What Would You Do With $1.5 Billion?

For much of the week the entire country was obsessed with the Powerball jackpot which, by the time of the drawing on Wednesday night, had climbed to $1.5 Billion. Yes, there is a ‘B’. It didn’t matter what your line of work or where in the country you called home, the lines at the local gas stations, 7 Elevens, and any place that sells lottery tickets were long and the stacks of tickets that people were buying were high. Even those who seldom gamble, and that is what this is, disregarded the long odds and bought tickets. And I was one of them because ‘eh, what the heck.’ Actually, I got two for myself and contributed two dollars to the office pool as well.

One of the interesting things that happens to anyone when they get a lottery ticket in their hand, especially with such a high potential payout, is that you can’t help but think about how you would spend the money should your numbers match. Most of the people I have talked to over the years and what seems to be common in the stories that you read about or watch on television is that a new house, car, and some outrageous vacation are where at least some of the money goes. Well, while tempting and at the same time not eliminating the possibility, it is not what I have on my list. When looking at the $1.5 Billion payday, here are some of the things that came to mind. Here is how some of my initial expenditures broke down in my mind:

·         $10 Million as emergency funds for my employer.

·         $2 Million to each of my 10 coworkers (under the condition that they continued working).

·         $10 Million each to various family members (siblings, aunts, uncles, nieces, nephews, etc.).

·         $20 Million to my parents.

·         $20 Million to my lodge.

·         $10 Million to the Grand Lodge of Pennsylvania.

·         $5 Million to my masonic district / district school.

·         $1 Million to each of the other lodges in the district.

·         $5 Million to Help for Heroes Fund.

·         $1 Million to various friends (we have a list).

·         $1 Million into college funds for our son and each niece and nephew.

·         $10 Million to each of our undergrad and graduate colleges.

·         $2 Million to the NRA.

·         $10 Million to the Rotary Club of Bala Cynwyd – Narberth.

·         $3 Million to pay off all debt and for some intense splurging throughout the rest of our lives (houses, cars, vacations, etc. would have to fall into this).

·         $20 Million Trust Fund for our son.

·         $10 Million each to Nefesh B’Nefesh and the Jewish Agency for Israel.

·         $10 Million to each of the Synagogues that have welcomed us and supported us over the years.

·         $5 Million to cancer research.

·         $1 Million for hiring genealogists to research all family lines.

·         $5 Million to the Monacan Indian Nation.

Adding all of these up it comes out to approximately $350 million. So, if you do a little calculating, it breaks down in the following way. When you look at the $1.5 Billion Powerball Annuity Jackpot, the lump sum option was approximately $900 million. Out of that $900 million you have to assume that you are going to lose about half to various taxes leaving you with $450 million. Once you subtract the $350 million in distributions above these leaves a total of approximately $100 million in the bank. It would be nice to sit back and relax never having to worry about finances again (especially without debt and with splurging already included into the budget).

Mortgage Monday: The Checks Start Now

With payment book from the bank in hand, the first of our many mortgage payments is due this week. While 30 years is a long time to be making payments at least we now find ourselves with an end date and with every payment we own a little bit more of our home. Of course, we hope that it doesn’t take us 30 years to clear this debt, at least this is the goal, so we are going to be sure to pay a little bit more each month toward principal.

Having already made an early payment it is a little disconcerting at first seeing the principal reduced by so little with every check. But, again, it is still giving us more equity each month compared to the simple evaporation of funds that we have experienced over the last several years. Now that is a disheartening number to think about. Even if your average monthly rent was $1200, over the course of five years you will have ended up paying $72,000 and have absolutely nothing to show for it. In the end, given the places that we have lived and the years that we have been renting, it is safe to say that our total is probably just north of $100,000. Seeing that principal going down by so little doesn’t seem that bad anymore.

Of course, now with us owning our home, we are also responsible for the maintenance of the house and surrounding property. A few other expenses should be expected and even with major repairs, it is still better than renting… and more cost effective given the amount of space that we now have. Each check brings us a little closer to what continues to be our goal… being debt free. While credit cards were the culprit in the past, at least now the debt is something tangible and something worthwhile.

And I will finish with this simple notion that seems to no longer be simple. While it is nice if our house increases in value over the years, all I want is the stability. If the value of the property were to stay the same I would be happy in the end. What is now seen as investment should be, once again, seen first and foremost as a home. That is how things used to be and how I view our new home. Paying interest is the price of being able to buy a home and have that stability. Our limited funds are now being applied toward a goal, something of value, and stability unlike the month to month uncertainty of the past. Now, each month, we can settle a little bit more.

Still Looking

Lately our weekends have been filled (at least half of each weekend) with our search to find a home. Our weeks have also been packed with numerous searches on various real estate websites trying to find that perfect place. We have also been looking to find properties that have the potential to be exactly what we want (at a lower price point of course). It has been, and continues to be, a long process.

While we have our list of things that we want in a home, we also have a strict budget. One that we determined not just by how much we want to spend but also how much we have been prequalified for by the bank. Fortunately, this part went relatively smoothly as both numbers ended up being about the same with the slightly higher figure coming from the lenders. It is nice to know what we actually have to work with when we look at properties rather than running the possibility of seeing something we like and wondering if we can get approved.

What we have also been running into here and there is the fact that we are getting toward the end of the real estate season so there isn’t as many listings and sometimes when we have expressed an interest in taking a closer look there is already an agreement in place. On the one hand it says a lot about the areas in which we are looking but on the other it is, at the very least, cause for the occasional moments of frustration. We can’t really do anything about it besides look at the others that are available and hope that we find what we are looking for.

However, we have introduced slight adjustments to our criteria which have opened up a number of other options. You never know what you might find that falls just shy of some of the things on our wish list (this is most notably found in the size of the property). On the other hand, one thing that we haven’t adjusted and will not adjust is the commute time for my wife. I guess the same can be said for everyone’s search to find a home… you have flexibility in some areas and you have to hold firm in others.

Overall, this is whole process is both exciting and frightening. We are both looking forward to owning our own place and finding our home but I am terrified of two very simple things. The first being the fact that we would be taking on around $200,000 of debt. Enough said about that one. The other is just part of my nature… if we agree on a deal and purchase a house, is there a better one out there, is there another place about to come on the market that would be a better fit for us. I guess we will have to just wait and see what we find but, for the most part, these are two things that I am eventually just going to have to accept and be happy with what we have. From beginning to end and afterward, it is not going to be easy.

Back To Zero!

The last time we have been able to experience a moment like we did today was right before our flight to Israel in the summer of 2011 (we were in debt once again before we even boarded the flight back to the states). After a couple of years of budgeting and chipping away at the payments, we got on that plane without the burden of debt. Today, while we still have other debts, we finally cleared the balance on our credit cards. Over four years later, after numerous struggles and setbacks, we have finally brought all those totals down to zero.

I must say this is a damn good feeling knowing that we don’t have to make those payments anymore. Well, at least not to pay down previous balances. We actually have a plan in place to keep these cards active having assigned specific charges, to maximize points, on each card. Order something on Amazon, use one card. Buy gas or groceries, use a different one. Go out to dinner, this third one will work. At the end of the month, we settle all the tabs. Heck, we are spending the same money but we are now getting points for the purchases we are already making.

Of course, as I stated before, we are not completely debt free. There are still a few other commitments that we need to take care of and, at the same time, we are looking to move by the end of the year so that means there is at least thirty years before we have to stop making payments on our debt. So, in reality, this is only one portion of our debt that had gone to zero unlike that short time in 2011 when, for a few months, we had absolutely no debt.

But, for now, we are just going to enjoy the feeling of those high interest pieces of plastic having been paid off. There is something uniquely satisfying about zero. I am also less stressed knowing that if something were to happen and we needed funds immediately, we have the credit to take care of most situations. Not the big stuff (the limits are still pretty low) but the moderate issues that everyone faces in life (i.e. something breaks, gets lost, needs to be replaced, etc.). And it is going to be that much more satisfying being able to focus on taking care of other debts rather than focusing on those high interest cards. It still isn’t going to be quick or easy but we can really start making some progress now!

Every Penny Is Part Of A Dollar

Over the past couple of weeks I have been taking advantage of a couple of opportunities that were presented to me in order to save a few dollars. Sometimes the numbers added up pretty fast while other times it was only a little here and there. Either way, they are all providing a little bit of a return and putting a few extra dollars back into our account. Actually, by the end of the week, all those small sums added up and turned into a rather nice return.

There were really two parts to this whole operation this week… price matching and a credit card promotion. While it did take some time this week, in the end it is going to save us hundreds if not thousands of dollars over the next year. It just goes to show that if you take a few minutes and put in a little effort, you can make things a little easier.

It started a couple of weeks ago when there were a few items that I had to purchase for the house. Not the cheapest things but not really high priced either. When I had a couple of minutes free in the middle of the work day, I pulled up the Sportsman’s Guide website to see if they had what I was looking for. It turns out that they did so I put the items in my shopping cart, typed in my coupon, and selected the 4 pay plan to ease the payment pain.

Everything went smoothly but I was curious to see if there were any other websites that were offering a better deal. Sportsman’s Guide offers a price match guarantee for 30 days from the time the order is placed. There were a few sites that had the same price, a few that were selling it for more, and a couple that were a dollar or two cheaper. I wasn’t about to call over a couple dollars. And there is was… a $25 difference. With website and item number in hand I called customer service and had the price matched within minutes. However, this was a onetime opportunity to save some money. My other call this week was more fruitful.

At some point during the day on Tuesday I got an email from a company regarding my credit card. The offer was for free transfers of other accounts (normally 3%) with a 0% APR for 1 year on those balance transfers. This particular card has the lowest interest rate so has always carried the highest balance… hence no room for transfers. So I gave them a call on Wednesday to explain the situation and to see if there was some way that I could take advantage of this offer.

It never fails whenever I call them, they found a way to make it work. Now, instead of paying a nearly 20% APR on a couple other cards, we are now paying 0% for the next year and, if needed, carry a 12% APR afterward. The percentages may not mean much at first glance but, over the course of a 12 month period this could potentially save us hundreds upon hundreds of dollars (it will also lower our monthly payments pretty significantly). I am sure that many of you may think that this is boring but it saves me money so I am very interested.

The essential thing to take away from both of these is that there are opportunities to save money / keep money in your pocket if you just pay attention. I am sure there are a number of opportunities that I have missed in the past but, in this instance, I was fortunate enough to catch them. When all is said and done, all it takes is a few minutes from you day and a willingness to work with the people on the other end of the line. It was a great week for saving money.

Keep Your Debts To Yourself!

Well, with her new book being released, it should be no surprise that Hillary Clinton was in the news again this week. Something else that should not be surprising is that fact that, once again, she is backpedaling to ‘clarify’ the statements that she gave to Diane Sawyer. One thing that you have to keep in mind when this happens is the fact that it is more than likely that all of the questions that she was asked were vetted and responses rehearsed for weeks prior to the two women sitting down for their conversation.

I am sure you have either watched, read, or listened to Mrs. Clinton expounding upon her hardships upon leaving the White House in January 2001 with particular focus on the financial ‘struggles’ that the Clintons’ faced reentering private life. As was reported by CNN, “Mrs. Clinton said she and former President Bill Clinton were "dead broke" and "struggled to piece together the resources" for mortgages in pricey Washington and the New York suburbs and their daughter Chelsea's tuition at prestigious Stanford University.” Yeah, even CNN is calling BS on this one.



Be careful what you say, your face might freeze that way!

I know, it must have been hard struggling to find some means of gainful employment so they could keep paying their mortgages, resolve their debts, and scrape together the pennies to cover Chelsea’s college tuition. Obviously, she had no other choice but to take advantage of the bountiful ‘limited’ opportunities at hand. She didn’t really want to but she had to force herself to make millions of dollars in speaking fees. How else was she going to pay off her millions in debt, keep current on her mortgages, and pay for her daughter’s schooling? It’s not like she could simply move to another state and swipe a Senate seat.

Maybe if Chelsea were in college now Hillary may not have had to work so hard to pay for her college tuition. It seems as though this administration wants everyone to have a college degree that they don’t have to pay for, at least not at full price. Now, I agree that higher education has become outrageously expensive and I am always for getting a discount but I am offended that we, as taxpayers, are going to have to pay for that discount. Where did you think that money was going to come from? If you are going to offer money for education we should, at the very least, give the funds to people that have earned that money and funnel the additional funds into the GI Bill. Oh wait, that's right, you already screwed up the VA.

I don’t know about you but I already have plenty of personal debt that I am trying to pay down without taking on someone else’s burden. I struggle every month to find that little extra so that we can make progress. Slowly we are inching closer and closer solvency but every time a new tax (which is what this whole scheme will end up being) that is a little less each month that I can apply toward solvency. So stop telling me how hard you had it trying to make payments on your numerous homes and the struggles you faced when you were forced to earn millions talking to the mindless throngs of sheep. And, most importantly, stop spending my money on things that don’t make any darn sense and are an insult to financial responsibility.

Last Chance To Find An Apartment

Throughout the week my wife and I kept scanning the maps on Trulia and Zillow with the hope that a new listing would pop up. While there were plenty of listings that came to market during the week, there was nothing that fit the criteria that we were looking for, most importantly, the price. With nothing to show for our efforts and our MIL Realtor not having any better luck, we did not make it out this weekend to tour some other spaces.

In an owner’s market, this just hasn’t been a good time to try and find an apartment within the budget that we set for ourselves. I guess we will be staying where we are for now with the hope that we can build up our bank account enough to get a nice starter home around this time next year. The other part of this year long project will be to improve our credit. It’s not that we have bad credit, it is rather good in fact, but there is always room for improvement and it would make things a bit easier when the time comes in trying to secure financing. The basic game plan is simple… build up our bank account, pay down debts, and continue being successful in our jobs (i.e. promotions/raises). How we achieve all this is also simple… work hard and work smart.

So, when the day comes, what will we be looking for in a starter home? The list is a little longer than a rental but, in an ideal situation, here is what the check list would look like:

1. 3+ bedrooms
2. 2+ baths
3. 2+ acres
4. Office
5. Basement (finished or unfinished)
6. Good schools
7. Montgomeryville/North Wales/Lansdale area (there is a little flexibility there for the right place)
8. Reasonable commute time to work (under 60 minutes for me, under 45 minutes for my wife)
9. Garage
10. Not on a main road  

I know what you’re saying… that is why it is called a wish list not a list of requirements. Some of the things are reasonable, some may be fantasy when considering that we will not have much to put into the home but it is a start and it is nice to have a goal.

The most important thing that we need to do now is to make do with what we have and the space in which we currently live. The basic translation of that statement means that we have to clean and organize both of which we have been putting off for way too long. We have a good spot at the moment, not ideal but it is a good apartment at a good rate. And while we may complain at times about various things relating to the building, location, people, and variety of other aspects we have a plan of action and we are better off than most. We have gone through a lot in recent years and we can make it through some more knowing what awaits us just on the other side of the hill.

So, until next year, the hunt is over.

The State Of The Union Is…

It is many things but nothing that I would call strong. Actually, scratch that. The state of the union is strongly divided.

While the address by President Obama this year was annoying and, at some points, downright stomach churning it was still better than it was last year when the television barely escaped in one piece. In that regard, things have gotten better since this same time last year. That may be the only positive development that I can really see that this administration has made in the past twelve months.

Like many of the President’s pubic addresses when the prompter is working properly, his performance was excellent. That part is undeniable and many people enjoy hearing the President speak just like many people like the forced overdramatic performances in B movies. But, just like the fiction found on film, the promises and pledges made are theatrics and nothing more.

The state of the union is divided. Too many people are out of work and any have given up trying. While the jobless rate seems to be going down it leaves me questioning how many people stopped looking? How many people are no longer counted?

Many minutes were dedicated to the calling for equal pay, for helping the African American community find work, for a higher minimum wage, for amnesty, and for many other things. Is this really where we should be focusing our efforts? Is this where we should be funneling our dollars? I don’t see this as a means to equality, this is a road to complacency. We need to be a nation of equal rights, equal freedoms, and an opportunity to pursue our own happiness.

No one ever said that life is fair. This nation was not founded as a coop. Embrace opportunity and work hard to make your life better. Does that mean you will live like the Jones’? No. Some will have more than others but many have more than they need. Are you really going to be better off paying higher and higher taxes, having money taken out of your pocket, in order to fulfill the promises of a government that insists on supporting the weight of the nation under the false premise that we need to give unequal amounts of money to some in order to ensure equality?

However, the most dangerous phrase of the evening which was used on a few occasions was “with or without congress” when referring to the actions that ‘need’ to be taken. It is this statement that should ring loudly in the ears of all who are listening. This is a frightening action and a threat of unilateral action that has the potential to be more damaging to the state of our union than any external force which threatens our safety and our freedom. This is a phrase that no President, regardless of party, should be using especially one with approval ratings as low as they are at this point. And, given the status that the United States still has in this world, it is a statement that endangers the safety and security of our allies especially Israel.

The state of the union, our union, is many things but, at this point, it is not strong, it is not stable, it is not safe, and it is not prosperous. We are in a state of division with a chasm that is growing faster than the national debt. It is with this reality in mind that we need to focus on and fight for change in the political system. It is through our efforts and our voices that we can fulfill the opportunity for change that has been given to us by the Founding Fathers. We all have an equal vote and an equal opportunity. It all comes down to who wants to work harder to change the state of the union and restore the strength that was once present.

Can A Hedge Fund Have A Heart?

(L-R) President Elect Sean M. Teaford, Guest Speaker Deepta Hiremath, President Dr. Sherman Leis. Photo by Past President Richard M. Trivane.

Anyone who has ever watched Shark Tank can recognize when someone has it and when someone doesn’t. Even with a great idea the entrepreneurial spirit is not always present. As soon as Deepta Hiremath began presenting yesterday at our Rotary meeting I could tell she had it.

Our guest speaker two weeks ago who spoke about the mortgage market and the potentially drastic changes on the horizon and how the process for people to get mortgages in the future will differ from today’s market. However, that doesn’t address the distressed mortgages and struggling families that are already in the marketplace and are trying to find a way to get their heads above water. This is where the focus of our discussion was yesterday.

Deepta owns and operates a real estate hedge fund by the name of King Peak LLC. While that term has fallen from favor in recent years there are still people out there running hedge funds that exemplify the four way test. Those people are not focused solely on the bottom dollar but are also looking for a mutually beneficial arrangement that is fair for all parties concerned. While the objective of any business is to be profitable it doesn’t mean you can’t help people along the way.

It is no secret that as a result of the crash in 2008, over-leveraged banks have been selling off second mortgages at drastic discounts in order to recoup guaranteed money which can be funneled back into the capital reserve. Who buys these mortgages? Debt collectors and entrepreneurs like Deepta.

While credit collectors will commonly flip the paper using high volume deals without any thought given to the lives and livelihoods that those mortgages represent, Deepta invests more than her money into these transactions. She invests her time, her energy, and her heart. Deepta focuses on the mortgages that commonly have the most devastating impact… second mortgages.

Due to the steep discount at which she purchased the paper, it opens up the opportunity to help and try to work with homeowners so that they can remain homeowners. She evaluates many of these mortgages on an individual and very personal basis and tries to find the best solution for everyone. Given the margins and the huge number of buyers, Deepta is almost guaranteed a profit. She doesn’t need to take the extra step but she does because she knows that what she holds in her hand is more than just paper.

It is part of the American dream to have the spouse, the house, and two and a half kids but sometimes we all need a little help to maintain that reality especially in these still trying times. As Rotarians we try to do right by others and ourselves every second of every day and while sometimes we may falter and show our human shortcomings it helps to have a business plan which helps us to live those principals. We can learn a lot from Deepta as well as other intelligent and driven entrepreneurs like her which will not just help to reinforce the Rotary principals but also as a reminder to ourselves of what can be done when we embody those principals.