Financial Planning

So this is going to be my responsible side taking over the blog. I know that this might be a bit “heavy” compared to the stuff I’ve been writing in here historically, but I think it’s important write about because it’ll help me think about the issues at-hand, and hopefully spark some thinking from you, too.

As of late, I have been a lot more cognizant of saving money. Last week, part of an evening was spent looking at my 2008 budget and refining my investment plans. Again, for those that know me, this probably comes as a huge shock. Yes, I still have some spending built into my budget this year, but I also have a pretty aggressive savings/investment plan so that I can weather both personal and national economic downturns.

A great quote I found online:

“The people who survived the Great Depression were the ones who had money to buy when everybody else was selling.”

Sobering stuff; enough so that I have become very determined to survive the rough next couple years.

Lately, I’ve been sweating the economic downtown. I went through the debacle of 2000-2001 with the dot-com blowout and survived it by moving in with my parents in Minneapolis. That’s pretty humbling, and while I do love my parents and do appreciate the help, I’d prefer to never have to do that again.

So I’ve been planning, scrounging, saving, and so on. Figuring out the best ways to start generating income from multiple channels (expect Google Adwords to show up on this site) so that there’s always at least something coming in. I’m going to finally make my VA disability claim over all the long-term issues I have from my injuries in the army. Basically, I’m trying to use these multiple income streams in such a way that I’ll be able to survive an economic downtown.

The big thing lately has been my urge to buy a house vs. rent. Yes, the market is awesome to buy a house now — if you can get credit. (Fortunately, through the VA Home Loan program, that’s not an issue.) At the same time, if the bottom drops out like 1929, do you want to be saddled with a home? And therein lies my quandry — what happened to rent prices on apartments during the Depression? I don’t know, and that’s an important data point. (Does anyone know the answer to the rent question? I’m very curious.)

I think right now, my plan is going to be to get to a healthy five-figure sum in savings by the end of the year (doable), and start looking for a house in November to close on December 1. That way I have thirty days to move my stuff from my apartment to my new domicile, and don’t have to take the financial hit of cutting myself out of my lease early. Obviously, as things progress, I want to ensure that both the financial markets and I are in good enough condition to buy a place.

So, after this year, I should be debt-free other than car payments and student loans. I’m going to make a special point, once the credit accounts are paid down, of paying an extra 50% a month on my car payment to help eradicate that more promptly. (Easily accomplished once the consumer credit is eradicated.)

If anyone has thoughts on other things I can do to help weather the storm, I’d be interested in hearing them.

2 thoughts on “Financial Planning

  1. Kudos to you for getting your financial life in order! It’s a good feeling, isn’t it?

    Regarding rents during economic downturns — I don’t think looking at rents during the depression will tell you much because the markets for both buying and renting were very different then than they are now, i.e. boarding houses, flop houses, rental of rooms by laborers, etc. What will give you something to go on however, is to look at what happened with the rental market in cities that experienced economic busts in more modern times. Houston in the 1980’s to early 1990’s is a great example. Houston was doing then what so many cities are doing (and will probably regret) now — building condos out the wazoo. When the bust occurred, there were several thousand condo units for sale in the Galleria/River Oaks (fancy) area of Houston and no one wanted to buy them, so they turned into rental properties. Because of the glut of rental properties in the city, and the mass exodus of much of the transient population, rents plummeted. I have friends who rented a 3 bedroom, 2100 sq. ft. penthouse condo in a prime location in Houston for around $750 a month. That same condo was on the market just months before for around $200k. That being said, with all of these houses for sale as a result of foreclosures, you may be able to find a really inexpensive house to buy just because the bank wants to get rid of it.

  2. The scrounging and saving and getting a healthy financial buffer all sound like great ideas. Buying a home, with the relatively depressed housing prices, is a good idea long-term as well. If the economy really tanks, your home may go down in value for a bit, but long-term, it will be a good investment and you’ll still be able to reap tax benefits in the meantime. It’s next to impossible to always time your purchase at the very bottom of the market.

    Just one note about your timing: A government guaranteed loan will almost always take more than 30 days to close. When I bought my first place with an FHA loan, it took close to 60 days. Perhaps the VA is faster than the FHA, but whenever the government has to approve something, I’d expect delays.

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