Tactical Help | Critical Juncture | Expand your Money IQ | Sustainable Prosperity | For Parents & Guardians

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Financing, tax, investment, savings, and real estate are all tactical “chess pieces” for the game of life. Each is an important part of your Money IQ.

Ideally, a “cost benefit analysis” is preformed when a company wants to make a change or new product offering. In other words, all of the options are explored, and the cost of those options.

On the rare times I see individuals attempt a cost-benefit analysis, they usually overstate the benefit and understate the cost.

I know folks who see “lower” rates for financing and jump to refinance or transfer the balance on their credit cards. A cost-benefit analysis is skipped. (Newsflash: the person who is selling you something is not the person who should give the analysis). The result: added debt load instead of mitigating it. I can say the same for construction, investment properties—just about any tactical piece is connected to many other hidden factors.

In the case of taxes: I can tell you stories of smart folks who overpaid their taxes for quite some time. Investments: sadly, often folks do not know how they pay for those investments. The money system: it isn’t set up to work for you. It is set up to work for the banks. (Although, that doesn’t mean you can’t play the game and win).

I believe that unless you do this for a “job” it is very hard to conduct a proper “cost benefit” analysis in all of these areas. Unless, of course you have a guide. If you already have a CPA, or CFP I work as the “quarterback” for your team. If you do not, then I teach you how to find a good one.

I believe education is important. Tactical money pieces should not be viewed as a “transaction”. I deal with them as a teacher. Working with me doesn’t just increase your Money IQ Skills, I line the tactical pieces up with your life—so you achieve sustainable prosperity.

A true story to illustrate my point:

In September of 2008, I was called by the brother of a client. I’ll call the brother Steve. My client is Chris. Steve is purchasing a new house. The market is a buyer’s market and he wanted to know if I could help with the financing.

So I asked a few questions about what Steve wanted to accomplish, long term goals with the house, and life. I asked questions about the house—sale price, location, etc.

It turns out Steve had not done his homework. The house according to the comparables I could see was overpriced. (Steve’s wife of course loved the house, thus adding pressure to the situation.) It also turns out the realtor was a friend of the seller. The broker in the realtor’s office (the realtor’s boss!) had the house listed so there was no “conflict”. The attorney was one the realtor “always uses”.

Additionally, Steve was going to borrow money from his 401K for some of the down payment. They were closing in October of 2008.

I gave my recommendation: don’t buy at that price. Never use money from your 401K for a purchase, and, oh, btw: you can’t get all of the financing you need for an overpriced house—the difference in cash has to be made up at closing by the buyer. And ummm, that incestuous thing with the realtor—probably not good.

Naturally, the realtor didn’t like my recommendation. The Realtor tells Steve I am “over stepping” my role and has Steve use the in-house order taker for the mortgage.

About 30 days after my conversation with Steve, his brother and my client, Chris, calls me. He says “Steve is in big, big trouble. He is going to be sued if he doesn’t close on the house and needs me to lend him money.”

I bet you can guess what happened: He agreed to pay too much for the house in the sales contract. The attorney never quite explained to Steve what happened if the house didn’t appraise, and the contract was written with some dubious omissions—like a contingency on the mortgage, or appraisal. Additionally, as the market crashed, Steve didn’t have the cash for the down payment and needed to borrow more money than he could afford to.

So I gave my recommendation, this time to Chris, my client and Steve’s brother. It was hard for him to hear, but he already knew the right answer for him. He needed to say no. Helping Steve would mean losing money for both of them. This would not be real “help” at all. I offered to coach Steve out of the situation.

When Steve called he was very dispirited. I said, “Send me everything, every piece of paper that you have.” The review showed: the mortgage person was sloppy and didn’t have him sign the proper disclosures. The realtor was sloppy and didn’t have him sign the proper disclosures. I called the wholesale lender (a realtor’s in-house finance is not who lends the money—they go to the same wholesale channels as everyone else) and told them they may want to check the appraisal.

48 hours later, Steve was out of his contract and was not sued. If you are wondering if Steve is my client—well, he was for a bit. He was wasting my time and his, so I fired him. (Nicely of course!)

 Steve had a mindset that he was unwilling to change: entitlement. He was owed something. Things were supposed to be a certain way. If they weren’t that way—then Steve was the Victim. This was Steve’s “story”. Steve of course could see some parts of his story (when he was on his proverbial knees) and many parts he was unwilling to release.

A messed-up story always demonstrates in messed-up financing, taxes, investments, savings and real-estate.

Steve today?  In a house that he “got a good deal on”. Except that the new septic, and the leaky roof have made that good deal—not so good. He got a home equity to fix these things, he owes taxes he can’t pay since hr tapped into his 401K. And the old car he had, gave out. He bought a new car. Now he wants to know how he is going to make all of the payments; home equity line, taxes, car, and house. He doesn’t make enough money. “someone screwed me good” Steve said to me when he called. I showed him how he’d be paying about $590.00 a month less for all of the same things, and owe no taxes if he had followed the plan I set up for him. I then gave him the really bad news: his credit score had dropped low enough that he couldn’t get any other loans, he was stuck. He either needed to take another job—or his wife needed to get a job. His response, “do you know how bad the economy is?”

How to spot a messed-up story demonstrating itself in a money situation:

  • You fight or argue about money.
  • People always “rip you off”.
  • You live paycheck to paycheck.
  • You don’t have savings or investments.
  • The criteria for purchases is only, “how much does it cost”.
  • Making only the minimum payments on your Credit Cards.
  • Transferring balances around on Credit Cards.
  • You use your home equity for everyday expenses.
  • You feel like you are never getting ahead.
  • You say, “I can’t afford that” or “I don’t have any money” constantly.
  • Expenses for children stress you out.
  • You lack joy.
  • You don’t know what the fees are for any of your transactions.

If you are looking for someone just to perform transactions, then I am not a good match. If you want to be educated and would like to have sustainable prosperity in your life please contact me to get started.

Contact Karen Monroy about how to put yourself in a position to make smart, tactical choices about your money and your life.