Subscribe to Aridni Watch those dollars roll in not out!

Earlier this month, a fellow personal finance blogger, The Simple Dollar, wrote an excellent piece about how he and his family was defining themselves by stuff up until two years ago.  They were buying five DVDs every week along with the latest gadgets, golf clubs, and other stuff on whims.

 

He nearly had a financial meltdown, he says… until he got smart about debt, money, and what’s really important.  He started selling off excess junk that he had accumulated, and seriously watched his spending.

Read how The Simple Dollar made life-changing habits to make his debt shrink instead of grow.  Now he and his wife celebrate multiple streams of income and feel financial satisfaction–something completely foreign to them before.

Check out The Simple Dollar for this inspirational story and suggestions for your own transition into control over money.

This article written by Todd on 24th March 2008

Subscribe to Aridni The 6 Financial Mistakes Couples Make

I just read an article over at ‘Smart Money‘ about how couples often make similar mistakes in regards to their finances. It brings up many good points and issues.

“Most of us don’t know how to talk about money,” says Mary Claire Allvine, a certified financial planner (CFP) and co-author of “The Family CFO: The Couple’s Business Plan for Love and Money.”

“People tend to be emotional and reactive about money, not strategic,” she says.

When emotions run high, people tend to make fiscal mistakes. Allvine’s solution: Approach family finances as if you were running a business. “If you put a business metaphor into the picture, you’d be surprised how much more methodical people are.”

In this article she talks about 6 common pitfalls that could arise if issues are not properly resolved.

  1. Merging finances
  2. Controlling debt
  3. Spending habits
  4. Investing Wisely
  5. Money Secrets
  6. Emergency Planning

Give the article a read, I think that you will find it full of good ideas and perspective for you.

This article written by Todd on 24th March 2008

Subscribe to Aridni IRRRL- Interest Rate Reduction Refinance Loan

Many veterans who have used their VA Home Loan benefit to purchase their homes have also refinanced with an Interest Rate Reduction Refinance Loan (IRRRL). An IRRRL is a refinancing program that is offered by the VA for veterans who want to refinance their current loans to get a better interest rate on their mortgage.

Some interesting facts that you should know about the VA IRRRL are:

  • An IRRRL is used to refinance an existing VA loan with a new VA loan that usually has a lower interest rate.
  • An IRRRL can be a fixed rate loan, an adjustable rate loan, or a hybrid adjustable rate loan.
  • An IRRRL must be at a lower interest rate than your previous mortgage loan unless you are refinancing from an adjustable rate mortgage loan. This is because the interest rate with a fixed rate loan may be the same or slightly higher than your current interest rate with your adjustable rate mortgage loan, but once the rate begins to adjust it may increase. Therefore you should refinance an adjustable rate mortgage before the interest rate starts to increase.
  • The monthly payment for an IRRRL must be lower than the previous loans monthly payment unless you are refinancing an adjustable rate mortgage or the new loan term is a shorter amount of time than the old loan term, like 20 years instead of 30 years.
  • For most IRRRLs the VA does not find it necessary to get an appraisal, credit information, or underwriting. Your VA approved lender may require these things, and if they do the costs can be financed into the new loan.
  • The lender can usually close an IRRRL automatically, so it is not a complicated loan process like taking your original mortgage loan.
  • If the loan that is being refinanced is over 30 days past due then the VA must approve the refinance so it can not be submitted automatically by the lender.
  • If thee loan that is being refinanced is more than 30 days past due then the late payments and charges to bring the old loan current can be financed into the new loan. The costs that are involved if the lender has already begun foreclosure can also be refinanced into the loan as long as they are reasonable.
  • Energy efficient improvements are allowed to be refinanced into the IRRRL. This means that if you want to purchase a more efficient furnace, put in new windows, re-insulate, or make any other home improvement that will save you money on utility bills in the future, then you can use the equity in your home and pay for these improvements with your IRRRL.
  • There may be an increase in your monthly mortgage payment amount if you finance energy efficient home improvements, finance your closing costs, include the funding fees in the loan, finance points, or get a higher interest rate when moving from an adjustable rate to a fixed rate mortgage.
  • Only as much as two points can be financed into the IRRRL at closing. A point is equal to 1% of the loan, and if you take more points on the loan then you can lower your interest rate.
  • You can not take cash out with an IRRRL. You can finance home improvements for the purpose of saving money in the long run, but that money is paid back to you as a reimbursement after the work is completed and it must be within 90 days of the loan closing. You do not get cash out of your home with this refinance loan.
  • If your monthly payment will increase by more than 20% due to home improvements, fees, closing costs, a shorter loan term, or other factors then the VA does require credit information and underwriting.

For more information on the VA IRRRL program go to www.va.gov

This article written by Guest Writer on 11th February 2008

Subscribe to Aridni My property is dilenquent

I received my property tax receipt yesterday along with a note:

Just a reminder that this parcel is delinquent for 2006.

WHAT! I’ve always thought that I was on top of all our bills. The key here, though, is BILLS. I didn’t actually get a bill for this property last year when I received all of the other tax bills. If I don’t have a bill for something, how can I know to pay it?

We bought the property last year, and the bill was sent to the previous owner. Now most local folks would probably forward tax bills to the new owners because that’s what us good guys do. But we bought the property as a foreclosure. The maga-bank who sold the property doesn’t waste time with details like, I don’t know, TAXES. They just tossed the paperwork.

Now I owe $75 in interest, and state law absolutely positively does not waive payments. Unless you’re the governor, I think. On one hand, I’m really frustrated. I would have paid those taxes one year ago. Where was the title company lady’s obsessive highlighter on the line item TAXES?

But on the other hand, I’m also thankful that one of the Treasurer’s secretaries took the time to write me a note. Otherwise, I NEVER would have known until the horrible day when I would receive this deadly note:

Your property’s up for auction due to dilenquent taxes.

Seriously, you only get one notice of taxes each year, and you only get one warning that you’re about to lose your property for unpaid taxes. Wouldn’t you think that maybe, just maybe, this year’s tax bill would have included a mention of unpaid taxes from the past?

So I’m writing a huge check right now and hand-delivering since 2007 taxes are due TODAY, and fees gets jacked up a notch tomorrow for late payments like mine. Thank goodness I mailed my taxes early this month and was warned! And even more thankfully, I’m glad property tax payments don’t make it to credit scores.

This article written by Katie on 7th December 2007

Subscribe to Aridni How to Cut Your Mortgage with a Few Bucks

A lot of people love satelite TV, and I can understand why. What I can’t understand, though, is justifying such an expense every month.

I was looking at a row of houses built by Habitat for Humanity and started wondering. I’m not here to make judgment calls about these people’s habits, but I plugged in some numbers you and your friends might want to think twice about.

If you paid an additional $50 toward your mortgage every month, a thirty year mortgage could be paid off in 24 years! (I assumed a 7% interest rate, which is higher than you want for your own home.) 24 years!

Think about what a few extra bucks each month could do to any loan. Interest is a powerful thing, especially when it works to your advantage. Know of any other powerful examples?

(NOTE that some lenders don’t allow prepayments without penalty, so read the fine lines of the contracts you have signed.)

This article written by Katie on 6th November 2007

Subscribe to Aridni Financial bloggers STILL losing focus?

Just over a year ago, we wrote a controversial post about personal finance bloggers. Since many of you may not have been reading Aridni then, we thought we’d share this classic blog post with you below. Be sure to check out the comments that arose in response, and let us know your thoughts on the issue.

    Confession: I go crazy whenever I discover another finance blog updating the world on that person’s net worth. All of the pie charts, ratios and data comparisons, and growing bars indicated dollars held—AHH!

    Instead of counting the fluctuating pennies in our Coca Cola stocks, we should, as financial bloggers, be looking for a way to make investments toward the future. The greatest investments cannot be calculated TODAY—owning a successful and growing business, owning a home that’s in an under-valued market, buying stock in an undiscovered beast like WalMart in 1995, etc. But when you cash in on those investments in forty years at retirement, prepare for the specific $ sign in your net worth to leap upward. Some of that money exists TODAY, yet you cannot show it on a net worth statement. Well I guess you could spend $400 to get your property reappraised every month. Think that’s silly? Not if you’re counting your net worth to the penny—might as well be accurate.

    We should be finding ways to establish money-generating avenues that can multiple for the future, not necessarily for today.

    And yes, I do make a monthly net worth update that is nowhere near accurate because most of my money goes toward future expectations. I like to chart spending in our personal lives and investments to make sure we’re keeping on track . If you truly aim to be a successful $$ man, I don’t see how you can know your exact worth.

    I think that showing the world my net worth updates every month online and throwing a virtual party when I’m up $500 is off the track. Yeah it all sounds cool… yet shouldn’t we be aiming for financial freedom not X dollars in the bank?

This article written by Katie on 28th September 2007

Subscribe to Aridni Why is that? - the tendencies of a 1st class passenger

I had an incredible experience–an upgrade to a first class seat on an international flight after a nightmare checkin disaster.

While enjoying the luxury of fully reclining seats and table cloths on my tray at meals, I noticed the man next to me. He was reading the duty free catolgue. And he was jotting down the duty free prices of cigarettes.

How strange. Sitting in first class. Figuring out ways to pinch pennies on cigarettes when he flies home.

This article written by Katie on 26th August 2007

Subscribe to Aridni I’m Jobless & Remembering What Mattered Before the 9-5 World

When I quit my job last month, I felt pretty uncertain of where life would go, especially because my husband quit his job the month before. I never expected to find such satisfaction in setting and accomplishing my goals instead of my employer’s.

Living without a constant paycheck is tough. When working for someone else, you start to depend on this little burst of wealth every two weeks when a boss gives you a check. When you don’t get that check, I think that you fight a little harder. You don’t clean your house as much, but you keep working when you get home after a long day.

My husband and I can only keep up this schedule until December when he starts graduate school, so I’m trying to make the most of each day. Freedom spoils you, though. I feel like I’ll be like the new college graduates with skewed perceptions of how work and life should be.

But then again, I think college grads believe in something that we long ago forgot:

1. Work and pleasure can be the same thing.
I don’t mean that you have to love every moment of everything that you’re doing—that’s impossible. But shouldn’t you be just as eager to start your work day as you are to finish?

2. Little favors can lead to big favors. Sometimes you can accomplish a lot more when you team up with others who have different skills and ideas. We’ve really tried to build good connections. While we were in Germany recently, our real estate projects kept developing. Our real estate agent was willing to serve as our emergency contact. My sister was depositing monies at the bank. And several great contractors and handymen tackled a few of our dreaded projects while my dad stopped in during his lunch breaks to follow up. With the exception of family, everyone else helped us along because we’ve helped them in the past, and they know we’ll have work for them in the future, too. Bosses can’t be feared, and as a boss, you can’t always appear so fearful.

3. Life is about living.
My last boss was a workaholic, and it made him furious that I wanted to leave at the end of the day. My memories of college often involved doing the least amount necessary to generate the most pleasing results. You figured out exactly what score you had to get on final exams to maintain your grade. And how many people actually read every text that they were supposed to? School was about more than what you learned in class. Work shouldn’t consume you when life holds far more.

4. Money isn’t everything.
I’m not thinking of reverting back to Ramen Noodles. But whatever happened to the thrill of a free meal or cheap living? How about riding that bicycle even when you can afford the gas now? We work to make money, and suddenly we don’t know what to do without the huge sums of money. You become entrenched by growing “necessities”.

5. You don’t have to be an expert to give it a shot.
In the workplace, it’s easy to see the people that are better than you and become passive. Sometimes it’s even easier for the boss to literally remind you of how unknowing you are because you lack the experience, the knowledge he has, or just plain common sense (HIS point-of-view). In college, we were fearless—what’s the worse that could happen? The sense of adventure vanishes at work, I’ve noticed. Don’t just stick with what you’re good at. Take a leap at the things you’ve never tried or don’t do as well.

Subscribe to Aridni Eliminate the Things that Irritate You

Have you ever noticed how many little things never get done because you’re so busy focusing on important things and urgent things? Look around your environment, and you’ll probably find over fifty of these things - e-mail accounts that need cleaned out, pictures that need framed or hung, products that need to be returned, faucets that need repaired… Trying to conquer all of these little chores would be impossible.

Yet finishing a few small tasks might actually boost your attitude.

Every time I see the charm that needs a chain, I get horribly depressed for a moment. I only see the unfinished necklace once a week or so, yet every time, it lowers my mood. There’s one thing I’m not getting taken care of. Why not take fifteen minutes to get a chain and be done with it? Why don’t you take care of your little things. We all know why we don’t. We have a million reasons and a million other things that are more important.

For the next week, I challenge you to start tackling some of these nagging areas that you neglect. Every time you take care of another box of clutter or flush out unused bookmarks on your computer, you’ll get a small boost. It’s a jolt without the caffine. You’ll feel better about yourself and your day. More positive energy feels great. Your mind will feel refreshed and ready to tackle other things… like that net worth.

This article written by Katie on 17th May 2007

Subscribe to Aridni Which way does the Cash Flow?

If the three types of business activities are operating, investing, and financing, then there needs to be a way to provide information about the money going into and out of each piece. Thankfully through the miracle of modern accounting, we have a statement that does exactly that.

The statement that tracks these fluxuations in the cash flow is quite logically called, the ‘Statement of Cash Flows’. From this statement you can easily determine how a company is treating that little recourse that they work so hard to aquire.

Here is a sample statement to show you the three areas and their relationship to each other. You can see that it is in essence three cash flow statements (one for operating, one for investing, and one for the financing activities) wrapped up into one overall master statement.

Aridni
Statement of Cash Flows
For the month ending December 31, 3000
(In Gazillions of Planet Aridni Dollars)
Cash Flows from operating activities
Cash receipts from operating activities
Cash payments for operating activities
$11,200
(5,500)
Net cash provided by operating activities $5,700
Cash Flows from investing activities
Purchased office supplies (5,000)
Net cash used by investing activities (5,000)
Cash Flows from financing activities
Issuance of common stock
Issued note payable
Payment of dividend
10,000
5,000
(500)
Net cash provided by financing activities 14,500
Net increase in cash 15,200
Cash at beginning of period 0
Cash at end of period 15,200

If the operating activities result in a negative number, this is certainly a red flag for any established business. Have they lost the ability to make money? While the investing and financing activities can be a loss without nessicarily being harmful to the company.

If the company is not making enough from operations to cover their investing activities, this could be a red flag if it continues. Or it could be that they are simply paying for a loss with other financial activities.

It’s important to check that a company can generate sufficient cash from it’s operations to fund it’s investing activities.

This article written by Todd on 21st February 2007

Subscribe to Aridni What’s your cut of the Retained Earnings?

The Retained Earnings Statement is the easiest accounting statement in the world to prepare and understand. It simply shows the amount of money that the company has at the end of the current time period (Usually Per Month, Quarter, or Year) after you adjust it for the income/loss and dividends payed during the period.

So the formula is simply

Retained Earnings at beginning of period
+ Net Income (as determined from your Income Statement)
- Dividends Paid
= Retained Earnings at end of period

And that’s all there is to it, a little addition and a little subtraction. If there is a net loss instead of positive gains with net income, then the number is simply subtracted. That case would look like the following.

Retained Earnings at beginning of period
- Net Loss
- Dividends Paid
= Retained Earnings at end of period

And of course, here is Aridni’s RE statment for December in the year 3000 using the (currently!) ficticious currency ‘Planet Aridni Dollars’

Aridni
Retained Earnings Statement
For the month ending December 31, 3000
(In Gazillions of Planet Aridni Dollars)
Retained Earnings, December 1 $25,000
Add: Net Income $5,000
Subtotal $30,000
Less: Dividends $3,000
Retained Earnings, Dec 31 $27,000

These statements can be useful to investors looking to find stocks with a history of high paying dividends. So if you are interested in setting up a Dividend Reinvestment Plan (commonly called a DRIP) then this should be something you might want to check out on you prospective companies before buying.

This article written by Todd on 19th February 2007

Subscribe to Aridni Make A Strong Income Statement

In a previous article I have talked about setting up a balance sheet for your company. Now I would like to cover the next type of statement you will run into during your time in business. This form is none other than the Income Statement.

The income statement has a simple and straightforward purpose, to report the success or failure of the company’s operations for a period of time. The net income (or loss) is determined by deducting expenses from revenues.

Outside of the company itself, there are two groups interested in a company’s income statement. Investors are interested in the past income because it can give information about possible future income which may affect the stock price. The second group of interested people would be creditors; they certainly don’t want to lend money if there is no way that the company can pay it back.

Here is an example using the fictitious currency ‘Planet Aridni Dollars.’

Aridni
Income Statement
For the month ending December 31, 3000
(In Gazillions of Planet Aridni Dollars)
Revenues
Sales Revenue $10,000
Expenses
Salaries Expense
Supplies Expense
Rent Expense
Insurance Expense
$5,200
1,000
750
50
Total Expense 7,000

Net Income

$3,000

It is important to notice that any amounts received from issuing stock are not revenues, and any amounts paid out as dividends are not expenses. Neither one of those are reported on this statement.

After your income statement is complete, you are ready to go on to your retained earnings statement next, which will show the amounts and causes of changes in a companies working capital.

This article written by Todd on 13th February 2007
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