Month: July 2019

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Your Home Is Not An Asset – Here Is Why!!!

On average, American’s spend 35% of their take home pay on housing. This is the single largest bucket of expenses most American’s have.

Is your primary home an asset or a liability? Below I have outlined my personal view on the classification of your home being an asset. I respect individuals opinions who might not agree with my stance 🙂

So here we go. This weeks Money Myth Monday’s quote:

To understand why I believe this is a myth, you must first begin with defining what an asset is. An asset, by my definition, is something of value that puts money into your pocket. A liability is something that takes money out of your pocket with no return.

Why Your Home Isn’t An Asset

By this definition, 99.9% of people who own homes don’t utilize their home as an asset, yet they think their home is the biggest asset they should own. By this definition, 99.9% of peoples homes are liabilities. 99.9% of individuals don’t realize any equity they have built up in there house is “fake”. Ooh let the waters swirl.

If My Home Is Not An Asset, How Can I Get It To Be?

The next logical question might be, so how do I turn my home into an asset if it is current a liability?

I feel there are two ways to do this. The two actions listed below are things I am currently doing. I am not giving advice, just informing you what I do.

  1. Option 1: House hack! House hacking is renting out areas and/or rooms in your home to others. Doing this allows for you to receive money back into your pocket each month. That by definition would turn your house into an asset and not a liability. I am currently doing this with my home. I purchased a 3 bedroom 2 bathroom home in Orlando and rent out the rooms long term. My mortgage is $1,777 per month and I currently charge $1,000 per month for each room individually. This brings me $2,000 per month, so I am not only turning my home into an asset, I am getting paid to live in my own home while I am paying down principal! If that isn’t a hack I don’t know what is! I recently started renting out the additional side room I have (it was meant for an office) for $600 per month. So now I am bringing in $2,600 per month and cash flowing $823/month.
  2. Option 2: Take out either a Home Equity Line Of Credit (HELOC) or do a cash out refinance to pull the equity you own out of your home and invest the money into another income producing asset. I do not recommend this option unless you are seasoned and know exactly what you are doing and why you are doing it. I am currently testing the waters with this and will provide an update of my experience with it. DO NOT pull out equity in your home to buy liabilities. If you think this is something that would be beneficial for you to do, you should only think of purchasing assets with the equity you are pulling out.

After reading this article, what are your thoughts on how you currently utilize your home? Did you purchase a home you can maximize the value from? Is your home putting any money back into your pocket each month? Don’t feel bad if it doesn’t. 99.9% of people are in the exact same boat. I am trying to be a little different by focusing on eliminating my largest monthly expense, rent.

Key Takeaways:

  • Understand the difference between an asset and a liability. An asset puts money back into your pocket while a liability takes money out of your pocket.
  • House Hacking is an incredible way to significantly reduce or completely eliminate your single largest expense each month.
  • The estimated equity you own in your home is of no value unless you sell your house or leverage the equity to purchase additional assets.

Are you willing to take the leap and begin turning your biggest liability into your biggest asset? 🙂

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About TheYoungRetireeBy33 – Part II – Developing My Money Mindset

Time for Part II of my about me posts. In this post I am going to catch-up right where I left off after my freshman year in high school. If you haven’t had a chance to read Part I, click the link here to read!

Freshman year ended up going extremely well for me. Not only from an athletic perspective, but also from an academic perspective. Math was always my subject while I would continuously struggle with English and Social Studies. Something about numbers and solving difficult problems was extremely intriguing to me.

Being a competitive tennis player brings an expense most might not think of. Have you ever seen a professional tennis player pop a string on their racket? Probably not too often. The main reason professional players don’t break strings often is the fact they have freshly strung rackets for each match. Ever wonder why they pull out a racket from their bag and it comes in a plastic wrapping? Well, this is because they have 5-10 different rackets in their bag that are all strung to different tensions. Based off conditions or how the individual is feeling, they will use a different tension on their racket.

Historically, I didn’t pop strings that often, but as I became bigger and stronger (now 5’ 11” and 120 lbs watch out! haha) there was more of a need for me to have my rackets restrung every week. At your typical country club this would cost $25 per racket plus any cost of the string you wanted to purchase (typically an additional $10-20). As my parents were very frugal and didn’t like to spend money, they started to quickly figure out this would not be affordable in the long term. So, what did they decide to do? Instead of paying someone else to string our rackets, they told my brother and I they would buy us a racket stringing machine if and only if we agreed to string our own rackets.

For those of you that have no idea what a stringing machine looks like, here is a picture for reference 😊

Being a naïve young teenager, I did not like this idea at all. Why would I want to learn how to string tennis rackets when I could have my parents pay for someone else to do it? Oh man did my money mindset have to make a big shift. Looking back, I should have easily been able to understand what my parents were trying to do. Save Money so we could Live Better (Walmart, plug).

The beginning of the Mindset shift:

My brother and I finally agreed to the deal. Sure enough, one week later we had the above stringing machine in the middle of our game room with my brother’s high school tennis coach teaching us how to string our own rackets. The stringing machine my parents purchased came with 2 different reals of strings (each real string will get you roughly 20 rackets). Huge win already!

The process of stringing a tennis racket when you are first learning how can take upwards of an hour and a half. My brother and I learning how to string were no exception to this. As I went to school the next couple of weeks, I began telling my teammates about my parents buying my brother and I a stringing machine. Unexpectedly, my friends started to become more and more interested in how my stringing abilities were coming along and whether I could tell a difference between a racket I strung versus one strung by a country club pro. Within two months I had mastered the art of stringing a tennis racket to the same standards you would expect from a professional from a country club.

I now had this unique skill and ability that very few had. So, what did I decide to do? $$$$$$$ Time to monetize my unique ability. At word of a friend breaking a string at practice, I would ask them if I could string their racket. The first question they asked back, “How much do you want?” Ummmm, well I hadn’t thought this through that much. Knowing the cost of getting a racket strung by a country club of $25 (plus money for the string, $10-20 more), I froze and told a friend $15 plus they provide the string. I could tell they were contemplating whether I was worth the risk. So, I decided to sweeten the deal a little more. I would add free string, so their total cost would be $15. My friend immediately accepted the deal, I mean how could you resist such an amazing offer 😉

Time to Get to Work!

Oh boy. What had I just done?!?! Did I really get a friend to agree to allow me to string their racket for money? How was I going to get my homework done for tomorrow and be able to deliver the racket in the morning?! I had never had a job before and the thought of earning money for using a unique ability I had was intriguing. I took my friends racket, strung it that night, and returned it to them the next morning. In exchange they paid me $15. An hour and a half’s worth of work and I made $15. $10/hr, not bad at all! Did I just start a business at 15!?!?

Woah…my first ever transaction. Word started getting around to everyone on the team. Before I knew it, I had 5 different teammates giving me their rackets to string. As I started to string more and more rackets, I naturally got faster at stringing. What used to take me 90 minutes started taking me 60, then 50, then 40, 30, 20, and finally 15. Holy crap. What had I started. I could now charge $15 and I would be able to string 4 rackets in an hour. Sign me up! I was now making $60/hr stringing rackets. Yes, I was directly exchanging my time for money, but I was a 15-year-old teenager making $60/hr. All I saw was money coming in. The ability to make money at a young age started getting somewhat addictive.

Before I knew it, everyone in my town knew I provided great quality, fast turnaround, and a great customer experience. The entrepreneurial money mindset was born!

Key Takeaways:

  • You are never too young to develop unique skills in which you can monetize
  • Have a game plan before you put your services out on the market! I was a naïve 15-year-old who had no concept of starting a side hustle business. I had not thought of pricing, ability to scale, and how to market. All things I wish I would have known more about now looking back.
  • Exchanging your time for money at an early age isn’t a bad thing (in my opinion). I know this might be a little controversial, but I think the biggest thing this venture taught me was how to have a great work ethic and be diligent with my time. It isn’t easy spending 1-2 hours each night stringing rackets when you have other responsibilities like homework, sports, and hanging out with friends.
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How To Shift Your Mindset – Take Control Of Your Outcomes

As I approach my 27th birthday tomorrow morning (7/3/19), I am thinking more and more about my goals, where I am in life, and where I want to be 1/2/3/4/5 years down the road.

Here is an incredible quote I read the other day in ‘Miracle Morning’ authored by Hal Elrod.

“Your level of success, will rarely exceed your level of personal development, because success is something you attract by the person you become.”

Read that one more time: “Your level of success, will rarely exceed your level of personal development, because success is something you attract by the person you become.”

Profound and powerful statement.

Earlier this morning I had a very calming walk in a natural preserve area. Most people living in Florida in the summer wouldn’t consider a walk outside in 95 degree humid weather to be calming, but I have decided to think of it much differently. In life, you have two options, you can look at the glass as half full or you can look at the glass as half empty.

What 95 degree weather allowed me to do?

Well one, it allows me to be outdoors walking a natural preserve area with little to no distractions from others. Going outdoors to walk in a natural preserve area when it feels like 105 degrees outside is probably not the most appealing thing to do for most individuals. Good, more calm and peace for me. Secondly, it allowed me to be outdoors and meditate while listening to the birds, frogs, insects and wind blowing. All sounds around me were unobstructed by any cars, planes, or distractions from my cell phone. I turned off my phone, brought a book with me and a pen to write down thoughts and ideas.

15 minutes into walking the trail, this is where I ended up stopping!

What an incredible spot. Calming. Relaxing. Peaceful. Zero distractions.

How To Shift Your Mindset?

In this life you live, there are two options you have. You have the option of having an fixed mindset or a growth mindset. There are many books that explain this in great detail, but this is what it means to me.

Fixed Mindset: A fixed mindset, to me, means thinking things are the way they are and they can’t be changed. You have no impact on whether or not good things or bad things happen to you. You are merely along for the journey and can’t control the outcome. Hopefully good things happen to you, and if they don’t you will blame things outside of your control

Growth Mindset: A growth mindset, to me, means you live in a world of abundance. Not thinking there are limitations to your potential. Not thinking there are limitations to your personal development. Not thinking there are limitations to the relationships you can develop. Not thinking there are limitations to the amount of money you can make. Not thinking there are limitation to the amount of people you can have an impact on.

What I Promise Myself For The Rest Of My Life?

In the past, I will admit, I have lived with a Fixed Mindset. I think the main reasons are from how my parents brought me up and how their mindset is. They both have fixed mindsets and instilled that in me from a young age. Don’t take risks they would tell me. Don’t invest your money in things that are calculated risks. Go to school to get a stable job with a company that is well known. Trade your time directly for money and don’t have your money work for you.

Moving forward, I promise to shift from a Fixed Mindset to a Growth Mindset. I promise to think in terms of abundance and not scarcity. I promise to continue developing myself both personally and professionally. I promise to develop my mindset. I promise to give back to others. I promise to have a positive mindset and outlook on life. I promise to smile more. I promise to build stronger and more meaningful relationships.

Key Takeaways:

  • Be one with your thoughts. Take time to walk outdoors completely disconnected from technology and others. Be one with your thoughts.
  • Understand the difference between a Fixed Mindset and a Growth Mindset. Think abundance, think positive outcomes, think you can have an impact on the things that happen to you
  • One last time 🙂 “Your level of success, will rarely exceed your level of personal development, because success is something you attract by the person you become.”