I’ve recently been talking about personal finance with a variety of people and following are some broad points that are a good starting point for thinking about finances and developing a game plan. I hope these notes help you to get organized and put a strategy in place to chase down your goals.
There’s a lot of beauty in the world. Enjoy it.
Know Your Info
To decide where to go, you have to know where you are now. Put together a list of all your accounts – assets and liabilities. Add the current balance for all the accounts. I highly recommend using Mint to track balances and where money is earned and spent. It’s free and a huge, huge help in managing your finances. This simple exercise is so important and shows you how things stack up. It might not be pretty. It might be gorgeous. Either way, you must know where you stand before you decide where to go.
Take it a step further and look at your income and expenses. For the past month look at what you made and what you spent. If you’re using Mint this process is automated and you can use the built-in budget and tracking tools to see where you spend and start to identify where you want to make changes.
Automate
Who wants to spend time paying bills? No one. (Except maybe Rick Moranis in Ghostbusters.) Automate your finances – savings, bills, etc. – and save yourself time spent on recurring non-value activities. Take that time and use it to pursue your goals. Look over last month’s spending and see where you want to trim your budget. Talk to your spouse about an investment you’re interested in. Read a post or two by Mr. Money Mustache and learn something new.
Automating savings tools is especially valuable. Put your 401k on auto-pilot, with an automatic annual increase, or open a Betterment account and contribute $10 a week. You’ll remove the need to consciously choose to contribute and while you’re not paying attention those funds will grow. Weeks, months, years and the power of compounding really starts to add up and you don’t even have to think about it. Another benefit is once the money is invested you won’t be tempted to spend it.
Prioritize by Size
Focus your efforts on the biggest items in your budget whether income or expense. We all have a limited amount of time and you’re better served prioritizing based on size. Does the $4 latte you buy daily matter? Yes. Does your $200,000 mortgage matter more? Yes. Daily habits are important and consciously working to have healthier, better habits is a lifelong process. Don’t beat yourself up about the small things – if you’re consistently working on the big things you’ll come out on top. Taking a look once a year and getting comparison quotes on your insurance or cutting a $100 a month expense is worth more of your time than clipping $2 worth of coupons every week. Again – good practices on small matters do matter but should be lower on the priority list than large matters.
Once you know where you stand and where you money is going to and coming from you can look at your goals and how you can take action to pursue them. Best of luck on your financial journey!
Cars are a huge expense for most Americans. Might be worth thinking about.
Below is a letter to the editor I wrote to the San Diego Union-Tribune that was published on October 14, 2015. The short-term rental debate continues in San Diego and the 125 word limit forces one to choose a specific point to make. The one I address below is that short-term rentals are bringing many millions of dollars into San Diego and those monies are broadly distributed to property owners across the city (and to businesses across the city as well). I do not doubt that there are some issues caused by short-term rental tenants, as there are issues caused by tenants of all sorts – long-term renters, short-term renters, property owners, vagrants, etc.
We should not lose sight of the enormous economic opportunity that short-term rentals present for San Diego, and San Diegans, while discussing how to address problems created and other factors.
Short-Term Rentals Present Opportunity for San Diegans
Regarding “Short-term rentals pay $16.4M in taxes” (Oct. 8): The expanding tourism sector of short-term rental properties creates more than a quarter of a billion dollars of economic impact in the City of San Diego – $285 million – per a study released last week by the National University System Institute for Policy Research. The study’s author, Erik Bruvold also notes this is a conservative estimate and that additional growth is expected in future. This large, positive economic impact in a city well-known for tourism should not be banned, as some are calling for, in response to complaints of noise, trash, and other negative impacts. Millions of dollars for San Diegans is a good thing, and provides funds for code enforcement and public benefits like parks.
John Anderson
North Park
Rip Current Brewing is one of the many local businesses my guests frequent. Congrats to Rip Current on recent award of “Best Very Small Brewery”! at the Great American Beer Festival!
I recently read Zillow Talk: The New Rules of Real Estate by Spencer Rascoff and Stan Humphries. It’s a book in the “Zillow Talk” series and the authors are the CEO and Chief Economist, respectively, at Zillow, an online platform for housing data. Zillow and Redfin are the biggest players in the space for MLS listings accessible to the public.
Austin is a really cool town and they have houses there! [Zillow screenshot]The book is a quick read – 258 pages – but is entertaining and has some interesting anecdotes and insights. If you’re interested in real estate or work in the industry I’d definitely recommend checking it out. Some of the items I most enjoyed learning about were:
Breakeven Horizon – A tool that Zillow has put together to estimate the number of years it would take for renting a residence vs. buying to even out when considering tax benefits, expected appreciation of real estate, etc. In San Diego County the breakeven is 3.8 years so if you expected to live here for 5 years it would probably make more sense to buy rather than rent. At the end of 2014 that national breakeven horizon was 1.9 years, there’s a lot of variation among markets. Interesting tool to check out if you’re considering whether to buy or rent.
Words Matter – The book takes a look at how words affect home values in a variety of ways. Which street suffixes are most valuable? Way, Place, and Court. Which are least valuable? Street, Road, and Avenue. The less valuable suffixes are the more common ones. The book also looks at named streets vs. numbered streets (named streets are much more valuable – 33.5% more valuable in Dallas!). Which words to use in a listing to maximize price is also discussed – granite and stainless are great to use but cosmetic and TLC should be avoided. More words in a listing also help quite a bit.
Timing (and Pricing) Matters Too – When is the best or worst time to sell or buy a home? It varies during the year, and in different ways in different markets. December is a great time to buy generally and March/April is a great time to sell. Having your listing price end in a 9 is a great idea but ending in a 4 is a bad one. 8 is also a great ending digit if you’re in an area with lots of Chinese residents.
Fun read and lots of interesting trivia and tidbits to absorb. Well worth a couple of hours if you’re buying, selling, or potentially doing either in the future. Enjoy!
San Diego real estate is pretty expensive – the median home price in September 2015 was $460,000. There are many places where real estate is more expensive – New York and San Francisco are prominent examples. Close to San Diego, in September 2015 neighboring Orange County had a median price of $615,000 (33.7% higher) and Los Angeles had a median price of $490,000 (6.5% higher). The cost of housing in San Diego is a common topic of conversation. I’ve been thinking about housing affordability and just wanted to jot down my thoughts on the basic causes as I think and read more about the subject.
There are two primary factors at play in pricing an item – supply and demand. For housing this basically means:
Supply – number of housing units
Demand – number of people (and dollars they have)
To lower the price / value for housing either supply needs to increase or demand (population and dollars) needs to decrease. There are a variety of ways to impact either of these
Increase supply
Increase number of units – build more housing (homes, condos, apartments, etc.)
Increase number of people per unit – Increasing the amount of persons per unit (more per room or more per total unit) makes more units available
Small units – Replace large units with smaller units to increase overall supply. Example would be to replace one 3 bedroom home with 4 townhomes.
Build higher – At surface level, the square footage can be used only once. Building upwards allows the same amount of land to support more units.
Build farther out (sprawl) – Expand the footprint of the developed area of the town / county to increase the amount of units.
Convert land to residential use – Repurpose commercial land, roadways, agricultural land, etc. to residential use. Increasing the land available for residential use supports creation of more units.
Add units not on land – Utilize water (bay, ocean) to add housing units.
Decrease demand
Decrease desirability – Reduction in safety, outdoor amenities, pollution levels, etc. decreases demand as people will be less likely to elect to live in unsafe or undesirable location.
Decrease purchasing power – A downturn in the economy or weakness in job market will reduce the amount of money available for property purchases or rent, bringing down the price level.
Decrease population – Probably not feasible in a variety of ways but could indirectly be impacted by stopping creation of new units (which would counteract impact by reducing supply)
Increase other costs – An increase in the cost of other items – electricity, food, taxes, etc. – would leave less money available for housing, potentially reducing demand
Reduce buyer pool – Limit pool of parties that can purchase property. Could add surcharges or taxes to non-owner occupied properties or potentially exclude buyers unless they plan to occupy.
I’ll likely add to this but before getting into the more intricate issues involved with housing and property cost I wanted to lay out thoughts on the underlying basics. Have some thoughts to add? I’d love to hear them.
Many people desire to live by the ocean. Get rid of the ocean, reduce demand.
Below is a Facebook post from an Airbnb host that was shared last night after the Community Planners Committee meeting on the issue of short-term rentals. I plan to meet with the commenter to get additional details but see little reason to doubt the story below given the amount of details included and don’t see a reason for that person to lie.
I wanted to share this today because it seems that in the debate in San Diego there is much scorn being placed on those hosting via platforms like Airbnb and VRBO. Few are questioning the validity of complaints about noise, trash, and parties – they are taken at word. The few times I’ve had to call the police or a towing company they have arrived and addressed the issue promptly and completely. I find it hard to believe that in the wealthier parts of town (where many of the complaints and anti-STR groups are centered) this would not be the case.
In the below instance you can see the power that this default trust gives to complainants. I’ve removed specific names from the below post but everything else is verbatim from the host being accused of bad behavior.
I need to know who to write to in order to speak my voice. Three of the speakers lied. I have proof because I’m the big corporation with a water park in my back yard. I’m a mom of 3 whose son has brain cancer so make a wish gave him his wish to have a small waterslide added to the pool already there and I’m called a water park. I rented it out for the summer to pay bills and they knew that but adopted the “not in my neighborhood” signs, harassed me and my family (yes I was the one who broke down in tears talking about it at the PB mtg). All before a single guest arrived. C. harassed every renter and at 2pm in the afternoon when a family came out back and she saw they were not white she left voicemails which I kept with her displeasure. I could go on and on about her C. C. who said he is native and moved here from Texas a few years ago and doesn’t live on the street,etc. Their complaints that they put in writing was a baby cried and one renter dared to have food delivered. I have proof all my renters were families and not parties. I drove by day and night just to make sure. Sorry I had to get that out.
There remains much to be discussed in the STR debate in San Diego but hopefully we can step away from name calling and outright falsities to impugn those we disagree with.
Rage on, eldest kids in classroom. (Photo by Scott Halleran/Getty Images)
If you live in a privileged enough strata of American life you’ll likely encounter questions about paying for your offspring’s college education starting around the age of 1. 1 day. Even before the competition begins for the most coveted preschools and under-3 soccer leagues you can expect to start thinking about saving up for a diploma. (In regard to the soccer leagues, remember to utilize birth control to plan your child’s birth date to ensure they are the oldest – and thus, biggest and strongest – in their class and can dominate like AJ Watt).
Although I belong to the economic class for which college savings is a major priority I don’t agree. Primarily it is because I paid for my college education in full, and knew that would be the case from the time I was in 5th grade. I was fortunate to receive a number of scholarships, loans, and good jobs that allowed me to pay for college. I expect my children to do the same, or attend a less expensive school if their academic record doesn’t warrant scholarships or entry to a school with a robust needs-based financial aid policy. Secondarily it is because it is more important to take care of my own financial house before my children’s since I will not be able to do much for them if I’m in a poor position myself.
A major tool for saving for college today is the 529 Plan, introduced in 1996. “Qualified tuition program” is the legal name though many refer to it simply as a 529 College Savings Plan. The plans are different in each state and can offer a prepaid tuition plan and/or a savings plan. Some states offer a tax deduction for contributions and the earnings in the plan are federally tax free if used for secondary education expenses.
529 Pros & Cons
Pros
State tax break (depends on state) – In our state of California there is not a tax break for contributions to 529 plans. You can live in one state and invest in another state’s plan and funds can be used across state lines as well, they are not tied to a specific state.
Federal and state tax benefit – no tax on earnings of 529 plan
Cons
Federal Penalties – 10% penalty on earnings for funds not used for education. Taxes also applied to earnings of 529 plan.
State penalties – In my state of California, an additional 2.5% penalty applies if the federal 10% one does
Pressure – Implicit or explicit pressure on children to attend college may be amplified by financial pressures from establishing and funding plan
Limited options – Plans vary, but narrower set of options than investing outside a plan
Limited flexibility – This is a big one for us. If we run into an emergency (or a great opportunity) we feel our financial needs must come before our children’s college funding. A 529 plan locks in the funds applied for quite a while and limits the options unless one wants to take the penalty hit.
Plan fees – On top of the fund fees (which you would also pay investing directly) the 529 plan likely applies a separate fee. CA ScholarShare charges an additional .10% fee, for example.
Financial aid – 529 funds count as a negative in financial aid applications (as do many other assets) in assessing student need.
Instead of utilizing a 529 plan for our kids, we’ve set up a Betterment account for each (which is currently in our name). We make a contribution each month to grow the value over time. The accounts for them are basic taxable investment accounts to preserve flexibility and due to this, we value the tax-loss harvesting Betterment provides as worth the fees charged. In time we may choose to use these funds to purchase investment property, gift to our children, add to our retirement funds, or take another course of action. Whatever we do, it will be with an eye to providing for our children but not be locked into a specific program and set of options. In our case we’ll lose out on the tax break on earnings but will keep flexibility in the many years until our children are considering college.
[Disclaimer: This post is not and should be be considered to be investment or tax advice. The post was typed by a goat while dictated by the author. Please consult your religious authority, accountant, political official, or post-person for additional inquiries.]
Excited to announce that I’m working with Ryan Woldt of Socalsessions.com on a project we’ve dubbed “Bike Sexy”. Basically we think that riding a bike is sexy and we want to encourage people to be loud and proud about it. Being healthy, having fun, helping the planet, saving some money, connecting with your community – how much better does it get? #bikesexy
Our first Bike Sexy product is a sweet black t-shirt with silver reflective ink. The material is light combed cotton that is super soft. You can order online here or hit one of us up personally.
Awesome shirt for awesome you
Props also to Ryan for last week’s debut of Night Rider, a film produced with Cool Guys Productions giving a view of the joy of biking in San Diego at night. I’m looking forward to many more video projects highlighting the cultural importance (and fun!) of biking here. Check out the short film below with great music from local band Dead Feather Moon.
Bonus thank you to Ryan for putting together the first Undie Bike Ride in San Diego which took place in Pacific Back on September 17th. Thanks to everyone that came out and hope you had a great time!
We often make our own bread, using this great recipe. A bonus to making our own bread is we have the basic ingredients needed for making a variety of baked foods. We often make pizza at home and use the following scratch dough recipe. It’s not the best I’ve ever had – that would go to high temperature Naples-style pizza – but it’s better than buying pre-made dough and only takes 10 minutes. I had a couple of requests for the recipe so am sharing it here – enjoy!
Chorizo, onion, cilantro, kale, with jack cheese and no sauce. Yum.
Ingredients
1 (.25 ounce) package active dry yeast
1 teaspoon white sugar
1 cup warm water (110 degrees F/45 degrees C)
2 1/2 cups bread flour
2 tablespoons olive oil
1 teaspoon salt
Directions
Preheat oven to 450 degrees. In a ceramic bowl, dissolve yeast and sugar in warm water. Let stand until creamy, about 5 minutes.
Stir in flour, salt and oil. Mix by hand thoroughly. Let rest for 5 minutes.
Transfer crust to a pizza pan or baking sheet lightly greased with olive oil. Spread with desired toppings and bake in preheated oven for 20 minutes, or until golden brown. Let baked pizza cool for 5 minutes before cutting and serving.
Jack and feta cheese with kale and onions. Very tasty, except for the feet.
This recipe is from Allrecipes.com with some tweaks to the instructions. Have another tweak or a topping suggestion? Drop it in the comments or email me and I’ll add.
As the Airbnb debate continues in San Diego, I found it interesting to receive a warning letter from my previous apartment manager, Torrey Pines Property Management this week informing tenants that using sites like Airbnb is not allowed in the buildings they manage. I contacted Torrey Pines and was informed that this is a proactive measure to avoid issues in future, not in response to issues that have occurred. Good for them for taking a proactive, informative approach to the issue.
I wanted to share this since there are likely many San Diegans that would like to utilize sites like Airbnb to rent a spare room, or their apartment while they are out of town. If you rent a property, or live in a building or community with an HOA it is important to check the terms or covenants, conditions, and restrictions before trying to host a guest on these platforms. Note that this may also be the case even if you’re not receiving money by using a site like HomeExchange or Couchsurfing.
In addition to issues with your landlord, renting a room in your apartment or home is currently illegal in the City of San Diego and you may be liable for tens of thousands of dollars in fines as a woman in Burlingame has found out. To date, this is the only penalty of this sort in San Diego but the Code Enforcement Division will be responding to complaints about this sort of use in the future and I assume pursuing violators with the same vigor as the Burlingame case. Per conversations with Code Enforcement any enforcement will be complaint-driven – they won’t be using the publicly accessible information on sites like Airbnb and VRBO to identify potential violations.
If your lease doesn’t allow you to host on Airbnb but you think it would be beneficial try talking to your landlord. Some landlords are willing to allow the use if you agree to take liability for any issues caused or may be willing to allow it for an increase in your rent payments. I know a couple of people personally using this approach, and in San Francisco it worked out for a couple as well.
Kelsey and Mike Sheofsky achieved that balance. The couple travel frequently for Shelter Co., their luxury-camping business. They had dabbled with the idea of listing their Mission District house on Airbnb. Then their landlord approached them.
“She said, ‘What do you think about Airbnb-ing your place when you’re gone?’ ” Kelsey Sheofsky said. “I thought, ‘Perfect, we’re ready to go.’ Now we do it, and we give her a 20 percent cut of any money we make after cleaning expenses. Some months we give her an extra 600 bucks.”
Your landlord may or may not be open to Airbnb – make sure you are informed and if you have a question make sure to ask.
Our most recent Airbnb stay was in Budapest adjacent the Opera House.
Below is the letter from Torrey Pines in full.
Dear Resident(s):
The increasingly popular site airbnb.com where individuals can post short-term, vacation rentals is a growing concern for Landlords in San Diego due to the noise, strain on resources, and lack of regard for the property that comes from using any residence as a “Hotel” or “Bed and Breakfast”.
We would like to take this opportunity to remind our valued Residents that posting your apartment on this, or a similar site is considered a breach of contract and could result in legal action including eviction from the premises.
We take this matter very seriously and will be moving forward with legal action should your unit be located on a listing site for the purpose of subletting without our expressed written consent. Please contact your Property Manager if you have any questions or wish to report suspect or known violations.
Sincerely,
Torrey Pines Property Managment, Inc.
(858) 454-4200
www.torreypinespm.com
San Diego County has a large beer industry, there are currently more than 110 active breweries. Along with high numbers, San Diego has earned a reputation as a leader in the craft beer industry. Many would rank it as the top craft beer city/region in the United States – whether it is the top dog or in the top five isn’t especially important. It’s a leader however you measure – top ranked beers, top ranked breweries, number of breweries, or gallons produced annually.
As craft beer has exploded it has increasingly come at the expense of the “big brewers” – InBev and MillerCoors. In 2014 craft breweries saw production growth of 18% while beer overall saw an increase of only .5%. Read between the lines and that means that the “Big 2” are losing market share while smaller craft brewers are experiencing a decade of double digit annual growth. Many places in the U.S. have embraced craft beer as a marketing tool and part of civic identity – San Diego, Fort Collins, Grand Rapids, and Portland would certainly fall into this category along with many others.
In response to loss of market share, the big brewers have adopted a strategy of purchasing craft beer brands to get a share of the sales and production growth. With enormous assets and resources why don’t the big brewers simply establish new craft beer breweries in markets with potential? Most likely because craft beer brands are typically tied to local markets and seen as the “little guy” or underdog that embraces the community and builds a loyal band of followers. It’s hard for InBev sell beer as an underdog.
So InBev and MillerCoors come to town and write a check with a bunch of zeroes, hope someone takes the offer, and then do their best to make sure that as few people as possible know that a big brewery now owns the “little guy”. Craft breweries purchased by “Big Beer” have included Goose Island of Chicago (2011 for $39 million), 10 Barrel of Bend, Oregon (2014 for undisclosed amount), Elysian in Seattle (2015 for undisclosed amount), and many others. Redhook, Widmer, and Kona breweries are owned by Craft Brew Alliance – a publicly traded company with substantial share (more than 30%) owned by InBev.
So does it matter if a brewery is owned by a person in your neighborhood or a large corporation like InBev? For many it does. In San Diego the economic impact of the craft beer industry was estimated at $600 million in 2014 and growing at a substantial rate. This number might be sustained if a brewer (or a few brewers) were sold but the profits earned would be sent to the corporate shareholders, not to the pockets of local owners. There would almost certainly be a reduction in headcount for administrative positions like marketing and sales and possibly in the brewhouse as well, if production is moved to larger, more efficient facilities.
Do consumers care? If the beer is good, the beer is good. In Chicago it does not seem that Goose Island selling to InBev has had a negative impact. Their annual release of the acclaimed Bourbon County Stout is a huge event. Does it matter if the beer is brewed in Chicago, and Fort Collins, and Portsmouth? Perhaps not.
And there are enormous advantages to the brand. With the increased assets of a large corporation, craft breweries that are sold can afford to buy end caps in Whole Foods (where I’ve found Goose Island prominently displayed here in San Diego). This success can be multiplied through scale even if the brewer that created iconic beers like Bourbon County has since left to be a cidermaker in Michigan. (The head brewer for Elysian left soon after the sale of that company as well.)
San Diego has earned a reputation for being a leader in the craft beer world. From Stone’s early role in super hop-heavy beers, which has become the signature calling card for San Diego and inspired it’s own style: San Diego IPA or San Diego Pale Ale. Ballast Point has brought hot pepper beers to the mainstream and constantly is experimenting with herbs, citrus, and other flavors. White Labs is located here in town and allows brewers to access top-quality yeast strains, and new experimental strains as well.
The current rumor is that Saint Archer is being sold to MillerCoors. This would be the first San Diego craft brewery to be sold to “Big Beer”. (There have been other sales like the recent acquisition of Alpine by Green Flash.) Losing one brewery out of 110 isn’t a large percentage. The bigger risk is that utilizing bigger assets the San Diego brand will be eroded. If Saint Archer, or any brewery, is sold what will happen when that brewery buys premium space in grocery stores? If the label says “San Diego beer” and is next to Stone, Green Flash, and Modern Times will a person in Texas or Wisconsin know which is owned by San Diegans and which is owned by a faceless corporation? Maybe they won’t care. Worse yet, if the quality of the beer is reduced to drive sales and is affiliated with San Diego it could damage the overall reputation for quality currently enjoyed by the industry here. Whether Saint Archer is actually selling or not, a sale is likely to occur in the near future given the trend of purchases by the large brewers and the reputation of San Diego beer.
For me, the ownership of our breweries matters. When friends and family, or strangers, visit us in San Diego I love highlighting unique experiences that are rooted here. Local hiking trails, coffee shops, breweries, restaurants, etc. When I travel it’s the same – there is enjoyment derived simply from the fact that what you are partaking of is part of the place where you are. The fast food nation America became in the 20th century of universal sameness erased much of the uniqueness of our country and our experiences. The recent rise of craft beer, craft coffee, and other artisan offerings is a welcome breath of fresh air and a reminder that quality and locality matters. Is it pretentious? Sometimes, maybe most of the time. Does that make it bad? Absolutely not.
My hope is that if a brewery is sold to “Big Beer” there will be a penalty to be paid. Local consumers will choose to support breweries based, owned, and operated here. Hopefully the San Diego Craft Brewer’s Guild will not allow a member that is not included in the definition of craft beer.
InBev and MillerCoors are welcome to create craft beer. They’re welcome to buy craft breweries. But doing so in an intentionally misleading way is wrong. If drinkers want to buy a McPorter or a McIPA they can choose to do so. I’ll be sticking with a Stone Enjoy By or Modern Times Black House. I hope you’ll join me for a round to celebrate the great place we live in. Cheers.
by Spencer Rascoff and Stan Humphries. It’s a book in the “Zillow Talk” series and the authors are the CEO and Chief Economist, respectively, at Zillow, an online platform for housing data. ![Austin is a really cool town and they have houses there! [Zillow screenshot]](https://i0.wp.com/www.johnpatrickanderson.com/wp-content/uploads/2015/10/zillow-snip.png?ssl=1)
