Think One Dollar

I sold my entire portfolio today. I wasn't going to, but after learning two tenants in one of my houses are moving out this Thursday, I took a hard look at my cash position and where it was headed. A third tenant in the same property left a few days ago, leaving three vacant units; an extra $2000 per month I need to come up with to pay the mortgage. One of my other property's also has a vacant unit that I'm about to put an ad in the paper for; another $800 I need to come up with for that mortgage. Oh, and the first floor tenant at my house, George, hasn't paid me rent in over 8 months; a total of $8000 worth of rent, all of which came out of my pocket to pay the mortgage. I'm sure you're beginning to see why I've become desperate enough to sell my entire portfolio at a 50% loss. Grrrrrr. You have no idea how hard it was to press those sell buttons, knowing I lost so much. Who knows, maybe the stock market isn't for me.

It's said, a penny saved is a penny earned. In today's terms, that penny is equivocal to a dollar. When we look in our wallet, or purse and see a dollar bill, we treat it with nearly as much care as the ten or twenty dollar bill. We don't want to loose it. It's money, our money. But when we see something for a dollar, or we spend a dollar, we don't think twice about spending the money. Its a buck, who cares right? Why then do we hesitate or think harder about spending ten, twenty, or thirty dollars? It's a very bad habit to have the "this will only set me back one dollar, no big deal" mentality. One dollar might as well be one hundred dollars, because after one hundred days of spending one dollar, you'd have one hundred dollars! If you figured out how to save one dollar every day for the past five years, and you put that one dollar aside in a savings jar (or account), you would have $1,800 right now. See, this is where your mind comes into play. When you compare $1,800 with 5 years, the amount seems small. But when you think about one dollar today, $1,800 later, then it seems worth it. A dollar a day really isn't much. In fact, if you use cash on a daily basis (as opposed to a credit card), you can probably come up with a dollar a day just from the coins you receive as change.

I'm sure you're wondering why the hell I let George get away with $8000 of back rent. Last year he was 5 months behind his rent and he kept promising me he would catch up in the spring, when his masonry business picks up. I took his word on it, and sure enough he caught up. The same thing happen this year, so I took his word on it again. But this time it's gone too far. I didn't take action soon enough. Today I took action. I spoke to a lawyer and he's going to take care of filing the eviction, showing up in court, and filing all required papers. It cost me $1600 (plus $250 for the filing fee), but I know it's worth it. I can't afford to put up with George's empty promises any longer. From now on, I'm never going to let rent get more than 1 month late, with any of my tenants. In this world you need to be proactive or perish.

If you could put $125 per week ($500 per month) in a savings account for the next 25 years of your life, you'd have $150,000 saved! OK, thats great, but here's were it gets interesting. Let's assume that you put that $150,000 in a high interest savings account, making 5% annually. You'd be making $625 every month just from the interest! And all this doesn't even take into account the interest you'd be making on the money during those 25 years. I setup an automatic weekly transfer of $125 from my bank account to my INGDirect account, which makes 4.25% interest right now. I've already reached my midpoint mark, so I know I'm on track. The key to saving like this is to treat your weekly savings deposit as an expense, a bill. You can't suddenly take back last months cable TV bill. Once you've paid it, its gone. When I'm desperate for money, taking money from my savings account isn't even an option. As far as I'm concerned, it doesn't exist. Another great way to make this kind of setup work is if you get money back for taxes every year. If you get $3000, put it all in a savings account. That's 6 months worth of $125 weekly savings deposits! If you can't afford $125 a week, figure out what you can afford and setup something automatic. If it's an automatic transfer out of your bank account, then you won't "forget" to deposit the money in your savings account. If one month you really need the money that was automatically transferred, you can always manually transfer it back into your bank account, leaving the automatic transfer in place.

The United States currently has the worst national savings rate since the Great Depression; only 1% of the national income! (more on this, here and here)

As INGDirect says, Save Your Money.