I told you so!
It’s been a while since I’ve written a post here, but I had a big life event happen today and I just had to write a little post and give a big fat “I told you so” to a bunch of people who doubted me over 2.5 years ago.
In December of 2012, I wrote a post about how I was taking a $15,000 401k loan to help on the down payment of my first house purchase.
Here are a few quotes from the comments of that post, including a few people who thought my financial decision was so awful that they had to stop reading this blog altogether:
401(k)’s are for retirement and unless it’s an emergency cash need, I just can’t advocate that as a good idea.
I feel more like you’re trying to justify your decision than advocating this as a great choice. I see our financial goals at odds, so I gotta unsub.
I agree with Lindsey. It looks like it’s time for me to unsubscribe as well. It appears that we have completely different financial (and life) goals and I don’t agree with yours.
Fast forward to July 13th, 2015. After buying the house for $200,000 in December of 2012, I closed on the sale of this house for $288,000. To complete the math, we did put about $35,000 into renovations on the home, and also paid a 3% Realtor fee to the buyer’s realtor at the sale. So here’s the final math:
$288,000 Sale Price – $200,000 Purchase Price – 8,640 Buyer Realtor Fees – $300 Seller Realtor Fee (flat fee listing) – $35,000 investment – $5,250 401k withdrawal tax+penalty = $38,810 profit.
259% Return on Investment in 2.5 years
In December of 2012, I had two options. I could either leave my $15k in my 401k and let it grow there, or I could leverage that money to buy a house.
If I had left it in the 401k and invested in the S&P 500, I would have gotten a substantial gain of 48.25%. That’s nothing to be upset with. But instead I bought a house, flipped it, and made a 259% return on investment, even after I did change jobs and had to pay a 25% tax + 10% penalty on the withdrawal.
In personal finance, there are no “right” answers because nobody can tell the future. Personal finance is personal and I certainly don’t have any issue with individuals who would never take a 401k loan to buy a house. That’s a perfectly legitimate financial decision.
However, when looking back you can absolutely determine which of two options had the better financial return, and it’s obvious that I made the decision that had the greatest return over 2.5 years.
The next step of my life is to use a big chunk of the profit I made to close on the new house my wife and I are building. We took the equity out of our house and put it back into a bigger, newer house where we plan to raise our family for decades to come.
Even though I’ve gotten a new, better paying job since December of 2012 and we are still being frugal with our money, I never would have had the money to build a dream home for our family if I hadn’t bought and flipped our first home.
Maybe the real estate market will crash and keeping my money invested in my home will make me a loser overall. Or maybe my new home will be worth 2 or 3 times what I paid for it when I look to sell in 10-20 years. I have no idea.
But I do know I made the right decision in taking a 401k loan to buy a house back in 2012.
As we all know that the finance industry is one of the oldest industries in the world. People have been dealing with payment management since the first communication between tribes started. However, with a constant change in the human society, the ways of dealing with money have also transformed. This has also resulted in numerous interesting processes for us to observe and obstacles to overcome in the finance industry. Therefore, students writing a dissertation on finance will have to do an in-depth research on a variety of topics, as there are numerous topics in finance to choose from.
As a student, it can be challenging to choose a direction in which you want to take your paper. If you are facing difficulties with that right now, then you must remember a few important things about finance dissertation topics. The first thing that you have to make sure that you like the topic on which you are planning to write content. You have to spend a lot of time in researching all the aspects pertaining to the topic to make sure that you get all the information. Furthermore, you have to ensure that you don’t get bored doing the work.
You can also take the help of an expert to comment on your ideas, since an expert was in this sphere for a long period of time. Getting the expert’s approval will get you on the right track. You have to pick a topic that has an adequate amount of data on it. The content written by you will have defined volume requirements, which are definitely more than a few dozen of pages. You have to be selective while searching for the right topic, which can help in making your research stand out. If you are looking for an expert who can help you out with finance dissertation, then the first thing you have to check is the credentials of the expert.
You have to keep in mind that the information will be provided by these experts only, so if these professionals are not credible enough, then you might not be able to get the best finance dissertation that you are looking for. When these professionals are not credible enough, this means that you might not be able to get the best corporate finance assignment help that you are looking for. Have a look at mastersthesiswriting.com, as they are the experts in making finance dissertation. While choosing the finance dissertation experts, you need to ensure that the experts have worked on the related courses in the past.
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My family has a vacation scheduled for the end of the summer, and my daughter is beyond excited. About a month ago, her grandmother gave her a dollar to spend while we’re there, which has raised the stakes considerably.
I have trouble finding words to describe her devotion to this dollar. We talk about purchases, have taught her to identify coins and bills, and save money in a change jar; all with the goal of teaching her about money. But if I offered her a $100 in exchange for her precious dollar bill, she would turn me down flat.
Cash vs. Money
The saga of that dollar brings to mind a long-held belief regarding teaching children about money. Identifying and counting cash are important, but they are essentially math skills. Learning the mathematics of cash is not the same as learning about money. It does not teach a young child what it means to manage a resource that is finite, or to be thoughtful in making choices that preclude other, potentially more attractive, options.
There are very few “stand alone” lessons in life, I’ve found. Which is how two of my most desperate parenting moments spawned some of my best money lessons thus far.
Desperate parenting moment #1: Newborn-level sleep deprivation
When my daughter was 3, she discovered that she could have company in the middle of the night if she kept waking her parents. Six to eight times a night. For over three months. Fortunately, she also discovered chewing gum around the same time. It took longer than it should have for me to think of it, but I finally made a chart and started giving her a sticker for each night she only woke me up once. Three stickers, a piece of gum, and voila! Problem solved.
After a few pieces of gum, I began to worry about the damage to her teeth. So we upped the ante. Three stickers for a piece of gum, or she could wait, save up five stickers, and earn a trip to the indoor play park down the road. Dental disaster averted.
Desperate parenting moment #2: Confronting the consequences of one’s previously inadequate parenting
Like many children, my daughter loves stuffed animals. She particularly likes them on her bed, and she doesn’t like to leave anyone out. Having failed to nip this trend in the bud, we were faced with its inevitable consequence: a toddler bed obscured by mountains of artificial fur and fluff.
In an effort to stem the bed’s growing population, we began allowing her to use the stuffed animals on her bed to “purchase” other things she wanted. A toy at the store? Sure. That will be one large, or two small stuffed animals. A few more minutes to play at bedtime? You get the picture.
The inanimate population of my daughter’s bed now hovers around a relatively reasonable five. The addition of another animal is contingent upon ousting an incumbent. (The alacrity with which my daughter switched from wailing heartbreak over the loss of her beloved “friends” to pragmatic calculation of their relative value has me straddling the fence between pride and a sort of horrified fascination.)
Reinforcing fundamental skills
Obviously, I wasn’t trying to teach my daughter about money with sticker charts and toy currency. But that’s sort of the point. Children do not generally confine their learning to things we are trying to teach. They learn all the time, and many of the lessons they absorb have application well beyond the immediate situation.
Recognizing that five gets you more than three, planning for a greater reward, and delaying gratification are essential to the responsible management of money. Each involves informed, conscious choices, which is money management at its foundation. So when it comes to teaching your kids about money, worry less about whether they recognize a $5 bill at the age of 3, and focus on building the skills they’ll need to make responsible decisions and build wealth.
A number of factors can soon conspire that result in you having various debts to pay off each month, from credit cards, loan repayments and even paying back friends and family for borrowed finances. If you’re someone who uses a credit card regularly and has at least one other outstanding loan repayment then a consolidation loan could be helpful.
Depending on the amount you owe, and your current financial situation, a consolidation loan is not always beneficial. However, if you can identify with the following it is worth considering to improve your situation.
Easier to Manage Debts
It can be hard keeping track of all the repayments you have, especially when they have to be made at different dates. Missing one can lead to additional costs on top, so putting them all together into one loan reduces this risk and makes it simple to see how much you owe each month. For the disorganised it can be extremely helpful.
A secured loan for consolidation from a company like Nemo Personal Finance ensure these multiple monthly repayments are put into one place. You will know the exact date an amount the payment will go out each month making it easier for you to manage your finances.* Remember, a Nemo loan is secured against your home so you must ensure you can afford the repayments.
Depending on how your debts are spread out, consolidating them all in one place under one interest rate could potentially cut down the amount of interest and therefore the total you will have to pay back. If some of your payments are currently attached to high interest rates or if the total interest is staggering then a consolidation loan should help.
Improved Credit Rating
Placing all your payments in one consolidation loan means you can close every other credit card and loan accounts immediately. This should greatly improve your credit rating as it helps you get on top of your financial situation and proves you are in control of them, which will be helpful in the future. You should also cut up any credit cards and cancel accounts with overdrafts to prevent against overspending again.
*Please be aware that the APR on your new loan with Nemo may be higher than the APR on the credit you are settling and may cost more over the course of the loan.
You’re at work, whistling a jaunty tune and wandering your office with a hop and a skip. Little do you know what dangers are lurking around your seemingly banal workplace.
But even the dullest setting can be rife with dangers. A strewn wire here or a faulty electrical socket there can turn a benign office into a place with more dangers than the Australian Outback.
As you wander without a care in the world, you suddenly trip over a wire on the ground, fly into a wall and smack your head with the impact of a sledgehammer pummelling a watermelon.
You lie back and feel concussion wash over you – and you’re not the only person who’s suffered such a fate.
According to government statistics, more than 78,000 injuries happen in workplaces every year – and 133 of these mishaps prove fatal.
There are, however, numerous ways your business can make itself safer. Here are just a few.
Contact the pros
You might believe you’ve got everything under control when it comes to keeping your workplace safe. But that will all change as soon as broken legs and ligaments are abound on the shop floor.
You’ve got to nip these dangers in the bud if you want to avoid a nasty claims process. So why not call in a few people who know exactly where the danger hotspots will be on your premises?
Accident claim specialists, like those at Claim4, can help you hunt down any dodgy sections of your workplace. After all, why not fix your danger zones before your accident prone employees happen upon them?
Sweep your workplace regularly and you’ll save tons of cash in the long run.
Listen and learn
While you parade around in your managerial ivory tower, your staff are hacking away at the coalface and figuring out every nook and cranny of your work premises. As you look out over these busy bees, why don’t you pay attention when they buzz in your ear?
Set up an open door policy where members of staff can come to your office and tell you about problems they might have. And if they alert you to any major safety issues, act on them at once.
As a boss, you should be all-ears – listening to your employees will save you a whole lot of bother.
Keep it regular
Your machinery is sputtering like a Victorian contraption, and your floors have more potholes than a golf course with a gopher infestation. But if you don’t keep on top of them, your workplace will become a death trap.
Check the nick of your workplace at every opportunity, and encourage employees to do the same. Your reputation as a safe and trustworthy employee hangs in the balance.
If the company you work for offers group life insurance, be sure to take advantage of this great benefit. Employers are not required to offer life insurance, so if yours does be sure to count your blessings. While having group life insurance is a nice bonus, it would be wise to consider purchasing additional life insurance on yourself.
Employer-sponsored group life insurance policies are different than individual life insurance plans in these ways:
- There are no medical exams
- They are designed one-size-fits-all
- They have less individual coverage
- They are only in affect while you work for that company
To purchase an individual life insurance policy, you typically need to undergo a medical exam. The life insurance company uses your exam results as one of the determinants of how much your policy premiums will be. The healthier you are, the more inexpensive your premiums. If you are purchasing additional employer-sponsored life insurance beyond the 50,000 that most employers provide, compare these insurance costs to individual plans. You can see these individual life costs by getting a free term life insurance quote. You may be pleasantly surprised.
Employer-sponsored group plans offer the same amount of coverage at the same rate, regardless of the individual’s health. This may sound ideal, and it is a great employer benefit, but there are a few problems with relying solely on your company’s life insurance plan.
Did you ever buy something that claims to be one-size-fits-all only to discover it definitely does not fit all? Employer-sponsored life insurance plans are designed to cover a large group and are planned as a one-size-fits-all package. They may not include any life insurance policy riders that would benefit you and your loved ones such as child riders, spousal riders, long-term care riders, or accelerated death benefit riders. A great benefit of having individual life insurance is how customizable it is for your unique situation. Life insurance through your work does not take your individual situation into consideration.
Most employer-sponsored life insurance plans only pay for coverage that is one to two times your salary. While this extra amount is helpful to your loved ones if you died, it will not last much more than a year or two. The standard recommendation of life insurance coverage is 10 times your annual salary; this is not the perfect number for every family, but employer-sponsored plans do not come close to this coverage amount.
Many people don’t realize that you can only collect on your group life insurance policy if it’s in force and you are employed with that company when you die. However, if you get sick or injured and are in the hospital long before you pass away chances are that you were terminated from the company. Many employer benefits contracts state that they will discontinue your benefits (including your life insurance policy) and terminate your employment if you are not able to make it to work after a month or so. Not only are your loved ones emotionally and physically devastated from your death, but they then find out you no longer have a life insurance plan in place and are also financially impacted.
Let’s say you were diagnosed with cancer and were in the hospital for a long period of time, but fought it and survived. You can rejoice that you are still alive to be with your loved ones, but your employment was still terminated. You now have to look for a new job. Maybe the next employer doesn’t offer life insurance. In this case, you will have to shop for life insurance on your own but now have a pre-existing condition which means life insurance may now be much more expensive or even unavailable.
Another situation when relying solely on your group life insurance policy could go wrong is if you are laid-off or if the company goes out of business. Say you are 55 years old and never purchased individual life insurance because you thought you were safe having it only through your employer. If the company goes out of business or starts laying people off, you are now 55 and have no life insurance. Your health and age play a huge role in determining the price of life insurance. The last thing you need to worry about as you get closer to retirement age is trying to find affordable life insurance. Again, your age and health play a big role in purchasing life insurance, so the sooner you buy life insurance the cheaper it will be.
Life insurance is a lot more affordable than most people think. According to LIMRA, consumers overestimate the cost of life insurance by nearly three times. Term life insurance is the most affordable way to protect your loved ones financially should something happen to you.
Example: A 30-year old non-smoking male can pay as little as $35 a month for a 30-year term policy with $500,000 worth of life insurance coverage to protect his family’s standard of living in case something unexpected happened to him.
Life insurance should be included in most financial plans. No one ever anticipates needing to use life insurance, but the unexpected happens. Make sure your loved ones are protected from financial disaster by being prepared. You can see how little it would cost you by getting a free and anonymous term life insurance quote today. This is one thing that you may wish you didn’t put off until tomorrow.
photo credit: Pictures of Money