What would you do if you won the lottery? I was driving the other day and saw one of the lottery billboards advertising how much the current lottery is up to. As of this post, the lottery is up to about 65 million dollars. Every time I see those billboards, I always start dreaming about all the things I would do if I won the money.
Sometimes, my dreaming is a little bit premature. I think about what I could do with all that money that I'll never win because I always forget to buy a ticket. When I moved to Georgia 10 years ago, I would buy scratch offs all the time. It was something new and exciting because the state I moved from did not have a lottery. I would never win anything more than a couple of dollars or free tickets. When I realized how much money I was donating (aka throwing away), I stopped playing.
If I did win the 65 million dollars, I'll be willing to bet that I wouldn't end up broke like some of the past lottery winners. 65 million dollars may sound like a lot of money. Yeah it is, but if you don't spend wisely, that money will be gone before you know it. I'm not going to lie and say that I wouldn't buy me a new house and a new car because I would. I just wouldn't go crazy with it.
If I won the lottery, I would buy a new house. The maximum amount I would spend is $300,000. I would be able to get a nice big house in a great area. I wouldn't need to buy a 50 room house and spend millions of dollars. I would also pay off the mortgages on my current properties and keep them as rental properties.
If I won the lottery, I would buy a new car. I would buy a 2011 BMW X5. It would cost about $81,000. Yeah, I know this is a crazy amount to spend on a car but with the money I'm not spending on the house, I'll spend a little extra on the car. This would be my big splurge.
If I won the lottery, I would make a sizable donation to several of my favorite charities. To name a few, I would give to the American Red Cross, the Atlanta Community Food Bank, Empty Stocking Fund and the National MS Society to name a few. I would also donate a large sum to the church I attended as a child.
If I won the lottery, I would purchase homes for several of my family members. Some of them are really struggling and could use the help. I would give some of them cash to use as they see fit and others I would purchase what they wanted for them. I know they are bad with money and I wouldn't want them to blow ALL of the money and have nothing to show for it.
If I won the lottery, I would purchase an apartment building. I've always wanted to build a real estate empire but I'm not financially able buy more than one single-family home at a time. Buying an apartment building would help my money work for me. I would be making an investment that pays for itself over and over again.
If I won the lottery, I would put more money in the stock market. I've written before about how I dislike the risk associated with investing in the stock market. The only investing I do right now is through my 401k. Outside of that, most of my assets are in liquid accounts. If I had hundreds of thousands of dollars available, I wouldn't be as worried about losing money in the stock market.
This is just a small list of the things I would do if I won the lottery. If I actually won a big lottery, I would consult a professional on how to best make the money last for the rest of my life.
What is the first purchase you would make if you won the lottery?
Do you live in a property owned by someone else? If so, are your personal belongings properly protected in the event of an unfortunate catastrophic event? If you live in a medium to large city and watch your local news, you see it all the time. At least once a week, there is a report of an individual or family that lost their home due to a fire. You may think you don't have to worry about someone else causing a fire and burning down your apartment building because you live in a single-family dwelling. Fires can happen there too. Yeah, the risk of loss is not a great living in a single-family residence as compared to when you are living in a building with multiple families.
It doesn't matter where you live or what type of dwelling you live in when it comes to weather related events. If you live in tornado alley, you have a pretty good chance of your home being hit by a tornado. Even if you don't live in tornado alley, your home can still be hit by a tornado. According to the National Weather Service, tornados can happen at any time and in any place if the conditions are right.
Maybe it's not even a weather related event that causes you to lose your belongings. Your belongings can also be stolen by a deadbeat (aka burglar).
If you can't afford to replace all of your belongings at one time or think it will wipe out your savings in order to replace your belongings, you probably should consider purchasing renters insurance. Renters insurance is very affordable and well worth the cost for the peace of mind it provides. Speaking of cost, you can get a very good rental policy for less than $300 a year; most times it will cost less than $200 a year for a basic insurance policy. When I was renting an apartment, I had a $25,000 policy and it cost less than $150 a year.
Don't be fooled into thinking you are covered by your landlord's insurance policy. That policy usually covers the structure and anything attached to it but not your personal belongings. I have a landlord's policy for the rental property I own and it only covers the structure and attached items; not my tenants personal belongings. If a tornado were to flatten the house or if my home was destroyed by fire, I could get the home rebuilt but there would not be any coverage for my tenants belongings. I make sure to include this in my lease and verbally tell my tenant that her personal belongings aren't covered under my policy. She's been with me for four years and she has still not taken out her own policy to cover her personal belongings. I would feel really bad if something happened but I did give her plenty of warning.
Where should you look for renters insurance?
If you own a vehicle, your first place to look should probably be your current automobile insurance company. By having multiple policies with the same company, you may be eligible for a multi-policy discount which will save you money on both policies. You can also use a site like InsureMe which will allow to input your information one time and obtain quotes from multiple insurance companies.
What type of losses does renters insurance cover?
Some of the things covered by a renters insurance policy include:
- Fire or Lightning
- Windstorm or Hail
- Smoke
- Vandalism or Miscellaneous Mischief
- Theft
Are you currently a renter? Do you have a renters insurance policy? How much coverage do you have?
(photo credit: dullspork, komunews)
Have you ever heard the saying, “if you fail to plan, you plan to fail”? I'm not exactly sure who originally said this but it is one of my favorite quotes. This quote can be applied to multiple areas of your life and not just your finances. Without a plan, you have no clue where you are going or how to get there. Not having a plan is like trying to make it from the East coast to the West coast without a map (or GPS these days). You know the general direction but you don't know an exact route. Just like a map can guide you from Point A to Point B, a good financial plan can serve as a roadmap to financial freedom.
I usually review my financial goals/plans at least three times a year. At the beginning of the year, I usually make my financials plans for the coming year. At the middle of the year, I'll review my goals and add or delete goals as necessary. In December, I review my goals for the year and determine which goals I completed and one's that I need to work harder on.
Here are my current goals/plan for the rest of this year:
Cash Savings. I set a goal last year of having at least $50,000 in cash savings by December 2010. As of this post, I am approximately 80% of the way there. I know some of you may cringe at the thought of having so much cash sitting idle and earning almost nothing in interest. Yeah, I know but I feel better knowing there's a nice cash cushion for me to fall back on should I need to do so. I also like knowing if I had $50,000 in the bank yesterday, I will have that same $50,000 today. I don't have to worry about some crazy happenings in the stock market causing the value of my account to fluctuate daily. I'm not a big fan of the stock market and I only do minimal investing outside of my 401k. Once I hit my $50,000 goal, I do plan to put a little bit more money in the stock market.
Debt. Looking back at my financial spreadsheet, it appears that at the end of the month, I'm only decreasing my debt (mortgages, student loans) by about $700-800 a month. My goals is to decrease the principal balances on my debt by at least $1000 a month. I'll only need to make minor changes in my monthly budget to accommodate the additional money. I usually get a nice bonus at the end of the year and I plan to apply most of it towards my debt.
Expenses. At the beginning of the year, I've been using a zero-based budget based on expenses of $4000 a month. Basically, at the beginning of each month, I transfer $4000 to my checking account for that month's expenses. Once that $4000 is gone, I can't spend anymore money for the month. (If an emergency pops up, that money comes from my short-term savings account set aside specifically for infrequent expenses. So far, this has worked great and I've had $200-300 left over each month.
Do you have a financial plan? What are some of your financial goals? How often do you review your goals?
Don't you hate those months when it seems like everything comes due at the same time. Thankfully, those months don't happen all the time or I'd be up a financial creek. I'm also happy that I've already planned for those expenses in advance and tucked the money away in a special savings account.
As much as it sucks that I'm going to be emptying out my pre-planned expense account, it's nice that the money is there for those expenses and I'm not trying to figure out where the money is going to come from or having to whip out the credit card.
What's going to be draining my bank account this month?
Auto. In Georgia, vehicle tag registration fees are due on or before your birthday. My birthday is on May 25th so I need to send a check to the county tax commissioner before my birthday or I'll be subject to a late fee. They late fee is pretty steep (10% of the amount of the ad valorem fee and 25% of the tag fees). I'll be stroking them a check for almost $400 which includes the annual license plate/registration fee, ad valorem tax and mail fee. It sucks paying a nice chunk of change for just a sticker. For that kind of money, you would think that we would get a new tag each year. Nope, I've had the same tag since I moved here 10 years ago.
Insurance. My auto insurance comes due this month. In order to avoid a $2.00 fee each month for paying in installments, I pay the bill for the six month premium in full. I save $12.00 by paying in full and I also get a paid in full discount. In addition to saving money by paying in full, I also get peace of mind. I don't have to worry about forgetting to pay the bill and driving around without insurance. The cost of my auto insurance is around $600.
Rental Property. I completed the long overdue quarterly checkup on my rental property and found that several items needed to be repaired and/or replaced. There are several windows in the property that need to be replaced. There is condensation in some of the windows and the tenant is complaining of high utility bills. The exterior trim needs to be repainted and resealed. The deck has some loose boards and needs to be repaired. The casing/trim around the patio doors needs to be replaced. The railing going down to the basement needs to be reattached. My tenants son kept putting it back up and eventually caused damage to the drywall. The wall needs to be patched and the railing will need to be put back up with drywall screws. The only good news about the repairs is that my uncle (the handyman) owes me quite a bit of money so I only have to buy the materials. I will have him do the repairs and the labor cost will be deducted from what he owes me. Including the cost of the windows, I estimate the cost of the materials to be around $1000.
At the end of the month, I'll have spent roughly $2000 on top of my regular monthly expenses.
How do you handle irregular expenses?
Have you ever gone out with a bunch of friends, had a great time but found your bank account much lighter when you got home? Or you went to store with a friend just to pick something up, but a few more items ended up in your bag? Whether or not you want to admit, sometimes friends can help enable poor spending habits.
You might want to take a hard look at your friends and avoid hanging out with these personality types:
Bargain Hunter
On first glance, you might think this friend is great to go shopping with. He knows where to go to get the best sales and always haggle his way into a better deal. However, if you find yourself buying things because it’s on sale and not because you need it, then your friend might be enabling a bad shopping habit.
Money to Burn
Money never stays long in this friend’s pocket. He likes to buy whatever catches his eye. Even if he’s got a trust fund or some other way to replacing that cash in his pocket, you find that when you’re hanging out, your money burns a little faster too.
The Latest Thing
Gadgets, video games, sports…it doesn’t matter what his interests are, except that he has to have the latest thing. Then he’ll bring his prize to you to show it off, and it gets you thinking, “Hmmm, I’d really like to get that.” Or worse, you’re at the store with your friend to pick up his latest prize and you find yourself picking one up as well.
Hey Look at That
This friend likes to browse, looking for things that catch his eye. When he finds that new, cool thing, he has to point it out to you. He may not have enough cash in his own pocket to buy it himself, but he has no problem helping you spend your money.
Mr. Mooch
Possibly the worst out of the bunch, this friend never pays his own way. There’s always an excuse, “Oh man, I forgot my wallet.” Or “Hey I had to pay for
Sometimes you’re not aware that you’re hanging out with these spending enablers. However, if you find hanging out with the friends becomes a budget buster, then you need to look a little closer at who you’re spending your money with. Remember, at the end of the day, it’s you, not your friends who have to pay your credit card bills so make sure that what you buy is really what you need. Don’t let yourself get talked into spending money you don’t have.
About the Author
The following is a guest post from Kathryn Katz, a Certified Personal Finance Counselor who works for Consolidated Credit Counseling Services in Ft. Lauderdale, Florida. Their non-profit agency helps families through financial crisis using credit counseling, debt consolidation and financial education.
This past weekend, I finally got around to doing some long overdue tasks around the house. One of the major things I had planned to do was pressure wash and seal the deck. I've been meaning to do it for quite awhile but it was one of those things that I kept putting off over and over again. As a homeowner, if something needs to be done around the house, it's up to me to get it done or pay someone to do it for me.
If you are a homeowner, a house maintenance fund is a must. There will be things that need to be done that you don't have the time or ability to do on your own. From what I've heard, the best rule of thumb is to set aside at least 1-2 % of the cost of your house for your maintenance fund. I keep at least $1000 set aside for any emergencies that may come along. I bought my home brand new so thankfully, I haven't had anything major come up yet.
With all of the affordable properties out there, you may be thinking of taking the leap towards home ownership. If you are thinking about becoming a homeowner, consider these pros and cons:
Pros:
- Freedom. I like being able to make any changes in my home whenever I want. There are several things I want to do around my house and if I have the money to do it, I can. If I don't like my paint color, I can change it without having to ask anyone.
- Tax Benefits. As an unmarried person with no kids, there are not a lot of things to reduce the amount of the taxes I owe the government. As a homeowner, I get to write off the interest I pay to the mortgage company each month. In addition to being able to deduct the interest I pay on my home loan, I can also deduct the cost of my homeowners' insurance and property taxes.
- Equity. Each month that I make my mortgage payment, a little bit of the money (and I do mean a little bit) goes toward the principal balance. After 30 years, if I make all of my payments as agreed, the property will be mine free and clear. It's also nice that most home loans allow you to make additional payments towards the principal allowing you to pay less in interest and own your home sooner.
- Freedom. Although it was listed as a pro, this can also be a con. As a homeowner, you can't just pack up and decide to move without figuring out what to do with your house. If you choose to sell your home, you have to deal with your house possibly sitting on the market forever, losing money if your home has decreased in value or having to come out of pocket to close the deal if you do sell the home. If selling your home is not a favorable financial option, you find yourself becoming a landlord.
- Maintenance. Living in a rental property usually means all repairs are the responsibility of the owner. If you are the homeowner, you are your own landlord. When the toilet backs up or the water heater goes out, your are responsible for the repairs. Remember that home maintenance fund I mentioned earlier? Here is where it comes in handy.
- HOA. If you live in a newer subdivision, you probably have a homeowners' association. The responsibility of the homeowners' association is to keep the subdivision looking nice and helping to maintain property values. Although you can do what you want on the inside of your home, the homeowners' association usually has the final say on what happens outside your home. Usually, there are rules governing paint colors, grass height, lawn decorations and rental restrictions.
- Higher Expenses. Buying a home usually involves spending more money. If you are buying a home that's larger than your rented place, your monthly expenses will probably increase. Having more space means higher utility bills.
Have you recently become a first-time homeowner? How is it working out for you?
