Personal Finance Blogs
August 30th, 2006 by KenricI’ve lately started reading a bunch of personal finance blogs that are written by people under 30. Their blogs are linked together forming a nice community of people under 30 who watch and care about their personal finances.
I enjoy reading these blogs because it really reminds me of how I was when I got my first job and began working. My mindset was based on saving money, buying and paying off my home and investing in stocks and mutual funds. I remember I used to have an excel spreadsheet calculated that I would input my savings into every week. It would extrapolate what my networth would be when I turned 30, assuming a 10% return on my paper investments (I was 23) and I would continuing saving $1,000 a month (by living at home).
I don’t know why, but that just seems silly to me now. I think it’s because things change, shit happens and nothing ever goes as planned. Maybe I didn’t want to live with my parents at the age of 30, maybe I didn’t want to stay at the job or I’d get laid off 5 times and maybe the stock market would crash in 1999…
I know that in the personal finance world that there is a big difference in the mindset between investors and savers. I know that my mindset has changed to an investor. Many of my friends are still savers. Here is a link to one of the blogs I read. You can find many others from her blog links.
http://pennyfoolish.blogspot.com/
While I don’t think that saving is bad, I just think that there are better ways to get to your financial goals. And with all the members on these blogs being under 30, they have time to take a risk or make a mistake. Time is on their side.
As an example, I sent an email out last night to some contacts because I had some cash I was thinking of investing as a hard money lender. Here are some responses that I got:
- 10% on a 1st’s for SFH
- 12% on a 1st on commercial bldg
- 12% and 2 pts (14%) on apartment complex
- 10% on a 2nd for 6 months
That is double the going rate at ING, HBSC or Emmigrant. Yes, there is more risk but life is about risk and rewards.
Posted in Real Estate | 9 Comments »
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Amen to that!
I use to follow personal finance blogs until some people became obsessed with cutting down the joys in life just to save a few pennys. That’s when I knew I was just on a different path.
And that’s why I’m glad I found your blog, Trisha#1 blog, etc.
It’s all good.
By Clifford on Aug 31, 2006
Ah, youth! I remember being about 12 years old and going to the bank. I had a passbook savings account that paid 5.25% interest and I loved going there each month and getting the monthly interest payment posted. 26 years later, my bank is now paying 1.0% interest on savings account. Unfortunately, saving money in the bank is a losing game. Fortunately, these people are young and will hopefully figure that out in time. Kira’s response to Erin’s comment speaks volumes to me about where her mind is at. As for not being interested in real estate investing, once I found out the benefits of it, I became interested. There’s something unique about every deal and you never stop learning..
By Shaun on Aug 31, 2006
There is definitely a split between investors/entrepreneurs trying to expand the topline and head for early financial independence and frugalists/savers trying to cut costs and be rich when they retire at 65 or whatever. Some are heavily in net debt and once they get out of that and keep learning they may emerge as more aggressive investors too. Those with $300-500k say and doing the frugal stuff probably are just very risk averse.
By moom on Sep 1, 2006
People have to start somewhere. You can’t go from broke and in debt and jump straight to being a double digit return investor. Learning to save and getting into the habit of responsible personal finance is a stepping stone for more complex investments and larger returns in the future.
By Single Ma on Sep 8, 2006
As one of those young PF bloggers this post was very interesting to me.
I think I figured out the issue when I got to the end of the post- when you list your possible investments I have no idea what they mean! What is a 1st or 2nd? What is a SFH? I think this is a great example of why so many of us young people are savers- we are still learning about the complexities of investing and how to do it. And by the time we get it all figured out hopefully we will had a wad of cash saved up for investing!
By Laura on Sep 8, 2006
Laura,
Thanks for commenting on the blog. I understand where you are coming from. There are so many different types of investments out there. Knowing what is out there is the key. Some people have all there money in a savings account making 1% and have never heard of ING or HBSC before.
SFH stands for Single Family House. A 1st is a 1st mortgage on a property and a 2nd is a 2nd mortgage on a property. So what I meant by 10% on 1st SFH means that you would be lending money which is secured by a 1st position on a single family home at 10% interest rate.
Being in 1st position means that if you had to foreclose on the home, you are the 1st mortgage in line. This is good because you are ahead of other mortgages secured by this property so if you had to sell the property to get your money back you are 1st in line.
For example let’s say you loaned $100k to someone and it was secured by a 1st mortgage on a house worth $200k and you’re friend loaned $50k to the same person and it was secured by a 2nd mortgage on the same house. This house now has 2 mortgages on it for a total of $150k. Let’s say this person fails to pay both of you your monthly payment and you foreclose. Now you try to sell the house on to get back your money and the house sells for only $140k.
Since you are in 1st position, you get the first $100k from the sale. Your friend being in 2nd position gets the remaining $40k. He has lost $10k by being in second position.
This is why 2nd position loans are at higher interest rates than 1st’s. They are riskier to the lender and therefore command a higher interest rate.
By blog on Sep 10, 2006
Single Ma,
You are correct 100%. The first thing you need to learn is how to take care of your own expenses and savings before you invest.
To use an old adage, you must plug up your leaks before you fill the tub.
By blog on Sep 10, 2006
Thanks for the explanation, I am really pretty clueless when it comes to real estate investing.
By Laura on Sep 10, 2006