The Financial Equation That Can Change Your Life

The Financial Equation That Can Change Your Life
Ask a person what is the single most important thing that
could happen to improve his or her financial picture and
the answer you'll get—in various gradations—is
a sudden influx of cash. Some of us wish for pay raises,
others want to win the lottery, and more indecisive types
just dream of a sudden windfall of cash.

Take an average family in an average neighborhood in a
small town that's earning, all together, about $60,000.
Chances are that family is whining about money and wishing,
possibly even praying (if they live in the Bible belt) that
they can earn more money. They probably even have an amount
in mind. If only, they will whine, we could earn $70,000,
we'd have it made! Even $68,500 would be enough! That would
be all it would take for us to be well off.

Meanwhile right down the road is another family in the same
general circumstances, and they're also moaning and
groaning about not having enough money. The thing is, this
second family already earns $70,000. But it's not enough.
They need $80,000, maybe even $85,000.

Whatever you earn, if you're strapped for cash right now,
chances are pretty good that some people in very similar
circumstances to yours are doing just fine with the same
amount you're earning.

And whatever sum you're dreaming about ... wake up! There's
somebody out there that fell into that much money and is
flirting with bankruptcy.

It's just as easy (maybe even easier) to go broke earning
$100,000 a month as it is to go broke earning $4,000 a
month.

If you're a typical American you probably wonder: how on
earth can you go bankrupt if you bring in $100,000 a month?
That's over a million a year!! How can you be anything but
rich?

You can go broke and it's not hard. Here's how. Spend
$101,000 a month. Believe me, that extra $1,000 can really
sneak in unnoticed when the income shoots up. That's why so
many lottery winners and movie stars and the "silly rich"
can wind up broke. When you only bring in $4,000 a month,
it's pretty hard to "make a mistake" and spend $5,000 since
you're probably counting your pennies.

Your financial health is made up of two things. Americans
fixate on one of them and ignore the other.

Part of your overall financial picture is your income.
That's true. I don't want to underestimate it. Your income
is vitally important. And don't get me wrong—more is
better when it comes to income.

But the other part of your overall financial picture is
what you spend. This is where Americans get glassy-eyed and
rub their foreheads.

Most of us act like we have control over our incomes
because we obsess about them and figure out way out of debt
based on income boosts. The truth is, you don't have much
control over your income.

Let's say you have a job. You really don't have much
control of what kind of raise you'll get. You can do a good
job, but if the industry suffers a downturn or your boss
doesn't like you or you make some career mistakes, you may
not even get any raise. The old adage that hard work will
bring you rewards really didn't mean that working hard for
a corporation guarantees you regular raises. You may not
get them.

You might think you could just find another job. That's
true. But the kind of job you can get depends a lot on your
education, skill set, and background as well as where you
live and the competition to nab those elusively rare
high-paying jobs. And let's face it, at some point, you max
out. If you're a world-famous brain surgeon working at a
world-famous brain surgery hospital you may be already at
the top of your game. You can't walk out and figure you'll
work somewhere else, because there may not be a "somewhere
else" for you.

But you do have a lot of control over what you spend.

Most Americans are mystified by that. They see debts and
expenditures as things that "just happen." It's true that
you have to pay rent, buy food, and pay your taxes, but you
have some leeway in the first two items. When it comes to
entertainment, clothing, and vacations, your control zooms
off the charts.

I've seen people spend money on things as if they were
zombies. A family in five-figure debt took an expensive
vacation one year and ended up getting dunned by collection
agencies because they let some of their already festering
debt fall into worse arrears than previously. When I asked
them why they went on an expensive vacation that year, they
seemed stunned.

"It was summer. We always go on vacation."

Young women feel that it's their birthright to have
designer jeans and expensive handbags, not to mention big
name shoes. College kids who wait tables to buy books will
put a spring break fling to Mexico on plastic. Why not?
They're entitled!

That entitlement mystique has created the mistaken sense
that our expenditures are uncontrollable. They're not.

You can trim your budget by 10% easily, without even
feeling anything. Most of us can save even more by making
conscious decisions and adjustments. And it's possible for
zealots to cut expenses radically without giving up a
decent lifestyle.

If you cut your expenses by 20% (a good target, by the
way), that's like getting a 20% raise. You can't reasonably
expect your company to give you a 20% raise, but you can
give one to yourself!

What's more, frugality is not necessarily a program of
hideous deprivation and austerity. It can be creative,
engaging, and fun. It forces you to do things differently
and many people struggling with debt and "low incomes" are
often struggling in other areas.

Here's what I mean. You may feel like your life is out of
control and you dream that a bigger income would "fix
things." But then you decide to start saving money. You
give up cable TV and going to the movies. This forces you
and your family to interact a bit more. You start playing
ball in the park after work or board games at night.

I've heard of restaurants-only couples who went on
frugality plans who discovered that cooking at home was not
only fun, they ate healthier food. The couple loses weight,
finds a hobby they both can enjoy, and learns (here's a
surprise) that it's really no more time consuming to cook
regularly than to eat out.

Money-saving strategies may encourage you to take up
sewing, start a garden, or bake your own bread ... but many
people find they enjoy these things.

Not only that, frugality is a good incentive to proper
work-life balance. Most of us get into the debt whirlwind
because we're living too much in the work zone. (Work is
expensive! It requires gas, clothing, day care, and all
sorts of special services to permit us to log those long
hours.) Frugality is going to force you to spend some time
at the home front.

And when it saves you money, you realize you not only can
afford to spend more time at home with the family, you
can't afford not to.

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Whether you're already a froog or just want to embrace the
frugal lifestyle, visit
http://www.livebetterspendless.blogspot.com . If you're
digging out from debt, don't despair. You can find all
information (no selling) at
http://www.debt-consolidation-diva.com .

Leases—Clarity Is The Key for Real Estate Investors (and Everybody Else on the Planet)

Leases—Clarity Is The Key for Real Estate Investors (and Everybody Else on the Planet)
The standard definition of a real estate lease is pretty
cut-and-dried: A lease is a contract. The contract gives
the lessee (tenant) the right of possession and use of an
asset (house, business facility, etc.) for a specific
period of time. In return for possession and use, the
lessor (landlord) receives payments during that period of
time.

Ah, but the devil is in the details of those leases! Often,
if you don't pay close attention to the language, an
agreement can become anything but cut-and-cried!

A clearly written lease benefits both parties. If you're
the lessor, you receive a fair income stream from the
property you've leased. If you're the lessee, then you
receive use of the property at a fair rental.

On the other hand, a badly written lease is a recipe for a
lot of financial trouble and personal headaches. For
example, if you're the lessor, you could end up with a
property that produces little income and/or appreciation.
If you're the lessee, you could end up paying rent that's
excessive in terms of prevailing market conditions.

So, from either party's point of view, it pays to fully
understand leases before one is ever signed. Here are some
rules to help you out:

Rule #1: Always get the lease in writing! I repeat, get it
in writing! Never, ever, ever rely on a verbal lease! Such
leases can be enforced, but they're much more difficult to
prove because nothing is written down and no one has a
physical basis on which to judge the validity of the
agreement. Good business sense dictates that leases and
contracts be written out in detail.

Rule #2: The language of the lease should be as clear as
possible. If someone offers you a lease with terms that are
vague or muddled, your ears should prick up at possible
financial danger. Insist that the language be rewritten so
you are absolutely clear as to what the rights and
responsibilities of each party are.

Rule #3: The lease should specifically define the rights
and responsibilities of the lessor and the lessee.
Definitely avoid any generic or "boiler-plate" leases.
Also, a generic form may not be consistent with your state
and local laws and provide grounds for breaking the
agreement. A lease should always be custom-tailored to a
specific property and your particular needs.

Rule #4: The lease language can be readily interpreted and
enforced by a third party (courts, etc.). If you need to go
to court to take care of lease violations, you want the
court to have no trouble in understanding the terms of
contract. Otherwise, things may not go in your favor.

Rule #5: The lease should provide consequences for
violating the terms (default, etc.). There should be clear
penalties for lease violations (e.g., late payments,
returned checks, etc.). If such penalties are not clear,
then you can have a devil of a time in collecting what's
due you (if you're the lessor).

Rule #6: The lease provides a prescribed manner of dispute
resolution. To deal with potential lease problems, you want
to be sure to have a dispute mechanism (attorney, law firm,
etc.) included in the lease language. That way, both
parties understand clearly how they can address any
disputes.

Rule #7: Make sure you get the complete lease. If someone
offers you a summary of a lease or just the first one or
two pages, insist on receiving the complete lease. Without
the complete lease, you could be signing up for rough
journey instead of a smooth ride.

Rule #8: Read every word of the lease! You may find terms
that are unacceptable, and you may want to change some of
the language or add addendums. Of course, terms are often
the subject of negotiation between lessor and lessee.

Rule #9: Always have your legal advisor review any lease
before signing it. Unless you have extensive legal
experience yourself, have an attorney or other professional
review the lease terms and explain them to you.

Key Point: Fully understand every aspect of a lease before
you sign it!

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Jack Sternberg is a nationally recognized expert on real
estate investment and the creator of the renowned "Buyers
First Program" who's been in the business for more than 30
years. Sternberg's deals have totaled over $750 million and
he's been to the closing table more than 1,500 times. For
more, visit http://www.askjacksternberg.com