MONEY Investing

Are You On Your Way to $1 Million? Tell Us Your Story.

There are many ways to build lasting wealth. MONEY wants to hear how you're doing it.

The number of millionaires in America hit 9.6 million this year, a record high and yet another sign that the wealthy are recovering from the Great Recession, thanks in large part to stock market and real estate gains.

Are you on target to join their ranks? Are you taking steps—through your savings, your career decisions, your investments, or your rental properties—to make sure that by the time you retire your net worth will be in the seven figures? MONEY wants to hear your story.

Related: Where Are You On the Road to Wealth?

There are many paths to that kind of wealth, and they don’t necessarily involve a sudden windfall, a big head start, or a six-figure salary. You can build up a million or more in assets through steady saving, a sensible approach to investing, modest real estate holdings, or a winning small business idea. Are you finding ways to boost your savings at certain point of your life, like when the kids are out of school or the mortgage is paid up? Are you planning to take more or fewer risks with your investments as you near retirement? And if you invest in real estate, do you find that owning even one or two rental properties is enough to achieve prosperity?

Got a story like this to share? Use the confidential form below to tell us a bit about what you’re doing right, plus let us know where you’re from, what you do for a living, and how old you are. We won’t use your story unless we speak with you first.

MONEY retirement planning

Saying No Put Me on the Path to Financial Independence

House key in ring box
Dmytro Lastovych—Alamy

How I learned delayed gratification means opening the door to your true goals, like a home or a comfortable retirement.

I was raised around a lot of money—not my own, but other people’s. Granted, by any reasonable national standard my family was well-off, but growing up in New York City meant that my playmates were the children of media moguls and Wall Street titans, so my comparison group skewed upwards several tax brackets. For a while this environment created both a sense of longing and, unfortunately, entitlement. Everyone else has a summer home, why can’t we?! That feeling of financial inadequacy turned out to be a blessing in disguise however, because it taught me what those moguls and titans probably already knew, which is that the most satisfying wealth is the kind that you create for yourself, dollar by dollar by dollar.

Financial independence is certainly easier to achieve with a good income. But you can also get there, or at least come close to it, by saving and investing no matter what your salary is. (See The Millionaire Next Door.) And so at the most fundamental level, independence requires that you always live well within your means. If you are not living within your means, then you are not saving, and if you are not saving, then you are not creating wealth, you are creating the opposite: need. Financial independence means not having need.

There is no saving without delaying gratification, saying no when you want to say yes—not just every once in a while but pretty much constantly. Saying no not just to the big trips or a car, but also to the expensive haircuts and the overpriced appetizers and the ballet flats with the big logo on them when a pair from DSW will do just fine. It means being chronically cheap and enjoying it. Because every no is a yes to getting things that you really, really, really want and can truly fulfill need, no matter what stage of life you are in.

In my 20s and early 30s, my biggest need, after I had established myself on a career track, was to have a place of my own. I had bounced from illegal sublets to 4th floor walk-ups and had literally begun dreaming of “discovering” an extra room in whichever cramped apartment I was occupying, a dream that I later found out was shared in the collective unconscious of similarly space-starved young Manhattanites.

At the outset, buying my own one bedroom seemed an impossibility. But after a job switch and salary raise, I began automatically withdrawing money from my checking account into a house fund. After several years, I had saved $60,000, at which point several of my relatives generously gave me gifts to increase my down payment and create enough of a cushion to meet co-op board approval. Buying that apartment at age 32 was my first major milepost on the road to financial independence, but I didn’t do it alone.

Related: Where are you on the Road to Wealth?

They helped me, I believe, because I had shown them that I understood what building wealth entailed: being a good steward of your own money, understanding that you have to teach yourself the things you don’t know, whether that’s fixed-rate versus adjustable mortgages or the value of compound interest, and yes, delaying gratification. Granted, timing was on my side—I bought the apartment in the early stages of the real estate boom as was able to later profit not only on its sale but the sale of a subsequent, larger apartment.

But having saved for a purpose once, I know that I can do it again in the future, although not whenever I want but whenever I am able. I would love to be putting aside money to install a master bathroom in my house, but right now it’s more important that my children, with whom I currently share a bathroom, have good childcare, and that I increase my funding to my retirement accounts. The master bath will have to wait.

So here’s where I’m going to get really preachy, because there’s actually another important lesson that all this delayed gratification has taught me. There will always be more and more things to save for: sleep-away camps, college funds, maybe even someday a summer cottage. Today, as I write this on a beautiful day at the end of June, I can honestly say that the path to financial independence also means being profoundly grateful for what you already have.

Ruth Davis Konigsberg, a fortysomething journalist and consultant to Arden Asset Management, writes weekly about retirement planning.

TIME real estate

Here’s Why Your Landlord Keeps Raising the Rent

Views Of Austin And San Antonio As Cities Bear The State's Financial Burden
A building stands under construction Austin, Texas,. U.S., on Friday, June 6, 2014. Bloomberg—Bloomberg via Getty Images

Turns out the rent really is too damn high

If you dread writing your first-of-the-month check, you’re not alone.

Apartment rents are continuing to rise rapidly across the country as landlords pushed through big hikes over the past year, even as household income remain squeezed.

The average monthly rent for an apartment rose to $1,099 in the second quarter of 2014, up 3.4% over the 12-month period ended in June, according to data from the real-estate research firm Reis. The second quarter was the 18th consecutive quarter of rent increases.

The ever-spiraling rental prices are because tight mortgage-lending standards keep younger people in the rental market longer, particularly in urban areas. With vacancies at just 4.1%, rental supply is tight — and as a result, average rents have increased 14% since the end of 2009.

In San Francisco, San Jose, Calif. and Seattle, rent growth exceeded 6% in the past year, and even cities like Charleston, S.C. and Nashville, Tenn.—cities not associated with high rents—saw growth of about 5% over the same period.

New York City was the most expensive rent market with an average rent of $3,152/month, with San Francisco the second most expensive.

Meanwhile household income stagnated in 2012 at $50,017, well below 2007’s peak of $55,627, adjusting for inflation, the Wall Street Journal reports, making it harder for renters to afford their apartments.

Maybe it really is time to vote for the Rent Is Too Damn High Party, the mostly New York-based political party that’s as frustrated with landlords as you are.

MONEY home prices

WATCH: Foreign Buyers Push U.S. Home Prices Higher

From Russia, Canada, the Middle East and elsewhere, international buyers are moving in.

MONEY buying a home

7 Ways to Get Your Kid Out of Your Basement

College students slacking off and living in parents' basement
Adam Crowley—Getty Images

If your child is one of the 14% of millennials who have moved back in with their parents, here are some tips to nudge him (or her) out the door.

For most of us, leaving the nest was a rite of passage. We went to college, and then proudly headed out into the world to make our own way, while our parents turned our old room into another guest bedroom.

However, for a significant percentage of young adults, that rite of passage is now all about returning to the roost rather than flying solo. According to Gallup research, 14% of millennials (24-to-34-year-olds) have moved back in with their parents. The homeownership rate for those under age 35 was 36.2% in the first quarter of 2014, down from a historical high of 43.1% at the end of 2005, according to Census data. According to numerous economic reports on millennials, this is attributed to a weak job market, high cost of living, significant college debt, and other factors.

These kids, as well as any adult children who have decided to move back in with mom and pop are lovingly referred to as “boomerang kids.” Clearly the analogy is obvious.

For Mom and Dad, who would love to have the ‘kids across the hall’ become the ‘kids across town,’ here are seven pointers you might want to consider:

Start Charging Rent

Cut off the free ride. Yes, it sounds harsh, but you may be doing both you and your kid a favor. Managing money and a monthly budget is something that is not learned in school, and it is certainly not learned hanging out in your parent’s converted attic for free. Give your boomerang kids a real estate reality check. If the free ride comes to a screeching halt and they are paying rent, they will probably want to do it in their own apartment, closer to (or with) their friends, near downtown or a closer drive to their office. Charge rent and enforce it. Once they start getting that first-of-the-month monetary wake up call, it might shock their system enough to have them consider alternative arrangements. If they’re going to have a landlord no matter what, they’re likely to consider a new, more independent situation.

Collect Monthly Payments

Here’s another way to give them a foot out the door – but still a leg up. Start charging them monthly payments now. Let them know that they will have to come up with the monthly equivalent to local rents each month for the next six months. At the end of the six months, you will give them back all the money when they move out. That does three things: You teach them budgeting skills, you incentivize them to move, and you give them a financial helping hand on move-out day.

Be A Strict Landlord

No parties, no loud music, no guests after 10:00 pm. Keep the house rules strict. At some point, your kid is going to want to have a little independence, and some fun too. Living with a strict landlord may just be the incentive he or she needs to find a place of their own.

Set A Deadline…and Stick To It

If you can sense that your boomerang kid is riding out his or her free meal ticket under your roof as long as they can, help them visualize when that ride will end. Create a deadline for them to move out and stick to it, no matter what. It’s likely you never intended to have kids under your roof for more than two decades, so your children need to respect that…and they need to get on with their own lives. Even in a world where millennials are underemployed compared to their Gen X, Y and Baby Boomer counterparts, there are still plenty of ways for them to make a living that enables them to live with a roommate or two or three…elsewhere.

Help Them Get Organized and Overcome The Mental Hurdle

After all the financial aspects are considered, one of the biggest hurdles to making a big move is mental: it just feels overwhelming. So many things to do, buy and organize before it can actually happen. Your child may just need the expertise of someone who’s moved multiple times in their lives to talk them down off the “I’m too overwhelmed and can’t do this” ledge. Map out all the necessities and then make a list of the “nice to haves down the road” so they can see what’s an immediate need, and what can be done over the coming weeks and months.

Gift or Loan Them The Down Payment

Trulia’s latest survey showed that 50% of millennials surveyed plan go to their parents for help with the hefty down payment that’s required to purchase a home in today’s housing market. If you want your adult child up and out of your basement, consider giving them the financial head start now they need to form their own household and be independent.

Buy A Multi-Unit Investment Property

I am a huge proponent of purchasing multiunit properties, such as a duplex or triplex, because they are great investments. In the case of your “failure to launch” millennial, slot them into one of the units of your new property and rent out the others. The rental income is likely to cover much of the costs of ownership, and you’ll have a built-in property manager in the building to keep an eye on things. Plus, your boomerang kid is learning valuable management skills at the same time. It can be an investment property for you, and solve the “son or daughter is still in my basement” problem, all at the same time.

 

More on Financial Independence

4 Ways to Lighten Your Kid’s Debt Load

Is Living with Mom and Dad Starting to Cramp Your Style? Take These Steps to Independence

Taking Five Years to Earn a B.A. is Common—And Costly. Here’s How To Get Out in Four

MONEY Ask the Expert

Should I Pay Off Loans or Save for a Down Payment?

140605_AskExpert_illo
Robert A. Di Ieso, Jr.

Q: Should I use savings to pay off car loans or make a down payment? — Carmella F., Pittsburgh

A: The first line of business is to make sure you have enough savings for an emergency fund, a minimum of four months if both spouses are working, six months if one isn’t, says Pittsburgh financial planner Diane Pearson.

Paying off the $30,000 in two car loans you told us you have would deplete your savings. Not only does that leave you vulnerable to unforeseen expenses, plowing money into assets that only lose value as they age doesn’t make sense, says Pearson. When applying for a mortgage, banks would prefer to see $30,000 in savings plus car loans over no savings and vehicles owned free and clear.

MONEY Shopping

Poll: What’s Your Next Big-Ticket Buy?

Is there a major purchase in your future? Tell us what you're most likely to spend the big bucks on.

 

 

 

 

 

 

MONEY

6 Acronyms Every Beginner Real Estate Investor Should Know

H-O-M-E letters in wooden blocks
Image Source—Getty Images

Pretty much every time you learn something new, you also learn a whole new vocabulary to go along with it. Real estate investing is no different. Real estate investors must understand the terms and investment vocabulary. Here are some definitions of common acronyms to get you started:

1. PITI

Principal (P), Interest (I), property Taxes (T) and Insurance (I). This is basically the “bottom line” or the minimum you need to calculate when thinking about purchasing an investment property with a loan. Usually it is calculated overall and on a month-to-month basis.

The overall number is what you would potentially spend on the property over the life of the loan. Month-to-month is the portion of PITI you have to pay each month to stay in good standing. This information will help determine how much rent you should charge.

Related: Trying to Choose The Right Loan? Stop Looking at Just The Rates!

2. LTV

Loan-to-Value, also important if you’re taking out a loan on your investment property, is calculated by dividing the loan by the property’s value, then expressing that as a percentage. For example, if the loan is $200,000 and the value of the property is $250,000, the LTV is 80%.

The lower the LTV, the more equity you have in the property, which means you have more room to negotiate should you decide to sell.

3. GOI

Gross Operating Income is the actual annual income collected from the property, which includes all sources of income (laundry, parking, storage, etc.) and takes into account any vacancies.

4. NOI

Net Operating Income is the income left over from your rents after paying all your monthly operating expenses. So, subtract your expenses from your GOI to get you the property’s NOI. For example, if you take in $10,000 in rents on all the units and spent $8,000 on maintenance, janitorial duties, supplies, accounting, insurance, taxes, and utilities, your NOI for the month was $2,000.

5. DCR

Debt Coverage Ratio is a term commonly used by lenders in underwriting loans for income-generating properties. It’s calculated by dividing the NOI by the total debt. Ratios of 1.20 and higher are considered average.

Related: Understanding Debt Service Coverage Ratio

6. CCR

Conditions, Covenants, and Restrictions are promises written into contracts where the parties agree to perform, or not perform, certain actions.

CCRs can occur in several contexts. There can be CCRs written into a deed when you purchase a property. Also, your tenants could sign a rental agreement in which they agree to certain conditions (such as “no pets allowed” and “you can live here as long as you pay rent, otherwise we can evict you”).

I’m sorry to disappoint you on that last one. CCR on the radio is much more exciting than the real estate investing version of CCR. But it’s an important term, so I hope I’m forgiven. Either way, I hope the acronyms listed above will help you in your quest to invest in real estate.

More from BiggerPockets:
10 Things I Hate About Working From Home
10 Rules For Investing in Real Estate Without Looking Like an Idiot
6 Tips to Turn Bad Tenants Into Amazing Tenants

This article originally appeared on BiggerPockets, the real estate investing social network. © 2014 BiggerPockets Inc.

TIME Economy

Millennial-Driven Housing Boom Could Be On The Way

A new study says as the economy improves many millennials could soon be leaving home — causing a housing boom within the next decade.

Young adults, so-called “millennials,” have been pushed by the recession to live with their parents into adulthood–but they really want to move out, according to a study by Harvard’s Joint Center for Housing Studies. That study found that millennials could form 24 million new households by 2025.

Three main factors have been holding millennials back from moving out, said the Harvard study: A weak job market for recent graduates, high debt from student loans and tightened lending standards.

The report also found that the number of young people who buy homes increases as their incomes grow. As and the economy improves, millennials–which the study defined as those born between the years of 1985 and 2004–will make decisions about their living arrangements that will, by extension, affect the economy.

But don’t foresee a mass exodus from parents’ homes, the authors said. Millennials will probably just trickle out of their parents’ nest in what would look like a steady, slow recovery.

 

 

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