It’s just the story we tell ourselves

There is your story, my story and the truth.

The truth on what we think happened; it’s just the story we tell ourselves. It’s not how it is though.

We tell ourselves that it’s okay to eat one cookie. One cookie was good. So now I will have two cookies.

We tell ourselves a story that is favorable to the hero (which is us). To shield us from blame, shame, failure so that we can remain safe and secure.

“It’s okay; you’ll do better next time. You really didn’t want to blog anyway.”

Don’t let this story drive you away from actually doing something meaningful today.

Prejudices, biases, experiences, nature, nurture have all shaped the stories we tell ourselves. Maybe it’s time to stop listening what it going in our head and start telling ourselves what we are going to do.

2% cash back guarantee

I have never, ever heard anyone admit that they don’t pay their credit card on time. Here are some stats:

  • 100 million Americans do not pay off their credit cards each month.
  • 63% of those that bankrupt couldn’t pay their credit cards.
  • 47% more is spent when using a credit card vs using cash.
  • 75% of airline miles are never redeemed.
  • More money is spent in the US on storage facilities then going to the movies.

Someone out there is not on time. Someone is getting charged for being late. Someone is over drafting. Somebody has to be doing it; otherwise the credit card business wouldn’t be in business.

Credit cards are the cigarette of the financial world. It’s time to cut them up.What about the points? Who cares about the points! I don’t have to sit around looking at my bank statements and worry did I pay this off in time?

But what about 2% on all purchases? Again who cares?
That is 2 cents off every dollar.
20 cents for every 10 dollars.
2 dollars off every 100 dollars.
20 dollars off every 1,000 dollars.
200 dollars off every 10,000.
2,000 dollars off every 100,000.

None of these points or cash back bonuses or flights will change your life. It only takes one time to be late. One time for the credit card companies to get a $39 late charge for them to win.

Credit card companies are not your friends. They are not trying to make your lives better. They are selling bondage.

Don’t sell yourself so cheap for cash back gimmicks. Your time and attention are far more valuable than what they can offer.

Give them the onion

Do you want to be remembered? Don’t be predictable.

We have an expression among our circle of friends: give them the onion, make them cry.

While a flower is nice and multiple flowers are even nicer, it is common. There is nothing special about the flowers. Sure you went to the florist, picked out the arrangement they would like and opened up your wallet to purchase them but anyone can do this. It isn’t remarkable. No one remembers anyone by being ordinary.

Que the onion. The onion is so random, so spontaneous; they can’t help to ask “Why did you give me an onion?”

You have them hooked. Now you can tell a story. Any story will work. Those who bring onions will be remembered.

Thrashing

Start thrashing now. Do it early while it is cheap. If you wait it is only going to get more expensive.

Over 150 years ago, Henry David Thoreau said “If one advances confidently in the direction of his dreams, and endeavors to live the life which he has imagined, he will meet with a success unexpected in common hours … In proportion as he simplifies his life, the laws of the universe will appear less complex, and solitude will not be solitude, nor poverty, nor weakness.”

Be wary of blanket statements such as: “I need to have my cell phone.” “I can’t get up without my morning cup of coffee.” “How do you live without a DVR?”

Why surrender so much power? You don’t need this. You don’t need that. What you need is essentials (shelter, food, water, clothing) not luxuries.

Try thrashing to the point where it is uncomfortable. A little discomfort in a comfortable world is not a bad thing. Who knows you may even like it. You can always bring that thing back in your life.

Ask yourself one question when deciding what to thrash; do I need this item or am I using this thing to distract myself from the world? If you don’t thrash this item this time and you are on the fence commit to saying if in 3 months I don’t use this item then it needs to go.

The cost of not thrashing, not taking away the distractions, can be insurmountable. We have more time and access to knowledge and resources than we ever had before in the history of the world. How are we using it? How are you abusing it?

Transactional people

We have all met someone who is purely transactional. That person always needs something from us. They need our money, they need our time, they need our attention.

It won’t be enough though. Ever.

Simply smile. Apologize that you can’t help and move on.

It may seem cruel. But completing the transaction will only make you feel worse. It will make you feel sticky and cheap.

Help everyone you can. But provide the kind of help that can change lives. The kind of change that can help us grow more than it will help others.

Try something new for the first time

When is the last time you can say you tried something new for the first time?

If your answer is “it’s been a while.” Maybe it’s time to step into the unknown. There is a problem. We don’t want to start something new unless we can see the ending. We are afraid. Afraid of shame and guilt. We are afraid of failure. So unless we have a map or set of instructions; we won’t start.

So…start. Start walking down the tunnel of uncertainty. Embrace the fear. Use your candle; it doesn’t have to light the whole way. It just needs light the next step. Then take it. And then another. And then another.

Pretty soon we will make it through this.

We can enjoy the outcome. The thrill of victory. The agony of defeat.

But it is not over. We need to start again.

A suckers game: mortgages vs rent

“Owning a home is better because I rather invest in something then waste money on rent”

30 year vs 15 year loan argument

Scenario #1:
$200,000 House
3.5% Interest Rate
30 year mortgage
Zero Down
Loan amount $200,000
No Extra Payments
————————
Total of $323,000
Scenario #2:
$200,000 House
3.0% Interest Rate
15 year mortgage
Zero Down
Loan amount $200,000
No Extra Payments
————————

Total $248,000

Paying a 15 year note will not only save you $75,000 but you will have 15 extra years of freed up cash to invest in retirement, purchase a second rental property, pay for your kids college, etc.

20% down vs 0% down
When you fail to reach 20% down on your house, you will most likely have to pay PMI to get a loan. PMI is Private Mortgage Insurance. Essentially, you are paying money each month that protects the lender in case you can’t make your payments. You can avoid PMI by putting 20% down on your house.

Scenario #3:
$200,000 House
3.5% Interest Rate
30 year mortgage
$40,000 down (20%)
Loan amount $160,000
No Extra Payments
————————
Total $258,000
Scenario #4:
$200,000 House
3.0% Interest Rate
15 year mortgage
$40,000 down (20%)
Loan amount $160,000
No Extra Payments
————————

Total $198,000

Again you will save anywhere between $10,000 – $25,000 on interest alone PLUS saving on not having to pay PMI.

Let’s say PMI will cost you $100/month (which is on the low end of mortgage insurance).

$100/month x 12 months = $1200/year
$1200/year x 6 years = $7,200
Assuming you made your payments you would have around 20% of equity around 6 years after starting. At that time you can request to cancel your PMI with a REFI (which will cost you).
Apartment Living vs Owning a Home
Average rent in Utah is $670/month. Let’s round that up to $700 to make the math easier.
$700/month x 12 months = $8400/year
The average income in Utah is $60,000/year which is $5,000 per month.
The average cost of living is about $750/month in Utah per person. The average family size is just a little over 3. Which bring your total expenses to $2250/month + $700 for rent to a whopping total of $2950/month of total expenses.

$5,000 of income/month – $2,950 in expenses (lets round that to $3,000) will give you $2,000 to save each month. That is 24,000 a year.

Put this all together
By moving into a house in Scenario 1 with no money down, on a 30 year note, with PMI you will have a mortgage payment of about $1000/month which in 2 years is $24,000. Lets not pretend that their not hidden expenses when moving and operating a house too (HOA, lawn service, plumbing, heating, cooling, trash, etc all go up) but I won’t factor this in. First two years in an apartment you will spend $16,800 on your rent. That is $8000 you will save in 2 years alone just by living in an apartment!

By saving 24,000 a year in 2 years you can be at $48,000. You will not only have enough money to put 20% down but you will have the luxury of having $8,000 for an emergency fund to handle these hidden expenses and if you are able to switch to a 15 year and pay the house off quicker you will have more money to invest into something else down the road.

You spend less and save more by living in an apartment. While the argument that a house is a better investment is correct; it is not a better investment long team if you too don’t have any money down and putting it on a 30 year note. Saving for 20% down and taking 2-5 years living in apartment to do it is the smartest way to move into real estate. While you are at it; cut up the credit cards and pay off the car.

Still not sold? Look at the numbers. The difference between Scenario 1($323,000) vs Scenario 4 (238,000) that is an $85,000 difference!! Not to mention you are out of a mortgage 15 years earlier.

The argument that I rather invest in a house then pay rent is absolutely foolish. It is a sucker’s game. Put 20% down on your house and have a 15 year fixed rate. It is the only way to go.