The Family Finances - One Family's Financial Journey

Jun 17

Is Economic Mobility a Myth?

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I read an interesting article today at MSN Money. It made reference to something called “The Great Gatsby Curve” that basically indicated that higher levels of income inequality are correlated to lower levels of economic mobility across generations of families.

In other words, the family income level you grow up in is a major indicator of the family income level you yourself will be a part of as an adult. Poor children tend to become poor adults, and rich children tend to become rich adults. Of course, this is nothing new. I’ve read of similar studies in the past that point to the same conclusion. I even wrote a post probably a year or so ago about a study that showed that poor high school students with high SAT scores went on to earn a college degree at a lower rate than rich high school students with only average SAT scores.

Personal Experience

I’ve always been interested in this topic because I always felt like I was one of those “poor kids” growing up. We had periods of time where my family was on WIC, free lunches and textbook rental at school, etc. While I can look back and say that my family was never quite poverty-level, we were definitely “working class”. But, I’m actually one of the exceptions in that I went to college, then went on to earn my MBA, and I would put my current family as right smack dab in the middle of “middle class”. So, it is certainly still possible to move up the economic ladder. But I always wonder what exactly it is that allows some people to climb the ladder and others to remain in the same place.

Even in my immediate family growing up, I look back and wonder about this. There were four of us kids in the family, and every one of us are now adults ranging from 29 years old to 19 years old. It’s definitely a tale of two cities. Two of us went on to college and graduated. The other two barely graduated high school. Two of us are driven to achieve, to improve our situation and make better lives for ourselves. The other two are kind of stuck, lacking ambition, without the drive to make things better.

Family Economics vs. Internal Characteristics

It always makes me wonder just how much economic mobility is really based on your family’s income and how much it’s really based on personal characteristics and traits (regardless of family income). To an extent, I think it’s a cop-out for people to say “I grew up in a poor family, and that’s why I’m poor. I didn’t have a choice”. But again, I can definitely see how it plays a role. Maybe if my family had more resources growing up, my other two siblings could have gotten extra help to nudge them toward a more successful future. On the flip side, I can definitely see how it’s fairly easy for the rich to stay rich. With more family resources, they are able to devote more to the children to help them get through difficulties and provide opportunities for learning and development.

What can we do about it?

All this leads to the question: What can we do enable greater economic mobility? We already have a number of social programs aimed at helping the poor. While some kids are able to really take advantage of these things and make a better life for themselves, the results are definitely mixed. I don’t have the answer. I know that simply spending more tax dollars on more government programs probably isn’t going to solve the issue. Even among poor high school students that earn full scholarships to college, their college graduation rate is substantially lower than higher-income students earning similar high school grades. Money alone isn’t the answer, though I’m not sure what exactly the answer is…

What do you think? Is there a way to promote increased economic mobility? Are current social programs doing enough? Do we need more, and if so what kind? Is promoting economic mobility even something we should be striving for?

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Jun 13

Our Housing Search: Living in the Camper

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Family, Finance

by Justin

House on Cape Cod, MA I recently wrote about how we finally sold our house, but I didn’t go into any detail about where we are currently living…

When we purchased our first house, we didn’t really take our time about it. We wanted a house, looked at listings online, visited two houses, and made an offer. It definitely didn’t take very long. Looking back, we realized this was not a sound home-buying strategy. This time around, we were going to take our time and really find something we would be happy with for the long haul.

Living in the Camper

The issue many people run into when they sell their house is that they find themselves in a mad rush to find another one. It’s becoming more and more common for buyers to demand possession of the house on the day of closing, which really puts the sellers in a bind to find new housing right away. Luckily, we had a workaround to this. My in-laws have a pretty large property, and they also have a 20-foot camper. While it definitely doesn’t compare to the comforts of having our own house, it is certainly a workable substitute while we decide what we’re doing about a house.

We’ve been there for just over a month now, and it hasn’t been too bad. It has a bed, refrigerator, air conditioning, and a bathroom. It’s definitely cramped, but it’s given us the ability to go about the home-buying process in a thoughtful, methodical manner.

Buying vs. Building

One thing that we talked a lot about was whether we wanted to buy an existing house or just have one built. There are pros and cons for either option. The city we’re looking to move to doesn’t have a large inventory of homes for sale, so our options are fairly limited in what we can buy. Building a house means we could have a floor plan of our choosing and the fact that everything would be new. The downside is that it is more expensive, and it would take months of construction for it to be finished. Buying a house means that we would have it much sooner. However, with any existing house it will have its imperfections and things we wouldn’t necessarily want if we had a choice. Things won’t be new, and you run more of a risk of things needing to be replaced sooner than a new house (appliances, mechanicals, etc.).

Key Factors in a House

Whether we buy or build, there are several key factors that are guiding our housing decision:

Neighborhood – We definitely overlooked this in buying our first house. A nice neighborhood is an absolute requirement. We want fairly quiet streets, neighbors that take good care of their homes and yards, and a really good public elementary school for our little boy.
House Features – This was our primary focus with our first house, and is still important to us. It needs to be large enough for our current family with room for possible additions to the family in the future (be it children or dogs).
Yard – Our first house was in a 1960′s designed city neighborhood with houses pretty close to another with small yards. We want a house with a nice flat yard somewhere around half an acre. We envision a swing set in the backyard for our little boy, and enough room for backyard barbeques and family picnics.

As of today, the search for the right house continues. I’ll keep you posted once we find it.

Have you purchased a house? What were the key factors for you in choosing one?

photo by: ReneS

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Jun 12

Tips to Gain Investors for Your Start-Up

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Finance

by Justin

The following is a guest post…

There are a lot of reasons why you need money for your startup company. Maybe you’re craving the abilities that expansion would bring you, or perhaps you believe you could rule an entire niche if you act quickly. Whatever your reason for desiring a cash infusion, the following tips will help you to woo potential investors to your cause.

Incite Questions

When you address an intelligent investor on the level of a Mr. Lindsay Rosenwald, you need to be on your game and know what you are talking about. If you don’t, this kind of investor will pass right by you. You must be able to both answer and incite questions, and that means developing your elevator pitch. Imagine you have about one minute to describe exactly what your business does, and to generate enough interest to get questions. The best question to get is “How?” There are some good ways to develop this pitch.

Make a Simple Business Model

Your business model is simply the plan you have to make your company operate. How will you get your good or service from a state of being raw materials into a finished product that is in your customers’ hands? When you have this put together, cut out all of the extra details that might confuse someone and make it clear. You can practice by explaining it to young family members — when even small children can understand it easily, you’ve got a simple business model.

Plan Thoroughly and Be Prepared

When you get someone interested in your very approachable business plan, you need to be thorough when they ask you questions. The “how” can be a complicated matter regardless of how simple the overall plan is. This is particularly the case if you’re dealing with regulators, finicky customers, international markets or technology. If you combine all of these things, you’d better have pages of plans you can summarize off the top of your head.

Be the Leader Your Company and Investors Need

Are you the kind of person who can lead a company? If you’re a slob, a slacker, indecisive, weak-willed or shy to the point of hiding from people at parties, you probably aren’t right to lead a company. People will judge you by the most arbitrary observations, and those observations are very pertinent when these very people may be who you need to finance the next stage of your company. So you have to look the part, sound the part and most importantly be the part. There are few aspects of your appearance and personal presentation beyond your control to fix and tighten up.

Understand the Difference Between Need and Readiness

Do you need money or your business will sink? Or are you ready for money because the next level beckons to you? If the first question was yes, your desperation will shine through and investors will all but run from you. If the second question was the yes, you might have a compelling story to tell.

Attracting investors isn’t rocket science, but you do have to present yourself and your business carefully. Endless practice and honest review will help you immeasurably.

photo by: Victor1558

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Jun 10

How to Keep Your Home Safe While You Travel

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Finance

by Justin

The following is a guest post…

Traveling is always a stressful experience, but it can be considerably less worrisome if you’re not adding to your stress with concerns about your home while you’re away. Did you remember to lock the door? What if someone breaks in? What if the pipes freeze while you’re gone during the winter, or a summer storm destroys your garden? Will the homeowners association cite you if you don’t mow your lawn for two weeks?

Before panicking, let’s go through a few basic tips on how to prepare your home for your absence.

Get a Security System for Your Home

One of the biggest worries a traveler will have is that, while away from their belongings, someone could break into their house, clean out their valuables and get away undetected before there is any way for them to be made aware of the intrusion. A simple way to deal with this is to install a home security system that will automatically notify the authorities in the case of forced entry. You can simply call in and mention that you’re going to be out of town for a few weeks, which instructs them to automatically assume that any alarms going off at the house are likely to be of a criminal nature. This way, the police will be able to respond and notify you of any security breaches in your home while you’re away.

Weatherproof Your Property

If you live in an area where extreme weather is a concern, you’ll want to have a contingency plan set up before you leave to deal with any emergencies. Talk to your neighbors and arrange for them to board up your house in the event of a storm warning. Severe weather can strike with little to no forewarning, so you’ll want to have a contingency plan − even if the sky seems fine while you’re still home.

Put the Hide-a-Key Away

Fake rocks, keys under mats, plastic boxes on the doorframe, upside down plant pots; no one who actually wants to get into your house is going to be stopped by the little hiding places that we use for our spare keys. When you go on vacation, take your extra key and put it indoors while you’re gone. Or even better: leave it with a trusted neighbor if you’re worried about losing your house key while you’re gone.

Get a House Sitter

An easy way to discourage would-be thieves is to make your house look lived in. And the easiest way to make your house look lived-in is for someone to actually live in it. Have a friend or family member that you trust to pick up your mail and bring it inside, or maybe even to hang out in the evenings. As far as criminals are concerned, the house will look occupied and won’t be as attractive target as a house which is vacant. Additionally, you can have them take care of any pets that are left behind.

With these tips in mind, you can help deter criminals from picking your long-vacant home as their next target, leaving you at ease while you’re overseas.

About the author: Ben Thatcher is a DIY home security guy who writes tips and tutorials for families to improve their security. He’s also an avid explorer who lives on a ranch in the middle of Idaho with his loving wife. He currently writes for Protect America, a provider of home security systems.

photo by: raganmd

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May 28

We Finally Sold Our House

Categories:

Finance

by Justin

Last July I wrote a post describing my worst financial decision, which was buying our first house…

You can read the details here, but basically we wanted to buy a house in a neighboring city to where we were living. But, for several reasons, we ultimately decided to buy a house in the same city we were living. One reason was that houses cost more in the neighboring city than where we were living, and we couldn’t afford the kind of house we wanted in the neighboring city. Another reason was that I just started my MBA, so I would be taking classes several nights a week in the city we were already living.

So, we bought our house in the fall of 2008 with the idea that we’d live there four or five years and then move to the neighboring city. Well, the housing market crashed and we were underwater on our house pretty quickly.

The Selling Process

Looking back, it doesn’t make any sense, but we actually first tried to sell our house in 2009. Yes, I know; this was the very next year after buying the house. We had a lot of showings (and by that I mean probably 20 or 30), but never received an offer. We knew it was a longshot to actually sell because we weren’t willing to sell at a loss. So, we had it listed for quite a bit more than we paid in order to break even after the realtor’s commission.

We listed it for sale again in 2010. Again we had a lot of showings, but never an offer. The housing market was continually going down, and our house was becoming worth less and less. We lowered the price a little bit, but were still asking enough to break even.

We left our house off the market in 2011 because my wife was pregnant and we didn’t want to mess with house showings and moving during pregnancy.

We listed it again in 2012. We were becoming a bit more serious about moving now that we had a little boy at home. We acknowledged the fact that we were going to have to take a loss on the house if we wanted to sell it. So, we listed it for the exact same price that we paid for it. Again, we had several showings (though not as many as in previous years) but no offers. We further reduced the price after a few months.

Finally, 2013 rolled around. We had actually left our listing open through the winter this time, so our listing was still active when spring started to roll around. We started getting some showings as soon as spring hit. Finally, a young couple came and looked at the house, fell in love with it, and made us an offer.

Negotiations and Closing

Their offer was a bit lower than where we needed to be. We knew we’d be taking a loss and would have to bring money of our own to closing just to get out of the house. We’d talked about it and had agreed on a certain maximum loss that we’d be willing to accept. Their first offer was significantly lower than what we were ok with, so we made a counter offer. They came back again with a slightly higher offer. It was still lower than what we wanted, but not by much. By this point, we were just tired of it all. We were tired of having this house that we didn’t really want. We were tired of getting the house ready for showings all the time only to never get an offer. We were tired of getting the house ready only to have the people never even come to the house. This actually happened several times, and I even called up one of the realtors that was supposed to show the house but didn’t and gave him a piece of my mind. Sorry about that; I got a little off track, but thinking about that still gets me fired up.

Anyway, we accepted their revised offer. We were just happy to get out of the house and be free to move on.

Now, the question is where would we be moving to? We hadn’t even started looking at houses because we didn’t want to fall in love with a house only to have ours never sell…

Stay tuned for the rest of the story in the days to come…

Tags: Housing

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Is Economic Mobility a Myth?

Our Housing Search: Living in the Camper