The House versus Home Conversation

House vs Home PPT image (00000002)One of our favorite discussions to have with new clients is what we call “House versus Home”.

It goes like this: When you hear the word ‘home’, what words comes to mind?”

Clients typically pause for a minute before beginning to list things like ‘family’, ‘neighbors’, ‘holidays’, ‘freedom’, ‘security’, etc. They begin to realize that the word ‘home’ tends to represent the emotional aspects of owning real estate. Put another way, they are the experiences you will have in a house.

Next we ask, “When you hear the word ‘house’, what words come to mind?”

Words like ‘appreciation’, ‘mortgage’, ‘leverage’, and ‘tax benefits’ begin to describe the logical aspect of owning a house as a physical shelter.

Part of our unique lending process is helping clients learn that your residence is more than just a place to call home. A home provides a place to raise a family, enjoy hobbies, socialize, sleep, relax, and more. Your sense of home comes from the experience you have living in your house, not necessarily from the house itself.

A house is the physical shelter made of concrete, wood, shingle, windows, and doors. Many of us equate the personal experience of ‘home’ with the physical ‘house’. The ability to separate the house (the physical asset) from the home (the personal experiences) makes it possible for our clients to begin viewing their house as a tool for developing and managing wealth.

Homeowners and new home buyers who can learn to separate in their minds the home (emotional) from the house (logical) are the ones we are able to help the most as we help them integrate their real estate into their overall short and long-term financial goals. With this new understanding, we can work together to show them how to better build wealth and financial safety moving forward!

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What if Life Started Tomorrow?

what ifImagine if everything up to this point in your life was simply “practice”?   Those mistakes with money were merely stepping stones in helping you learn how to play the game of life correctly once it started.   That business venture that failed wasn’t actually a failure, but rather a practice run in knowing what to do and not do when real life begins. The short sale or foreclosure you went through was simply education on how important it is to have more money saved in the bank. The conflicts with your spouse or children were just helping you master your marriage and parenting skills for when life really gets started.

How would your mindset shift if none of the past really mattered, and everything that was truly important for your life actually started tomorrow?  

What experiences and lessons would you bring forward and build upon going forward? What burdens of the past would you be able to mentally let go of and forgive yourself (and others) for?

When you really think about it, we tend to carry a lot of baggage around with us. Our past dictates many of our present and future decisions. The past keeps many of us from taking risks or pursuing big goals. We allow past failures to erode our confidence. And without confidence, we don’t have the courage to do what we need to do for a bigger, better future.

Here is a simple, yet powerful process I’ve learned over the years to continuously work at building a bigger, better future for myself and my family. It is rarely easy, but having a path to follow definitely helps.

The 4-Step Formula for Starting (a Better) Life Tomorrow

  1. Commitment: Commit to a bigger, better future for you and your family. This might mean a new, stronger commitment to saving more and spending less. This could mean committing to living healthier or spending more quality time with those important to you.
  2. Courage: If you do not truly commit 100%, you will not have the courage to do what must be done to make changes. Have the courage to write that book. Have the courage to meet with a financial advisor. Have the courage to cut back on your spending so you can eliminate your consumer debt.
  3. Capabilities: Having a new capability means you can get something done in the future that you can’t get done now or you can get it done far better than you are doing now. Committing to getting out of debt, and then having the courage to cut back on your spending to free up money to pay off debt, requires new capabilities or skills. We teach clients The 4-Step Money Priority Model™ and the Debt Snowball for having a plan to eliminate debt easier and faster. A new capability is learning new exercises to lose weight, or new recipes to eat healthier. It might be learning how to set measurable goals with specific action plans to achieve them.
  4. Confidence: Confidence is actually the result of the first three. At the end of the day, we all are in search of more confidence. The secret is, we can’t find the confidence that quitting the job we can’t stand and starting our own business is a good idea, until we go through the first three steps. The confidence will come as we see that first credit card balance paid down to zero. And the great part is, as your confidence grows, you will then commit to even greater things going forward!

View everything up to this point as practice. Life starts tomorrow for real. How will you approach it differently?

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The Story of the Magic Penny

2015-cent-obvIf you had the choice between taking $3,000,000 in cold hard cash right  now, or a single penny that doubles in value every single day for 31 days, which would you choose?

If you’ve heard this story before, you already know that choosing the penny option is the better choice and will lead to greater wealth. But why is it so hard to believe that choosing the penny will result in more wealth over time? The answer is simply because it takes so much longer to see the payoff. Most of us can’t stand delaying our gratification. This is why in general, the savings rate in the United States is very low compared to other countries, and credit card debt keeps millions of families from achieving financial freedom.

Let’s look at the math behind the story a little closer:

Assume YOU choose the $3 million in cash in hand right now, and your best friend chooses the penny gamble.

  • On day #5, your friend has just 16 cents. You of course have $3 million!
  • On day #10, your friend has $5.12 cents, while you are enjoying your riches.
  • After 20 days your friend has $5,243, while you are treating your friends and family to dinner.

At this point, how is your friend feeling? He or she has delayed his or her                             gratification in hopes of making a smart, long-term decision as they are                     watching you live large with your mounds of cash. But…the invisible magic of compounding is about to take effect.

By day #31, your friend’s single penny has multiplied (or compounded) into $10,737,418.24!

This is more than 3x your original $3 million!

This simple, yet compelling, story shows why consistency over time is more important. On day #29, your friend has about $2.7 million, still a bit behind your $3 million, but by day #30 your friend pulls ahead with roughly $5.4 million, beginning to leave you behind.

The magic of compounding, along with small steps taken constantly over time, is what can lead to massive success. Just imagine exercising 15 minutes every day versus “waiting” until you suddenly have 1 hour freed up to go exercise all at once on the weekend.

Darren Hardy, publisher of Success Magazine and the author of The Compound Effect, describes success as a series of small, seemingly insignificant steps, done consistently over time.

What areas of your life could this principle be applied, so you could enjoy the results a month, a year, or 10 years from now?

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Boost Your Confidence – It Means Everything

ProgressOne of the biggest breakthroughs I have personally had in recent years is realizing how important confidence is. I have come to believe that confidence is the key to just about everything, both personally and professionally.

In sales, the confidence professional makes the calls, sets the meetings, and gets the business. In life, the confident person is cultivating relationships, making friends, helping others, being a great parent, etc.

So if confidence truly is this important, how can we increase our own confidence? The simplest way I have learned is this:

Celebrate progress…not perfection.

This means creating a habit of constantly acknowledging the small accomplishments (progress) you make along the path to your ultimate goal. While most people are trained to not celebrate until (and if) they accomplish the goal, I have learned how important it is to celebrate your progress along the way.

Unfortunately, too many people don’t take the time to acknowledge the small bits of progress they make along the way. Take for example a good friend of mine who is looking to lose weight. They have a goal of losing 25 pounds by the end of the year. So should they not celebrate their progress along the way and just wait until they hit the final goal? No! Maintaining the momentum is critical and it takes confidence to do so. This means they must celebrate along the way, as they knock off the first five pounds, or accomplish two weeks with no desserts. These are small victories on the path to the ultimate goal! If, on the other hand, they constantly base their progress on that one ideal result (25 pounds) then they will become increasingly frustrated and might lose momentum if it seems too far away.

Here is the new, better way to do this. Set the goal (lose 25 pounds by 12/31/15; have $10,000 in savings; etc.). Then, only measure yourself by “turning around” and measuring your progress based on where you were last week or last month. This alone will transform how you feel and increase your confidence dramatically!

Here are some other common examples I see all too often. Think about how you approach these or similar scenarios in your life.

  • Your child takes third place in a competition. Her heart (and yours most likely) were set on getting first. But last year, she and the team didn’t even place at all. What do you focus on? The fact she didn’t get first? Or the amount of progress made since last year?
  • You set a goal to have all of your consumer debt paid off this year, about $10,000. At the end of the year, you’ve paid off all but $2,200. You fell short due to an appliance needing to be replaced. What do you focus on? The fact you didn’t get to $0 as planned or the fact you have less debt now than since you can remember?
  • You and your spouse make a commitment to have two date nights per month. That’s 24 over the course of the year, or 12 half way through the year. So far you count only six actual date nights out without the kids due to unforeseen events. What do you focus on? The previous year you had no date nights out for just the two of you, but you’re far behind on the goal you set for this year?

A small shift in what you focus on can change your life and take your confidence (and happiness) to new levels you never knew possible.

Action Plan: At the end of each day, write down three accomplishments for the day. Three “wins” where you’ve made progress or you are proud of. Gradually you will train your brain to focus on the progress and let go of the ideal or the “perfect” result you envisioned.

Note: This is not easy. And I hope it doesn’t come across that way. But the reward is worth it.

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Assessing Your First Half of 2015

4th-of-july-sparklersIt’s July! My family and I had an amazing time celebrating the 4th of July with friends and watching the parade through downtown Lake Oswego. We finished the evening out on a boat in the middle of the lake, enjoying the fireworks show from the water.

At the same time, I am realizing it is the half-way point of 2015. I make it a habit to always spend a little time reflecting on the year so far. I encourage you to do the same!

What are you proud of?

What have you accomplished this year that you are proud of? Did you pay off some debt? Get a raise at work? Start saving for retirement? Start a new company? Hire a new employee? Take a vacation? Schedule (and stick to) date nights with your spouse? Buy a new home?

Confidence is the key to just about everything. I have learned this over the years, through my own personal ups and downs, and in watching others. Knowing this, one of the easiest ways to boost your personal confidence is to reflect on your accomplishments as often as possible. Accomplishments can be big or small. But jot them down somewhere. Celebrate your progress.

What New Year’s Resolutions Can You Check-Off?checklist

Remember those? When we all are brimming with new excitement about the year ahead, optimistic it will be our best year ever? Unfortunately by around March it seems most people can’t remember what goals they set for the New Year. It is actually very easy to explain this unfortunate phenomena…we are creatures of habit. Too often people get comfortable with the way things are, and though they want different results for their future, they have not changed their daily or weekly habits.

The reality is, the only thing that will ensure you accomplish a bigger, better future is to change your habits.

If I am bringing up a sore subject, don’t get down! This is why you hit the pause button briefly to do a half time report on your year so far. The great news is there is still six months to go! If you set a goal to exercise regularly, at least four days per week, then you can still do it. Get clear about what the result will look like if you do this. Get excited about feeling better about yourself, having more energy, being more active with your children, etc. Harness that and adjust your schedule to get to the gym. Now, if you have exercised more than ever in the past, yet it’s not as much as you would like to, celebrate! That is progress. While it’s not your ideal, it is a huge step in the right direction. This is the same if you’ve started saving more money this year, paid off debt, etc.

How can you finish the year strong?soccer_goal_wallpaper_download

There is no law that states you can only set big goals at the beginning of the year! I set new goals every quarter. This helps me focus on fewer, bigger goals for a 90-day period. Find what works for you.   After taking a little time to reflect on the first six months of 2015, I encourage you to write down what needs to happen in the next six months to make 2015 a huge success for you. How much would you like saved in the bank? What debt would you like paid off? How many miles will you be able to run (or walk) by the end of the year? Get clear and be specific.

Above all else, practice focusing on your accomplishment rather than all of the things you haven’t yet done. Making this your top new habit for the year could be life-changing. It has been for me.

  • Trevor Hammond, Manager of Aspire Mortgage Group, Coach, Author, Father, Husband

 

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Buy Now or Wait – A Tale of Two Families

Patriotic Buy now or waitSummer is here and the temperatures are hot. And so is the housing market! Summer is historically the busiest home buying season of the year, tapering off in September once school starts again.

One of the big questions that continues to come up is, “Should I buy a new house now or wait?” This question comes from those renting currently and thinking of trying to get into their first home, as well as current homeowners wondering if now is the time to put their house on the market and go find their dream home.

Buy Now or Wait: A Tale of Two Families

The Smith Family is thinking of buying, but has decided to wait until they have saved up more money. They plan to buy in the summer of 2016. The Johnson’s on the other hand, feel that the combination of rising home prices and rising interest rates make this the perfect opportunity to buy a new home this summer. Here is a simple, side-by-side comparison:

Buy Now or Wait Graph

Obviously there are more factors that go into this decision, but the above comparison brings to light a couple of key things:

  • That same house that is worth $400,000 today will cost more to buy a year from now, based on a conservative 5% appreciation rate.
  • Interest rates have already increased from the upper 3’s to the lower 4’s in most cases. The Fed intends to increase (short term) rates later this year, and all signs are pointing to higher fixed rates a year from now.
  • Often people forget that if they wait to buy, and work hard to save up more money, the amount needed to close also increased while they waited.

One of the biggest benefits the Johnson’s come away with, in the example above, is that a year after buying their new home, they will enjoy a house now worth $420,000! That is a $20,000 increase to their net worth, while enjoying the lower payment that will never go up as long as they have the mortgage.

It Depends

When clients first ask me, “Should I buy now or wait?” my standard answer is “It depends.” People should never buy a house solely because rates are low or because of the potential rise in prices. Once I have had the chance to look over their current financial situation, and discuss their short and long-term goals, we can together determine if buying now makes good financial sense. If so, then I can confidently say, “YES, let’s buy now before interest rates rise and that same house costs you more a year from now!”

 

 

 

 

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How Can I Reduce My Spending?

Spending cuts, isolatedThe big question this week is, “How can I reduce my spending?”  What this really means is, how can I free up more money so I can save more…or at least spend it on things that I value more?

I like to educate clients that there are only three things you can do with your money:

  1. Spend it
  2. Prepay debt with it
  3. Save it

(Well, I suppose there are more things you could do with money…use it to start a fire, wrap presents with it, make paper airplanes with it…but let’s be serious.)

A key thing to grasp is that no expenses are too small or insignificant.  The daily newspaper, your monthly Netflix or Pandora subscription, the daily stop at Starbucks on the way to work, dining out too often…these little expenses are what adds up quickly.

Expenses generally fall into two categories:

  1. Essential expenses that you cannot avoid, such as your mortgage, rent, utilities, groceries, car insurance, etc.)
  2. Discretionary expenses that you choose to incur, like eating out, entertainment, gifts, furniture, etc.  Discretionary expenses are the ones you have the most control over.

Here are some simple tips to get you started at spending less, so that you can save more:

  • Do you buy a lot of books?  Try the library instead, or do a book swap with friends.
  • Take coffee or lunch to work rather than buying it.
  • Limit eating out to once per week rather than twice.
  • Cut back on smoking or alcoholic beverages.   Heck, quit smoking!
  • Turn lights and TV’s off, and don’t waste water.  Even though utilities are an essential expense, there are ways to reduce them.
  • Email more often, or use Skype which is free, rather than calling long-distance.
  • Always go grocery shopping with a list to avoid impulse items at the end of the aisles.
  • And one of my favorites…if you buy all of your groceries from Zupan’s or New Seasons or Whole Foods, try Trader Joe’s.  You’ll save hundreds, and eat very healthy as well.

Action Plan:  Pick a realistic goal for your monthly spending reduction.  Try not to make too many changes all at once.  To see how big of a difference this can make, do the math.  If you start by committing to reduce your spending by $2 per day, that is $730 per year!  Set the saved money aside for a family vacation or apply this new savings to reduce your debt faster.

We would love to hear how you are reducing your spending!  Comment below and share for everyone.

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Attitude Check Time

attitude

 

 

 

Here at our Aspire office, attitude means so much. We recently shared the following quote with all of our team and now want to share it with you.

                                                          “The longer I live, the more I realize the impact of attitude on life.  Attitude, to me, is more important than the facts.

It is more important than the past, than education, than money, than circumstances, than failures, than successes, than what other people think or say or do. 

It is more important than appearance, giftedness, or skill.  It will make or break a company…a church…a home.

The remarkable thing is we have a choice every day regarding the attitude we will embrace for that day.  We cannot change our pasts, we cannot change the fact that people will act in a certain way. 

We cannot change the inevitable.  The thing we can do is play on the one string we have and that is our attitude.

I am convinced that life is 10 percent what happens and 90 percent how I react to it.  And so it is with you – we are in charge of our attitudes.”

 by Charles Swindoll

 

 

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How much money should I keep in a savings account for emergencies?

emergency-fund11Question:                                                     How much money should I keep in a savings account for emergencies?

Answer:                                                    Many financial professionals suggest that you put away three to six months’ worth of living expenses for emergencies. We actually call these funds “Cash Reserves,” because the reality is, most things that might happen are not really emergencies. Once established, we also refer to this as your “sleep well at night” account!

If you lose your job, or become disabled and don’t have adequate disability insurance, you’ll need that money to pay your regular monthly expenses, such as mortgage payments, insurance premiums, groceries, and car payments, until you can find another job. Without such an emergency fund, a period of unemployment could put your assets at risk. Similarly, if your car breaks down or your spouse has a medical emergency, you’ll want to have the necessary cash to pay the bills. You don’t want to be faced with an immediate need for cash, only to discover that you don’t have any.

You may have already set up an emergency fund. Did you put the cash in a five-year certificate of deposit (CD) or other long-term investment? In an emergency, you will need to get at those funds immediately. You can certainly pull your money out of the CD early, but you’ll pay a penalty. It’s better to keep some funds more liquid, in a traditional savings account, a money market deposit account, or a six-month CD, for example. That way, the cash will be readily available when you need it.

Finally, keep your emergency fund separate from your everyday accounts. You might even want to use a different bank. Unless you are extremely disciplined, you’ll be tempted to spend those extra funds if you keep them in your checking account. Remember, if you can put off an expense until next week, it is probably not an emergency.

 

 

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Consumers Think It’s Easier Than Ever To Get A Mortgage!

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Consumers who believe it would be easy to get a mortgage today jumped to a record-high 54%, Fannie Mae’s February 2015 National Housing Survey found.

On the other side, the share who believes it would be difficult to get a mortgage dropped to a survey low of 43%.

Optimism toward the economy is growing on the heels of continued improvement in the employment market, adding to an overall boost in the housing market.

“Continuing improvements in consumer attitudes in this month’s National Housing Survey lend support to our expectation that 2015 will be a year of the economy dragging housing upward,” said Doug Duncan, senior vice president and chief economist at Fannie Mae.

“The share of consumers who think the economy is on the right track rose to a record high since the inception of the survey nearly five years ago and for the first time exceeded the share who believe it’s on the wrong track,” Duncan said.

The share of respondents who believe the economy is headed in the right direction increased 3 percentage points last month to an all-time survey high of 47%, while the share who believe it is headed in the wrong direction decreased to 45%, a new survey low.

Article by Brena Swanson                                                                                                              March 9, 2015

Fannie Mae: Consumers think itÕ easier than ever to get a mortgage

 

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