Posts

Image of group of smiling people with title of blog post: 4 Tips from The Pursuit of Happyness

4 Tips from The Pursuit of Happyness

Image of group of smiling people with title of blog post: 4 Tips from The Pursuit of Happyness

The Pursuit of Happyness is one of our all-time favorite movies. We share four tips from the life of a homeless-father who made millions.

On The BIGG Success Show, we talk about a homeless father who built a multi-million-dollar fortune. Here’s a summary of that discussion.

We talked recently on this show about a new way of looking at money. Ken Honda has written a fantastic book called, Happy Money: The Japanese Art of Making Peace with Your Money*. Is your money happy with you?

It made us think of one of our favorite movies, The Pursuit of Happyness. It’s the true story of a once-homeless single father, Christopher Gardner (played by Will Smith) and his son, Chris Jr. (fittingly played by Will’s son, Jaden).

Read more

The People Who Hate the Janitor

The BIGG Success story of Gac FilipajToday we want to talk about an incredibly inspiring success story. More importantly, we want to talk about the people who hate the janitor.

Graduation season is always full of high hopes and BIGG dreams. We always enjoy hearing or reading about all the great convocation speeches.

But this year’s biggest inspiration didn’t come from any of the high-powered speakers. It came from a janitor.

You may have heard about Gac Filipaj. He’s the 52-year old graduate from Columbia University.

What a success story – he fled to America to escape civil war and ethnic cleansing in his homeland. Like so many first-generation immigrants, he sought opportunity.

And opportunity – just like the success it leads to – comes with a price. He thought nothing of this; he was willing to pay it.

He discovered that Columbia offered its employees 14 credit hours of classes every year for free. He wanted an education. So he took a job as a “heavy cleaner” at Columbia – mopping floors, cleaning toilets, and taking out the garbage.

After learning to speak English, it took twelve more years to get his degree in the classics. He attended classes in the morning followed by a full day of work from mid-afternoon to 11 PM. Then he would crack open the books to study, occasionally pulling an all-nighter to study for an exam or write a paper.

Now he plans to continue on to get his PhD. He wants to teach. And he hopes to get promoted to supervisor.

It’s the American Dream alive and well!

But what really struck us is the attitude of the haters. And there are plenty of them, visible in the comments on the various stories we read.

You know these people. They are so miserable that they can’t feel good about themselves unless they feel like they made others feel bad.

They don’t see any value in this amazing man’s accomplishment. They assert that a janitor’s job is menial. They decry his degree as useless. They say it was a waste of time.

We couldn’t disagree more.

We believe there is dignity in every job. Every job is an opportunity to learn about yourself and become a better person.

We don’t profess to knowing anymore than they do. But from what we know, we think he made a great decision. He’s living his life on his own terms. Who cares what they think?

In the meantime, what are they doing? Commenting on his life and mocking his choices.

We ask you – who’s wasting time?

Image in this post from stock.xchng

Starting from Scratch – Part 2

scratch_beginnings

Today on The Bigg Success Show, we continued our discussion with Adam Shepard. Adam is the author of the book Scratch Beginnings, which describes his year-long real-life experiment to see if the American Dream is still alive. Last time, Adam told us about the initial stages of his experiment and what it took to begin his path toward independence. Let’s get back to the conversation …

georgeAdam, have you ever thought about becoming a Wall Street investment banker, losing all your money and turning to the government for help?

___

___

adam_shepard
I have not.

___

___

Read more

Starting from Scratch – Part 1

scratch_beginnings

We had a special guest today on The Bigg Success Show.

Adam Shepard is the author of Scratch Beginnings. After graduating from college, he conducted a real-life experiment, by starting out homeless with only $25 and the clothes on his back, to see if the American Dream is still alive. His book chronicles his year-long journey. Here’s a summary of the conversation …

___

___

___

marylynnI loved your book, Adam. There were times when I couldn’t put it down because I was worried about you! I can’t imagine what your mom and your dad must have felt.

___

___

adam_shepard
They definitely did not sleep much on that first night … that’s for sure.

___

___

Read more

Are You Throwing Money Away by Owning Your Home?

toss_moneyWe all know that the three essentials for living are food, clothing, and shelter. We definitely rent our food. Do we rent or own our clothing? Hmmm.

Part of the American dream is to own your own home. And there are good reasons to do so. For instance, a Federal Reserve study[pdf] shows that the average family that owns a home has a net worth of nearly $625,000 while families who rent have a net worth of just a little over $54,000.

——

——

Homeowners on the move

We’ve seen an interesting statistic bantered about, but we haven’t been able to pin down a reliable source. If this statistic is true, American homeowners move once every five years or so, on average.

So we thought we’d consider what that does to the buy vs. rent equation. We’ll use some averages and national statistics to create an example. However, what really matters is your own situation and your local real estate market. Only you, working with your financial advisors, can determine what’s in your best interest.

——

marylynn When I was younger, one of my bosses in radio told me that I was just throwing away money by renting. I remember thinking that it made sense. I’d reached an age where maybe I should consider buying. So I did. As often happens in the radio business, less than a year later, I lost my gig. So I had to sell my house to move to a different market. I lost a lot of money by buying. If only I had had a crystal ball!

——

Putting buy vs. rent to the test

We created a fictional purchase to see if we would be better off renting or owning a house for five years. We assumed that:

  • We put 20% down (approximately $63,000).
  • We financed the rest with a 30-year mortgage
  • The interest rate would be 6.50%, slightly above the current rate.
  • Our house would appreciate 4% per year, slightly below the recent average.
  • Property taxes would cost us 1% of the value of the home.
  • Insurance would run 0.50% of the value of the home. (Renters and homeowners have to insure the contents. We have the added burden of insuring the building.)
  • Repairs & maintenance would consume 1.50% of the value of the home.

Over the first five years, 83% of our total mortgage payments would go for interest. In other words, for the most part, we’ve traded renting property for renting money. If the interest rate is higher, the portion that would go to interest would also be higher. Of course, the reverse is also true.

During this period, we would pay $2,171 per month as “rental costs” for our home. We call them rental costs because they have no value once they’re paid. They only allow us to keep owning. So if we could rent a similar property for less than this, we would be better off renting instead of buying.

Of course, if we had made a down payment of less than $63,000, our cost would go up because we would be paying even more interest.

Where’s the break-even?

We also looked at how it would take before we would break-even. After all, it costs money to sell a house. We would have to pay commissions to our realtor, closing costs, and the like. We assumed these costs would total 8% of the selling price.

Given our assumptions, we looked at what would happen if we sold after one year. Our house would now be worth $326,560. From that, we would pay $26,125 in selling costs. After a year, our mortgage balance would be $248,392.

So we would be able to take out $52,043 in cash. But remember, we invested $63,000. So we lose about $11,000 if we sell after one year.

But that’s not the whole story …

We haven’t yet considered the opportunity cost of tying up that $63,000 in a house. Because if we didn’t invest it in this house, we could have invested in something else. We assumed we could have earned 6% by investing in some portfolio of financial assets.

That would have returned nearly $3,800. So by buying this house and selling it in a year, we would put ourselves in the hole nearly $15,000.

Even after 2 years, we’d still be about $3,500 behind, given our assumptions. Of course, one of those assumptions is that real estate prices are rising. It’s almost certain they will in the long run, but will they rise in the next year or two? They may not in some markets.

What’s the bottom-line?

We concluded that if we didn’t plan to own a house for at least two years, we’d rather rent. We also saw that the longer our holding period, the better we would do. For instance, in the last five years of the mortgage, only 15% of the mortgage payment would go to interest. It seems like buy-and-hold is rewarded in real estate investing.

How to get around it …

We have two friends who have been able to get around the short-term ownership problem. One of them is in the military, so he moves frequently. He only buys a house that he knows would make a good rental property. If he gets transferred, he hires a local property manager and rents it out. Until he decides where he wants to retire, he plans to hold a number of his houses.

Another friend doubled-down on this strategy. He moved quite frequently as he climbed the corporate ladder. Not only does he own houses in a number of cities, he bought additional rental properties, so he has a diversified portfolio across a number of cities. Now he’s retired living off the rents!

So you can get around the disadvantages of short-term ownership by having an alternative exit strategy!

Next time, we’ll discuss how a toy that you probably played with as a kid can help you manage your time. Until then, here’s to your bigg success!

Subscribe to The Bigg Success Show in iTunes. 

Subscribe to the Bigg Success feed.

Related posts

9 Questions to Answer Before You Make Extra Mortgage Payments 

(Image by tychay, CC 2.0)