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Making
Sense of Your Family Budget.
Franklin I.
Akinkoye
If
you never seem to have enough money to go around, establishing a detailed
budget may help you find the extra dollars you need to meet your financial
goals. Never had a budget? Then now is a good time to grab a pad and
pencil, sit down and begin to document how your money flows out of your
checkbook.
Start
with Your Monthly Bills.
Go to your checkbook or bank statement and figure out how much money you
spend each month on mortgage, utilities, cable television, car payments
and anything else requiring regular monthly payments. Next, jot down your
revolving credit charges. For fluctuating payments such as credit card
balances or heat/air conditioning, go through a year’s worth of payments
and average them out.
Look
at Disposable Income.
Money that doesn’t go toward life’s essentials is considered
disposable income. How do you dispose of yours? What do you spend on
entertainment? Dining out? Children’s recreation? Although food is
essential, how much money do you spend on the best wine or specialty food
items when less expensive substitutes could suffice? Do you really need to
eat out three times a week? Several trips a week to the supermarket for
items you don’t really need add up to a lot over time.
Find
the Holes.
After looking at a year’s worth of bills, did you learn that your credit
card balances barely move, despite the fact that you don’t use them
much? Then pay them off one by one and stop having interest charges eat
into your family budget. Now add up all the money you could save and ask
yourself if that money would be better spent on a child’s future college
education or in your retirement. If your answer is “yes”, you know
where you can find the money to fund these financial goals.
(Mr.
Akinkoye’s article is a reprint from “Let’s Talk Money”, a
publication of Prudential Financial, where he is Senior Life
Representative.)
Investing
and Holding Land.
Ejike Okpa II
Having been in the land economics and real estate industry for nearly 20
years in various capacities, but more especially as a market analyst with
bias for appraisals, permit me a space to offer an observation as a public
service.
If
one were to imagine that 67% of US economic wealth [asset] is related and
tied in land and real estate, it becomes necessary that anyone who wants
to participate in this economy must
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understand
the fundamentals. The richest corporation is FANNIE MAE with more than $1.3
trillion in assets and various mortgage - backed instruments and securities.
The asset base of FANNIE MAE is more than all the economies of Africa, Asia,
South and Central Africa and some parts of Eastern Europe. It is all real
estate related and driven.
As
new and recent immigrants, our impact will be felt when we start acquiring a
'piece' of America outside of our homes. Various sources including HUD
indicate that African Americans with about [+/-] 14% of the population own
less than 2% of non-residential real estate in US. African immigrants are not
yet on the radar. We are practically present but not economically
quantifiable. However, Asians are noted to be actively and aggressively buying
up commercial real estate and revamping old neighborhoods. If we agree that
he/she who owns the land controls the growth and development, then we can
understand the politics and dynamics that come to play in the industry.
Most minorities are not yet present in significant numbers in this
milieu.
Usually
investment in real estate starts with land acquisition for future or immediate
development. While one's residence is considered real estate because it
contains all the aspects of real estate and real property, it is judged a
consumer product because many homeowners do not buy the land and then develop
it. That aspect of real estate comes as a packaged transaction.
Land holding or investment is a complex endeavor that requires more
than casual dealing.
I
have come across many people that have held land for more than a period of
over 5 years. This approach is very uneconomic except one
has other sources of income to offset the passive loss related to land
holding. The Tax Reform Act of 1986 did away with passive income write-offs.
The real estate and banking industries collapse of the 80's was partially as a
result of that tax removal. A passive income loss allowance is the ability to
write-off a loss from one source using income from another source. With the
repeal of that tax provision, income loss was made to be subject property
specific.
So that is why land holding is an unattractive investment except if one is a
major player with a complex entity structure that shields and protects income
and asset. For the average land investor, it is unattractive. Also this is
intended to discourage 'speculation' in land.
Here
is an example of why holding land is not a good investment. Let's take for
instance a piece of land worth $100,000 with reasonably good location but not
suitable for development until 5 years hence.
Note that I have not considered the opportunity cost of the invested
$100,000.
Assuming one holds on to the land for the period, the carrying cost
that includes taxes, management and insurance could be as much as $3,500 per
year. Continue
on Page 3
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