also essential to look at the income side of the equation, and earn enough, because if you don't have enough income then no amount of frugality will pad your nest egg. And yes, even if you earn big $$, if you don't curb your spending, you can easily fritter it all away and end up with no cash at the end of the journey.
I'd take a round guess and say a half a million in today's dollars, by the time you are 60, is the lower end of money that would allow for a secure retirement for an individual. (couples would have a slightly different figure, probably more like 750,0000. So, to my mind, the litmus test question is, "given my current net worth, my income, and my current rate of savings, will it add up to half a million in today's money? " If so, great. If not, I'd be thinking about making serious changes pronto.
I'd say most of us would do well to cut out the bar runs and cafe trips, the unnecesary clothes shopping and the Disney channel subscription, and pay attention to this.
And if you take a cold analytical look at your own numbers and see that you're not on track for that 500,000 in 2008 dollars, now might be a good time to start by doing something as easy and painless as making your own coffee and muffins.
Just make sure you keep the better parties and intellectual discussions from extending from beyond the English major social circle. You might find, as a few of my more pretentious English major friends have, that your superior education doesn't help you nearly as much as you thought it would when dealing with your other, more common, acquaintances.
I had thought that my school was the only one producing English majors with an intense false sense of superiority. Thanks, this will help me to better explain their behavior to my other friends in the future.
What the folks at YellowPagesGoesGreen are doing is great stuff. Most likely will NOT stop the Yellow Pages from arriving on your doorstep. At least not yet.
Hi Nora, relating to this article, you can deny the request a merchant has to see further ID if the card is signed. This can also protect identity fraud.
but what bothers me further is the other things that merchants demand that we give into without realizing that it goes against our rights as card holders. According to Card Acceptance and Chargeback Management Guidelines for Visa Merchants, merchants can't force minimums (page 9), charge surcharges for using a card (page 10), or hold a estimated tip (page 11)(show card page 31). But they are still doing it! I'm interested in you opinion, as the woman who tries to charge everything; How do we protect ourselves against these charges? You can neither print or copy the PDF Visa has on their website that I cited. So what is one to do when faced with an angry merchant who is demanding you do what he says or leave without the goods.
It was very blunt, which is why I think that it got so much of a reaction, but it also states some great truths. I don't, however, think that all the things that got our country into this situation are bad- it's economics that there will be up and down turns. Just stay the course and it will go up again.
Mahalo also has great general search results- they're all human-built results so you know the pages are relevant. Plus, you can join thier editorial staff and create your own pages to get some extra $$.
Also, UpTake.com is great for searching for travel-related results, it's all in one place there.
I learned to cut hair from my mom ages ago. She learned on her first husband, and I have done the same on mine. When we first moved in together he was going to go looking for a barber and I simply had him buy a $20 razor and hair cut kit at the same time. Over the years I've started to do his friends as well when they're over if they need it and haven't had time to get it done. It's not only a great time saver, it's fun!
I tried to talk DH into learning to cut my hair, but he doesn't trust his hand-eye coordination and fine motor skills so I still splurge and go to a saloon occasionally. However, since I grew my hair out, it can now go up to 6 months between saloon visits!
I just spent an hour meeting with a young woman who is planning to create an Esperanto student organization at the University, so soon there'll be two free options for people to learn and practice their Esperanto in CU.
And the student organization will even have a small budget from the University--what could be more frugal than that?
Although you need to pay for a membership and pay for a GPS machine, it's SO MUCH FUN! I usually mooch both the membership and the GPS machine from my family and friends, but it's such a great way to get out with friends/family without having to dump loads of $$. Plus, you usually get to discover some cool places and get some exercise as well.
I never knew that it was an option to opt out of the telephone book- I hate them and always have like 4 or 5 delivered to my door each month, it's agrivating. Though I recycle them, it'll be much better to be able to opt out. Thanks!
I'm surprised you didn't mention the outstanding free opportunity to study Esperanto afforded by the presence of EKOCI in Champaign. :-) I suppose when writing an article of this sort, it's hard to pick and choose among the dazzling array of possibilities.
For people interested in Champaign Urbana area, or new to the region, I've collected various tips in my blog http://chambana1000.blogspot.com . This includes the following:
* Urbana is originally named after Queen Anne! (though via the names of two other towns)
* It is illegal for Monsters to enter the City of Urbana without a permit! :)
The other tips are not so wacky, so enjoy the info ...
Thanks so much for providing the opt-out link. The video was funny, too.
The thing about the Google number (someone else mentioned it above) is that it only has business listings. If you want business, government, and residential listings and you're not near a computer screen, the way to go is 1-800-FREE411. Our number pretty much replaces the need for the Yellow Pages, White Pages, and those blue government pages at the beginning of the book. Oh yeah, it's also as free as it sounds.
I'm not a fan of the sales comparison or realtor CMA...heck, I am a realtor. I love discounted cash flow analysis (income approach) to gauge investment value, but the reality is that for single-family residences (SFR) this just doesn't cut it.
Home buyers may think of themselves as investors, but they typically pay premiums to investment value. Most SFR equivalent cash flows are insufficient to justify market values.
Similarly, the cost approach is not quite realistic for SFR either. This is mainly used for new and unique properties, such as sports complexes, marinas, etc., and for good reason. The older the structure on the property the more difficult this approach becomes.
When it comes down to it the investment axiom of "an asset's value is whatever someone is willing to pay for it," holds true. You can derive whatever figure you want through whatever method you want, but when you list the property a prospective buyer only cares about relative advantage within his localized area of interest...if he can find the same property qualities next door for less money, he'll take that over a cleverly contrived asking price.
You made a great point, though, in that an anomalous occurance of a panicked neighbor selling for way below market does not necessarily mean the market, itself, has suddenly crashed.
They all sound fun, but the jazz / sculpture garden walk and the Strawberry Jam sound beyond cool.
Maybe the "get a degree and get a better job" rule worked in the 70s but now you have to have the right degree, tons of experience even before you graduate and know a lot of people in the right area or you get a McJob!
English majors major in Starbucks. Want to get a real job? Sciences, Math, Engineering, and medical is where the money is at.
How could you leave out La Bamba's?!? Everytime I drive through Champana I have to stop for a burrito the size of my head! So tasty.
Additionally, the best and closet estimate you can get is from a Realtor. A GOOD Realtor has the knowledge of the local market, the houses on the market and their specific condition such as upgrades, locations, days on market, seller motivation, when the house came on market; they know about supply and demand, what the buyers want now, ...etc.
They know about what houses are sold for what value and why.
They don't just take the numbers and crunch them, they actually know about the houses!
They are the best source and they will come out and do a market analysis for you for FREE. Great way to find the best estimate for your house.
Oh, you should get some recommendations and find great Realtors.
Sam
Fix My Personal Finance
http://fixmypersonalfinance.com/
Great article, Julie!
I recently found myself with the new lifestyle of money and free time and have had a rough time with it. I leased a townhouse for 2200 a month and now realize that was a dumb move even before moving in. I bought the stuff poor people buy when they have extra money instead of focusing on saving and actually going outdoors with the 8 hours I now have free. The one thing Im glad I did was buy a fake rolex to see how long before Id get tired of it and it was about a week when I realized its pointless to wear a watch since I dont need to know what time it is anyway. Its all advertising and craving what you think rich is supposed to feel like but the day I had 20k in checking I knew what fools middle class folks get taken for.
if a twenty-year old in 2008 gets a reasonably well-paying job makes sure to save 10,000 per year, and continues for the next forty years at average 5% after-inflation returns on investment, he or she will have 1.2 million at the age of 60 (this is in today's dollars, not 2068 dollars).
If, at the age of forty, due to improved career prospects, he or she increases her savings to 20,000 per year up to the age of 60, she will have 1.9 million in 2008 dollars.
Along the way, she can choose all kinds of options that many people can't--she can buy a business, commercial property, feel more freedom to do what is most interesting to her because of the backup of having that cash available. Thus, it may be easier for her to pick work on her terms, and because it interests her, as opposed to just to make ends meet.
It's not that unreachable. Over time, it's quite attainable. It's just that many/most people aren't even aware that it's a possibility so they don't see what steps they could take (within reach) that would get them there.
Wow- clearly I read a different article than some of the above commentators because I didn't come across any "fat-shaming" or hating.
This is in fact an observational article, maybe the author is guilty of some generalisations but as someone who works in health research I have to agree with most of them.
Thanks for the article Carrie- I enjoyed it.
I think one reason Bach might have used 10% in his books is because it sounds nice and, for a good 10 years, it seemed like a normal investment return. Also, that way he can motivate people by telling them they can accumulate a million bucks (That's in 2048 (the year) dollars, which are only worth about 33 cents each, by the way) by cutting out coffee visits. Even if it's not completely realistic, it's reasonable of him to do since a lot of people don't "do" compound interest and don't know present versus future values. If it gets people motivated to make a positive change in their lives, I say great. Wiser and more knowledgeable heads (like Warren Buffett) know that there's no way for most people to average anything close to 10% per year. Try maybe 6 percent. And those are pre-inflation numbers. Then take out inflation at 3% a year and the numbers look a lot less impressive to the uneducated eye. So Bach just dangles the obvious numbers in front of people. That's all right in my mind if it helps them get off their butts and improve their financial stability and future.
Essentially, some of us are we're arguing over whether you're going to get 900,000 or 400,000 by cutting out coffee breaks. Well, either one of them is a lot more than zero, which is your other option. Even if you state it correctly, in inflation adjusted terms,(and few pop finance writers seem to want to do that) and the 400,000 in 2048 dollars turns out to be worth $133,000 in 2008 dollars, I suspect you'd rather have that than nothing.
It's also essential to look at the income side of the equation, and earn enough, because if you don't have enough income then no amount of frugality will pad your nest egg. And yes, even if you earn big $$, if you don't curb your spending, you can easily fritter it all away and end up with no cash at the end of the journey.
I'd take a round guess and say a half a million in today's dollars, by the time you are 60, is the lower end of money that would allow for a secure retirement for an individual. (couples would have a slightly different figure, probably more like 750,0000. So, to my mind, the litmus test question is, "given my current net worth, my income, and my current rate of savings, will it add up to half a million in today's money? " If so, great. If not, I'd be thinking about making serious changes pronto.
I'd say most of us would do well to cut out the bar runs and cafe trips, the unnecesary clothes shopping and the Disney channel subscription, and pay attention to this.
And if you take a cold analytical look at your own numbers and see that you're not on track for that 500,000 in 2008 dollars, now might be a good time to start by doing something as easy and painless as making your own coffee and muffins.
Just make sure you keep the better parties and intellectual discussions from extending from beyond the English major social circle. You might find, as a few of my more pretentious English major friends have, that your superior education doesn't help you nearly as much as you thought it would when dealing with your other, more common, acquaintances.
I had thought that my school was the only one producing English majors with an intense false sense of superiority. Thanks, this will help me to better explain their behavior to my other friends in the future.
I've heard of Maholo when it was first starting out. I'll have to revisit it now. And thanks for the other recommendation, too!
Linsey Knerl
What the folks at YellowPagesGoesGreen are doing is great stuff. Most likely will NOT stop the Yellow Pages from arriving on your doorstep. At least not yet.
Best way to stop the insanity is call the publishers direct.
Hi Nora, relating to this article, you can deny the request a merchant has to see further ID if the card is signed. This can also protect identity fraud.
but what bothers me further is the other things that merchants demand that we give into without realizing that it goes against our rights as card holders. According to Card Acceptance and Chargeback Management Guidelines for Visa Merchants, merchants can't force minimums (page 9), charge surcharges for using a card (page 10), or hold a estimated tip (page 11)(show card page 31). But they are still doing it! I'm interested in you opinion, as the woman who tries to charge everything; How do we protect ourselves against these charges? You can neither print or copy the PDF Visa has on their website that I cited. So what is one to do when faced with an angry merchant who is demanding you do what he says or leave without the goods.
http://www.mycardblog.com/2008/08/5-common-mistakes-a-merchant-will-make...
It was very blunt, which is why I think that it got so much of a reaction, but it also states some great truths. I don't, however, think that all the things that got our country into this situation are bad- it's economics that there will be up and down turns. Just stay the course and it will go up again.
-Suz
I'll have to check it out, although I'm with you - wish I'd thought of it! Bet they're sitting happy...
-Suz
Mahalo also has great general search results- they're all human-built results so you know the pages are relevant. Plus, you can join thier editorial staff and create your own pages to get some extra $$.
Also, UpTake.com is great for searching for travel-related results, it's all in one place there.
-Suz
I learned to cut hair from my mom ages ago. She learned on her first husband, and I have done the same on mine. When we first moved in together he was going to go looking for a barber and I simply had him buy a $20 razor and hair cut kit at the same time. Over the years I've started to do his friends as well when they're over if they need it and haven't had time to get it done. It's not only a great time saver, it's fun!
I tried to talk DH into learning to cut my hair, but he doesn't trust his hand-eye coordination and fine motor skills so I still splurge and go to a saloon occasionally. However, since I grew my hair out, it can now go up to 6 months between saloon visits!
-Suz
I just spent an hour meeting with a young woman who is planning to create an Esperanto student organization at the University, so soon there'll be two free options for people to learn and practice their Esperanto in CU.
And the student organization will even have a small budget from the University--what could be more frugal than that?
Although you need to pay for a membership and pay for a GPS machine, it's SO MUCH FUN! I usually mooch both the membership and the GPS machine from my family and friends, but it's such a great way to get out with friends/family without having to dump loads of $$. Plus, you usually get to discover some cool places and get some exercise as well.
-SUz
I never knew that it was an option to opt out of the telephone book- I hate them and always have like 4 or 5 delivered to my door each month, it's agrivating. Though I recycle them, it'll be much better to be able to opt out. Thanks!
-Suz
I'm surprised you didn't mention the outstanding free opportunity to study Esperanto afforded by the presence of EKOCI in Champaign. :-) I suppose when writing an article of this sort, it's hard to pick and choose among the dazzling array of possibilities.
Good to see another blogger from Chambana ...
For people interested in Champaign Urbana area, or new to the region, I've collected various tips in my blog http://chambana1000.blogspot.com . This includes the following:
* Urbana is originally named after Queen Anne! (though via the names of two other towns)
* It is illegal for Monsters to enter the City of Urbana without a permit! :)
The other tips are not so wacky, so enjoy the info ...
Thanks so much for providing the opt-out link. The video was funny, too.
The thing about the Google number (someone else mentioned it above) is that it only has business listings. If you want business, government, and residential listings and you're not near a computer screen, the way to go is 1-800-FREE411. Our number pretty much replaces the need for the Yellow Pages, White Pages, and those blue government pages at the beginning of the book. Oh yeah, it's also as free as it sounds.
Cheers,
Jay
rune scape is da best ever lol i am totally addicted!!