We ALMOST Bought a $1.8M House…

And I am, at this moment, regretting not doing it.

$1.8M.

$1-8-0-0-0-0-0-0.

That’s a heck of a lot of cash.

We’re not rich people. We’re not the type of people that should be spending $1M a home, let alone $1.8M.

But — that is what it looks like we HAVE to do if I don’t want a crazy horrible commute and we don’t want to leave the area.

What makes the $1.8M possible is that we’re still strongly leaning towards buying with (AND LIVING WITH) my in laws. The big requirement is that they have a separate living area from us (separate unit on the property or at the least an in law with separate entrance.)

The $1.8M house was super cute. 3 bedroom, 2 bath, with a 400 square foot garage we could convert…

It had its issues. Other than being $1.8M. It had some termite activity, according to the disclosures. The 400 square feet of the garage would be challenging to turn into a real 1 bedroom apartment (my in laws aren’t married but are friends, so they can live in the same unit just need their own rooms.) The lot didn’t seem that big, though I guess it was at 7,500 sq ft, but most of that was in the front yard and in a very long driveway.

I regret not buying it, but I would have regretted buying it.

It was originally a 2br/1ba, and along its life some time an addition was plopped on the back of another bedroom and bath – the master suite. But the suite wasn’t that sizable… a full sized bed felt tight in there. While the home showed quite nicely, the reality was that for $1.8M it was too small for us, given we want to grow our family soon.

But I don’t think anything here will really be the right fit… unless we want to spend $3M+, which we don’t, and we won’t, unless we win the lottery we don’t play.

That said, my husband and I started tracking our joint net worth and it’s about $920k right now. Not too shabby. Mine is about $840k of that! But that’s ok. We’re doing well, yet living in a 1 bedroom apartment. I realized that this year, with my stock and bonus and such, I could clear $300k-$350k before tax ($117k of that I’ve already made as of April 1, which is crazy to think.) If I could maintain this level of income for the next 30 years, sure, we can afford a $1.8M home. But I won’t. I won the job lottery at the moment and am holding on for dear life. In 3 years, I can save a good $300k and we should break $1M in net worth. After we hit $1M, I’ll feel comfortable having another child… but I’m not sure I feel comfortable purchasing a home for $1.5M+. $500k, sure. $800k, maybe. $1M, possibly. $1.8M…

That’s too much for a house. That’s just insane.

My husband makes $80k a year. We aren’t paying for childcare right now, but if his parents got sick that could change any minute and we’d have $2k/ mo right there. With another kid, that’s $4k a month. It just doesn’t add up. Even if his mother puts down $1M and we have a $800,000 mortgage, that’s about $7000 / mo. How does anyone do this?

The Things that Matter: American Workaholism and Being a Mom

It’s 5am and I am exhausted but can’t get back to sleep after my son woke up screaming for milk a few hours ago. He didn’t actually drink that much. My breasts are still engorged and I’m too tired/lazy to pump. I’m supposed to “wake up” for work in an hour, to make myself presentable for an 8am meeting. I’m not doing the best job of being presentable given I’m so exhausted and no amount of coffee will help.

But my exhaustion isn’t just due to being woken up in the middle of the night. It’s the hopeless exhaustion of now being in the midst of the roller coaster of life, with time both going too fast and too slow, and memories of long gone childhood reminding me that life wasn’t always like this–always so formulaic in its requirements for supporting basic sustainability of existence.

My fear to pay more in rent a month isn’t helping. My fear of running out of money, or, more so, of getting to the point where I have a nervous breakdown and do not go into work one day because I can no longer stand the majority of my waking hours being dedicated to trying to get people to buy a product that–very successfully–helps companies reduce their workforce (though that’s not its primary purpose, but like most tech for business these days, it’s one of its benefits.) Oh, it’s a great product and it’s exciting to be part of a company that’s growing and a team that is not in it to change the world despite also building products that reduce headcount (the idealism of startups was nice for a while, but it also feels good to be part of a team that doesn’t entirely live and breathe work 24/7.) But, at the end of the day, always the very long yet never long enough day, I sit in traffic on the freeway for 45 minutes with all the other commuters headed home and talk to my 6 month old son on the phone who is crying and anxious for mom (well, for mom’s chest anyway) and who doesn’t care that I’m sitting in traffic or that I have to go to work to make enough money to try to save so maybe one day we can buy a house and go on vacations and such.

The reality is that my situation is so much better than 99% of the world, maybe even 99.9% of the world, and I’m still, well, not happy. I don’t know if I have the capacity for sustained happiness, given it’s me we’re talking about, but I’d like to not constantly live in fear. I acknowledge that buying a house with monthly mortgage payments will heighten my anxiety immensely. If we can make it work to buy a property with my MIL and FIL, and keep our monthly payments closer to what we’re paying now (or at least what we’d pay in rent for a decent 3br/2ba apartment), then maybe that’s ok. But then there’s all the other issues that come up with home ownership. It’s terrifying.

But then I’m also sitting here, 35 going on 40, realizing that there is no “when” at this point in life. I’m past the stage of saving and waiting. It’s now or never. I have a kid. I have a job that is as stable as my work will probably ever be. I have a husband who may return to school to make even less than he does now, but at least he’ll get benefits in case I should lose said job. Why not just take the leap? Have some stability for once? I’d like to give that to my kid. He won’t remember his first year of life, but I’d prefer not to jump around from rental to rental throughout his life. I know it’s not the end of the world, but I grew up in one home from 0-17 and although moving once or twice in that timeframe is ok, moving every year or every other year is best to be avoided. I want to meet my neighbors, I want to feel like we’ve “made it” by having our own backyard, however small it is. Our own kitchen and bathroom and walls and tiny storage area so my bike doesn’t have to live in our living room.

I’m tired. I’m tired and unhealthy and I know my body is upset for it. I feel myself aging too fast. I’m not finding time to work out and my diet has gone to complete shit. There’s so much I want to improve, but for now, I’m barely getting by.

Home (Bitter) Sweet, $2M Bay Area Home

I haven’t written in a while, because as a new mom working full time, there isn’t time in the day to do much other than work, feed (a baby), eat and sleep. And even that last one rarely happens these days.

A lot is going on with our finances these days, so I have plenty to write about, but I’ll focus here on our recent quest to purchase a house in the Bay Area. In short, it’s not going well. I just can’t accept that we have to spend $8k a month on a mortgage for the next 30 years in order to afford anything remotely decent in the likes of a 3br/2ba house. And the market isn’t even at its hottest these days.

The big question right now is whether or not we go in with my husband’s parents to purchase a home. In theory, this is a good idea, since his mother has $1M for a downpayment and his father can contribute $2k a month to the mortgage and bills. That would help a lot if we get a loan for, say, $750k on a $1.7M home. And, you’d think you could find a house with enough room for $1,7000,000. But – we’re in crazy land here real estate wise, and while $1.7M gets you more than a closet, it’s not that much more (and the closets, well, they aren’t big enough to fit much of anything.)

Anyone learning of our situation wold say — why don’t you live further from your work, or, heck, move to another state? Yes, all possible, but not what we want. I already feel like I live too far from work with a 45 minute commute one way and I barely see my kid. If we HAVE to, yes, I can do a 1.5 hr commute one way / 3 hrs RT but — then I get into the philosophical question of WHY. I don’t like my career to begin with, the reason I am working in it is because it pays well (at the moment, really well.) But that won’t last forever. And if there’s anything that gives me a panic attack, it’s committing to staying in this career (and somehow remaining gainfully employed in it) for the next 30 years.

I’m really not sure what to do here. My general thought is this:

  • Try my best to keep my current job for 34 more months, which is netting about $300k/yr pre tax for next 3 years
  • Stay in our $2500/month 1 bedroom apartment until my son is 1
  • Move into a rental 3br/2ba house closer to work that my father in law can also live in (requires a lot of looking for the right place, since he would need a private entrance to his room and ideally his own bath) — about $6000/mo ($4000 / mo for us, $2000 for his father)
  • Live there for the foreseeable future and save as much as possible
  • Either get promoted at work into a role that pays even more and that I can see myself in for next 30 years (unlikely) OR just keep saving until we have enough for a sizable downpayment to keep monthly payments low OR move far far away and never look back

The only reason why it makes some sense to buy a house now is that my mother in law has that $1M in cash earning basically no interest at the moment, so putting that into a house would at least allow that money to keep up with inflation, probably. It would even make sense for her to loan us the money and for us to pay her interest on it. Either she spends it then on something she needs in her life, or one day it comes back to us as my husband is an other child. Either way, it feels better than taking the full $1M and putting her in a tiny in law unit on the property without its own kitchen. She might not care, but it just feels wrong.

We did meet with a real estate agent and I’m running out numbers with a broker to get pre approval. I’m shocked that without my MIL’s $ for a downpayment, it still looks like we can qualify for a $1.8M variable loan, give or take. That’s insane to me. I know you don’t have to take as much as the bank offers you, but that’s basically a $9k a month payment. Since they aren’t counting my bonus or stock – that’s somehow assuming we can pay $9k a month on about $10k after tax. It makes no sense. And we wonder why we have housing bubbles that go bust.

I’m trying to avoid the emotional side of me that wants to BUY A HOUSE NOW. It’s being amplified by knowing that my mom has to sell my childhood home, and even though I’ve lived in apartments now for many years I always had a place to go back to that was my home. With that house being sold, I don’t have a home any more, and that makes me feel icky. Not icky enough to make a stupid financial decision, but icky nonetheless.

I hired a CFP to help us figure this all out but I am pretty sure I made the wrong decision in who I hired as we’re way too confusing for him – he’d be good with a straightforward couple who both earn tech salaries and will likely earn those salaries for their entire careers. That’s not us. So I’m pissed at myself for picking this guy. He’s not bad, but he’s not flexible and he doesn’t think outside the box. We need some flexibility here. And he’s supportive of buying the home now, but I’m not so sure he should be.

In any case, we’re working on pre approval then will decide what to do. I’m kind of hoping we find a 3br/2ba home for $1.2M that we can buy and live in with my father in law, with his $2k / month going toward mortgage/taxes, and then his mother can find her own similar property when she has to move in the next few years (when her mother passes away, the property will be sold and income split amongst the 3 siblings.) At that point, she should have about $1.5M in cash or more and she can go out and buy a small house with a nice backyard and we can have our $1.2M tiny house that we work to fix up and make our own. That’s really the best plan, I think, though finding anything half-way decent for $1.2M is pretty impossible here. We could get a 2br/2ba condo, but that doesn’t make sense since we want to have more kids and that wouldn’t allow us to grow our family or have guests over. So I’m hoping we go for a $1.2M house close to my work, we can make that work with his father so that covers taxes, at least for a few years, and we do our best to make this home our own. I really think that’s the best way to go about things, if we don’t just stick to renting.

Update on the Whole My Mom’s Finances are Fucked Situation

Sorry for the foul language, but hey, when things are fucked, there isn’t a better way to describe the situation than the appropriate terminology.

The saddest of all is that THEY SHOULDN’T BE FUCKED. At first, I felt super guilty for letting my dad convince me that he had $50,000 set aside for my wedding to spend without, I don’t know, asking to see all of his bank statements before signing the contract for my venue and vendors. Ok, I still feel super ridiculously guilty about this.  I feel guilty for never saying thank you in the right way for this generous gift.

BUT – it turns out, the $50,000 wedding was just one financial mistake in a list of what may be hundreds. Even if I were to repay my mother back every penny, she’d still be in quite the pickle. And I’m willing to repay every penny (my father would never let me do that, but he’s not here anymore, so there’s that.)

I’ve run the numbers. I put them in front of her face. I try to share how each year, not counting the tax debts and family loan she’s overspending her income $40,000-$50,000. Despite her $50/$60k or so after tax income with her SS and Pension, she’s still draining her IRA. She keeps saying she’ll take money out of the IRA. I keep telling her the IRA won’t last forever or anywhere near it.

The house has to go. I really, really, really don’t want it to go. I know it’s just a house. It’s just a stupid piece of property with a dumb room that I lived in for my first 17 years of life. It’s just a dumb piece of wood that has so many memories good and bad all jumbled up in it that I see maybe twice a year if I manage to make it out to the east coast that often and with it I can escape back to childhood and feel like there’s some sense of stability in the crazy fucked up world, but that’s not enough reason to keep a house that’s costing my mother $40,000+ a year to maintain and that isn’t even counting big fixes like… needing a new oven (it hasn’t worked in years now) or a roof or carpeting or anything else.

But I tell her over and over again that the house needs to go, and now that I’ve run the numbers, sooner than later. I tell her I’d love if there was a way to keep it, but there isn’t, and the best thing to do financially is to sell it ASAP. That means starting work on getting it ready for sale NOW. But she’s down in Florida in her winter condo, swimming for a few months. I’ll give her this winter — her abusive husband just died and left her with a bunch of unexpected debts and she needs to just get away and have some time to relax and not think about it. But then she’ll say in summer it’s too nice out and she has to go to the pool and she doesn’t have time to clean. My sister, who lives in the house for free, btw, works a minimum wage job and always says she is too tired to help with anything (her job does require her to be on her feet all day) but she lives there for free and really is no help… physically or financially….

I wish there was some way to have reasoned with my father about his spending… but he’d just blame my mother for HER spending. Well, they both spent too much. I understood and empathized with him wanting to spend his retirement income before he passed away. But he didn’t need to buy a zillion worthless paintings and sculptures at local art fairs (that now represent a rather large collection which has to be sold or donated or trashed) or all the worthless “collectables” and my mom didn’t have to spend so much on shopping and they both probably should have moved to a smaller property a long time ago (vs buying a second home which was cheap to buy but expensive to own in Florida) and…

I just feel absolutely sick because no matter how many different ways I spin the numbers they don’t work unless she sells the home. The whole tax situation is a trainwreck as well, as we’re now awaiting to find out what penalties will be assessed on some very late taxes that he refused to let my mother file on time and lied to her about having the correct amounts paid off (maybe he thought he did, I think he lost his mind in these last few years.)

You know, even at the end, my mom had to rush around to find a cemetery plot and paid top dollar because my father couldn’t handle thinking about these things and kept putting it off, despite being diagnosed with a terminal illness 13 years ago and told he had 2 years to live. Even after all that. So my mother ended up spending god knows what on the cemetery plots for both of them and funeral home expenses and all that, plus a brunch at a decent restaurant afterwards and poof there goes the money that my father said was saved for my sister’s wedding! Oh, and there was no liquid assets to speak of so my mother had to put it all on her credit card. My uncle did offer a $30k loan after we asked him for help to pay off the bills but that’s coming due next year as well and I’m sure he wants his money back and I unofficially said I’d be on the hook for it if she couldn’t pay or some reason. They have a legal agreement signed so he gets proceeds from the house when it’s sold. All that, just to pay for a funeral my father couldn’t properly plan for because he wanted to be immortal. I wanted him to be immortal to, but clearly we cannot have what we want.

And I feel guilty about moving away but I also know if I was there every second of every day these last 10 years it would be no different as my father only complained about my mother’s overspending but never ever would look at the bigger picture. I understand that being terminally ill was horrific and he couldn’t admit it to anyone so instead he just bought things as they made him feel like he would live forever, I guess, but those things are just things and I wish there was a way to bring him back and somehow give him happiness without having to just spend all this money on so much stuff that now has to be sold just to sell the house…

Even with the house sold, my mother will still be overspending, but I think she’ll be ok… if she were to sell the house immediately, which she won’t do. She says she needs years to clean it out. The reality is that she needs help to clean it out. A lot of help. Emotional and physical help. It will be very hard and stressful. It will be very hard for me as well. I certainly will struggle to part with my childhood furniture, which I thought one day might be used for my own children (especially if I had a girl), but it probably doesn’t make sense to ship it across the country, esp given right now I live in a one bedroom apartment with no room for it.

I wish I had a zillion dollars and could just throw money at this problem and be done with it. So. I have some liquid assets right now and I’m tempted to do just that. I mean, my parents paid for my college education AND my wedding so it wouldn’t be the strangest thing to pay my mom back now and help her out financially. But I also have a child and need to support my own family as I’m the breadwinner and I have serious mental illnesses and I can’t maintain my jobs for long enough and I still can’t afford a house.

I’m really struggling and I’m not sure what to do. I can just let her run out of money in a few years and go into debt, but then what? Do I just say “I told you so?” A few years ago I set her up with a Mint account and tried to teach her how to budget and it went nowhere. I think she’s starting to get why she needs to budget but she refuses to, so what do I do? She can’t spend $700 a month on food (I get how she can, I’ve done it before, but she can’t) and she especially can’t if she’s keeping the family home with its $700/mo variable home equity payments that will pop up to $1700/mo in 2020 and also whatever this tax payment plan of ~$1000/mo will be for 72 months…

Then these tax lawyers and enrolled agents want $3k-$4k to help her reduce her penalties for taxes and I’m sitting here thinking maybe we should just try to do this ourselves because she doesn’t have $3k-$4k to pay for help (if we can do it ourselves) and I’m just sick of feeling like I have to protect her from vultures who prey on the weak but also don’t want to be stubborn like my father and refuse help when it’s needed.

I could give her $100,000 but it wouldn’t solve anything, it would just delay the inevitable. I’d rather save the $100,000 for when she’s older if she really needs the support, vs now when she’d just spend it on things she doesn’t “need” though she’d say she does.

So that’s the state of that.

A Widowed Mother Who Lost Her Wealth (And a Grieving Daughter Trying to Help)

My family was never wealthy, but for my entire life we’ve been more than comfortable–comfortable enough to not pay close attention to our spending. While we never took lavish vacations (unless paid for by points acquired through my father’s work), we didn’t budget. We should have.

As an adult with my own job and an understanding of the value of a dollar (and my motto – no matter how much you make, every cent counts), I’ve managed to build up a networth of over $650k, give or take, at age 35. I want to be proud of that. I want to enjoy this as some sort of accomplishment. But I can’t. I can’t because I feel incredibly guilty and lost when it comes to helping my mother out of the financial mess she is in right now.

Some may look at her situation and say it’s not that bad. I guess it isn’t, but it will be soon if she doesn’t plug up the holes in her sinking ship. Not all of the holes are her fault–but she’s just so delusional and has no ability to stop spending. It is impossible for me to advise her beyond subtle suggestion that she cease spending when my parents paid for my college education, a nice wedding, and an overall nice life. Part of me feels like I ought to help her out and provide the funds to plug up some of those holes. And–most of me knows that even if I were to give her my entire $650k, she’d still find a way to burn through it.

This is a long story… a very long story… and one that is keeping me up at 2am with a newborn who is sleeping so I really ought to be sleeping. I can’t sleep. I can’t do anything but let my mind spin on this giant dilemma, trying to find some sort of solution to the puzzle. There isn’t one that’s pretty or that my mother will agree to. But, after sitting back and letting my recently-deceased father make a mess of the finances in his last years of life (not that I had much say in that, but I could have maybe done something… more on that in a minute)… I feel like NOW I have the opportunity to stop this sinking ship before it reaches the bottom of the ocean.

The picture was looking rather unfortunate on the first go-round of budget vs income that I quickly ran after my father passed away this summer and my mother had to make some decisions about her social security survivor’s benefits (which are confusing as hell, yet to be fully understood, and the subject of another post I’ll write one day.)

As we did more digging, we uncovered that in 2014 there was $1M in an IRA. By 2017, only $400k remained. During that time, there was the purchase of a second home which cost, including renovations, about $100k (or maybe more because my parents seemed to always underestimate the cost of their renovations and not keep tab.) There was my wedding, which, at $50k, was a lovely affair and something that made my dying father beam with joy, but was an event that never should have happened given the financial situation my father either somehow didn’t understand or hid from me and the family. He said, over and over again, he had $50k set aside for my wedding and $50k for my sister’s. He said many things. I’ll never know if he was delusional due to the cancer drugs, unrelated mental illness, old age, or maybe just a serial liar–to not only us but himself.

When he was working he was bringing in good money, at least for a middle class household. Ironically the man who left his family without a stable retirement spent his life’s work as an actuary–planning pensions for companies and accessing risk of running out of money to fund those pensions. I try to find humor in this.

But then, and I guess I didn’t realize this since I was already away at college, he stopped working around age 55 due to his obesity and mobility issues, and then shortly after that began collecting disability. His work paid out nicely for a few years, and also offered a good pension, but the reality was (and where I was blind sighted is) that the amount coming in did not cover the amount spent. I don’t know the exact gap, but it was substantial, and ignored.

Although the wedding was a big expense and the second home purchase wasn’t for pennies,  what really did them in, based on my research into the last 10 years of spending, was their crazy high expenses. My mother, ever in denial, would say she doesn’t spend like rich people do, then come home with piles of clothes “on sale” from Chicos or some “non luxury” store, not to mention a pile of face creams on auto-purchase from QVC and who knows what else. Then, there was the dining out bills, and the $600-a-month house cleaning services (I’ve convinced her to drop that to 2x at $300 a month.)

I’m not one to judge how they spent their money — they had a right to spend it any way they wanted. And I understand my father, facing certain death, wanted to enjoy his limited wealth in his final years. It was just the perfect storm of financial chaos. Even his long term care policy, dutifully paid into for many years, likely costing over $20,000, ended up going unused because he refused to admit he was dying–or, perhaps because he realized that the policy didn’t actually cover enough to not require dipping further into the shrinking retirement savings left.

With this, I’m left to wonder if my father, as ill as he was, didn’t go to doctors outside of his cancer doctor because he hated going to the doctor–or, if part of this was because he couldn’t afford the treatment. In the end it wasn’t the cancer that killed him, but issues with his heart and blood pressure–perhaps related to his cancer treatments, but undoubtedly something he could have had treated better over his life and especially those final years… but he chose to only focus on his cancer. If his goal was to die of something other than cancer, then he succeeded. I’m pretty sure his goal was to live forever and he couldn’t think of the world any other way. I get that, no one wants to admit they’re dying–but when you are facing a terminal illness and are told you have 2 years to live (and then you manage to live more than 10) at the very least you can pick out a funeral plot and prepay for a burial, not leaving your wife to run around to cemeteries the day after you die to pay the highest possible amount for both of your graves (yes, this happened. Yes, I was out-of-my-mind with a one-week-old at this time, trying to provide advice.)

But now–now the biggest issue, and the one I find saddest–is that we’ve uncovered a horrible situation regarding taxes. Taxes unfiled and unpaid. All of the numbers I’ve been running to try to save her primary home in the northeast–which, while worth $500k, has a $200k home equity loan out on it, by the way–were thrown out the window. And I threw my hands in the air. I give up. This is looking bleak. Sure, she can cut all of her spending. She can stop the house cleaning services and limit work on the house to only vital fixes for a while… nothing cosmetic. But even then, she starts dipping into that small $400k IRA immediately–which shrinks to almost nothing after the taxes are paid, and she has nothing left to pay the home equity that comes due in 2020 and flips to principle and interest at 3x what she’s currently paying.

In short, the only real answer is to sell one of the properties, and sooner than either of us would like. I’ve told her clearly that the northeast home, while a place that holds all of my memories as a child, and one I’d love to keep, is a complete money suck and sadly I think it needs to go. She agrees, but wants years to clean it out (she’s a hoarder and my attempts to help her get rid of things on my last visit, outside of taking care of a 3 month old, did not make a lot of progress.) I selfishly want the house to stick around for a while too–although it won’t be the home for my “dream” visits with my family… holiday visits to grandma and grandma — long summer nights with my kid(s) playing in the backyard through the sprinklers, running after fireflies like I did as a child–I thought maybe a smidgen of this could exist.

I know a house is just home and a home is just a house. I’ve lived enough places since leaving that house now… gasp… 18 years ago. I mean, I knew, deep down, we couldn’t hold on to it forever. Mom would move out when dad died at some point. But either time went by too fast or I didn’t think it would be this soon. She clearly wants to stay there… but it’s not possible, especially not with the vacation home as well.

She could potentially sell the vacation home, which would pay off some of the home equity. But she doesn’t want to do that, and I think it wouldn’t be wise anyway–they invested quite a bit in renovating that property and, while it’s small, it is a good place for her to live in her “young” old age. Even though some of her friends still live in our development in the northeast, many are moving away, and few still go to the social gatherings she goes to–whereas the 55+ community with the vacation home is filled with active seniors, at least in the winter months. I’m worried about how she’ll like it there in the summer when it gets extremely hot with violent storms and most of the residents leave to the north–but maybe she’ll be ok. She seems to find people to talk to wherever she goes (or talk “at”, but to her there’s no difference and she’s pleased either way.) So, the financial planner in me says — get her out of the northeast home as fast as possible. Like, yesterday fast.

But she’s committed to not moving until at least 2020, and she still thinks she can make it there much longer. She keeps asking me how long she can stay and I try to explain to her that there’s no exact number because the question becomes how much she needs left in her IRA to grow to afford her lifestyle–AND what is going to happen to her later in life if she needs long term care (since my father cancelled her long term care policy years ago saying it was too expensive.)

Now, she does have an after-tax income of $60k+ per year once she gets full social security benefits. That’s pretty darned good. If she had one home, especially one home that doesn’t cost as much as one with a lot of property and an aging architecture, then maybe she’ll be fine. She can sell the house, pay off the home equity, take the remaining $250k or so to pay off the taxes (est $80k) and family loan ($30k), and then take the remaining $150k and, ideally, invest that somewhere safe, while slowly drawing down the IRA and minimizing tax damage in the future.

She could, alternately, sell the vacation condo and put that money into the northeast home, but the costs are just too high there and she’ll still run out of money. I think with the vacation home she can actually live on her income, even if she wants to travel to visit her grandson or spend some time in NY.

The problem is, the longer she stays in the NJ home, the harder it is to ensure her life when she moves is financially ok. What I don’t want to happen is that she burns through her IRA in a few years because of credit card bills and loans and having to pay this ridiculous amount of taxes that sadly are just so high because of penalties due to my father not filing (yes, getting to that in a minute)…

So the taxes… I really don’t know what happened. My father always, ALWAYS paid the right amount each year. He didn’t always file on time–but if you pay the right amount and don’t file the IRS doesn’t actually care. Somehow, whether on purpose or by massive mistake, he was short about $23k one year and $18k the next. The $42k in taxes owed is crappy, but the penalties on that because it was never fixed are what is extraordinarily sad. For that money, not only did he take too much out of the IRA in two years to cause such high taxes owed, but he ALSO then didn’t pay those taxes or file or anything. I want to ask him WHY? But I can’t. Because, you know, he died. And I’m still dealing with processing that and all these feelings I have around wanting to empathize with him for being such a sad, sick man but also then being angry and grateful and who knows what else–is why I can’t sleep.

I’m now looking at any tax relief available to my mother, but it seems unlikely she will get any help from the IRS. Innocent Spouse theoretically applies to her–my father was abusive to her for years and refused to let her partake in household finances, even when she offered, and later, begged–especially regarding the taxes. He would yell at her and occasionally become violent. There are even police records of this (though not in the years the taxes are owed.) But “innocent spouse,” as far as I can tell, is for partners who lied on their returns. Well, he didn’t file a return, so there’s not much innocent spouse we can claim…

Now there is an abatement of penalty clause where, if you were in good standing the 3 years before the year you failed to file, you can get the penalties waived for that one year. But you only get to do this once. Not only was my father failing to file year after year (always having paid the full amount on time except apparently in 2011 when he had a small payment plan), it’s impossible to know if he already requested this one time penalty abatement. There are no records. He did all of his own taxes. My mother is perplexed–after going through all the of the papers… she says to me, it doesn’t make sense–where are all the taxes? The papers from the IRS?

My theory is he, either strategically or in a rage or in a fit of paranoia, threw them all out one day. Maybe he just straight up lost his mind and got rid of a box of important things by accident. Maybe he realized he did that and was so ashamed he just gave up on ever doing the taxes. Who knows.

One thing is for sure – he refused help–even from his few close friends and his family. And, for a man who said he wanted to leave his family with wealth and ensure his wife was financially ok for the rest of her life (which never made sense to me given how emotionally abusive to her on a daily basis) he sure made quite the mess. He just couldn’t admit he was struggling. He had way too much pride. And, in his final years, he didn’t want to accept his mortality. He told my mother she was overspending, but then he’d overspend himself. He once asked my mother how much my aunt and uncle gave me for my wedding — $500. He immediately wrote out a check to their daughter for $600! It wasn’t about generosity with him, though he’d like you to think it was. It was always about showing off how generous he was.

Even during the year of my wedding–I offered to pay for more of the wedding up front, even if he wanted to pay, so he wouldn’t have to withdraw so much out of his IRA that year. I knew the taxes would be high. No, he said. He was offended by the suggestion. He had the money and he wanted to spend it. Yes, I have guilt for spending it, but I didn’t know how bad things looked. Last I heard there was still $1M in the bank and a home that was paid off. I failed to dig in too much–but as blind as I was with eyes shut to the downfall of the great American dream, my mother seemed to have clawed her eyes out in order to be incapable of looking.

So now what? I have my own life to sort out here. I’m doing well, but have a long way to go. My first batch of RSUs vest in a few weeks… and with that I should have a $50k bonus after tax (should the stock market not completely disintegrate before Christmas) and I could say, you know what, mom, you guys paid for my college and wedding, and now I’m gifting you $50k (or, $15k in 2018 and $15k in 2019 and so on.) But what good would that really do? She needs to understand the value of money. I think I’m starting to get through to her a little bit. I paid for dinner the other night and she actually said thank you. It’s not that I want her to have to thank me – it’s that I want her to realize the value of a dollar. It may be too late to fix this mess… but maybe it isn’t. Maybe I can gift her a happy next however many years she has… for as narcissistic and childish as my mother is, I still think she’s been beaten down by an emotionally abusive mother then an emotionally and physically abusive husband, and she deserves the right to happiness in her old age. She has to throw out the clutter and really be wiling to simplify… and that would be good for all of us.

I just don’t know if I can convince her of this in time, and also let go from my crazy ideas to “save” my childhood home by either purchasing it or providing enough money in gift form to pay off the home equity or… plenty of bad ideas that not only wouldn’t help stop the bleeding, but also could financially ruin me as well. So I hope we can all make the right decisions and fast enough to stabilize and move on from this challenging period of our lives.

I do not want to lose my job.

I’m already feeling incredibly guilty for taking a small amount of additional time on disability for PPD, and am ashamed to face my colleagues when I return to work, especially knowing that I will be taking additional (legally-protected) leave in the next year to spend time with my kid. I hate, hate, have being THAT woman and would not blame my employer for figuring out the fastest way to show me the door.

I’m hoping that won’t happen. I don’t pray, but I’m praying that won’t happen. I just can see how they’re understanding how they can operate perfectly well without me, and they would rather replace me with someone else–or any mistake I make will be a quick reason to show me the door. I feel bad for becoming a mother and worse for not adjusting well to motherhood.

When I return to work, I really need to bring my A-game, from day one, through day a billion. I always try to do this, of course, but now I have to fight hard and strong to keep this job. I don’t deserve it, I am not good at it, and I have to try hard to do whatever it takes to be a good employee. I don’t know how to do this, because I’m socially awkward, unintelligent, and a complete fraud. But I’ll try. I’ll try and I’ll stop telling my husband I’m going to get fired because it makes him upset and he says I need to stop telling myself this because I self sabotage.

How can I keep this job? Like, really keep it. For at least three more years. Twelve more quarters. Thirty-six more months… 1095 more days…of amazing, irreplaceable-quality work.  Non stop. Full energy. Listening to my coworkers and doing whatever it takes to help them achieve their goals. Helping my boss who already looks great look even better. Being a team player. Never asking for anything other than the opportunity to do what’s right for the team and company. Maybe, maybe I can keep this job those 1095 days.

It’s a whole new ballgame now, being a mom. I’m terrified. I feel very alone in this journey and need to figure out how to just make it work, on my own. I wish I was smarter… higher IQ… or at least better at faking it. I’m so scared right now. It’s like I’m hanging onto a cliff with one hand with hurricane force winds swirling around me and gravity times a thousand puling me down. I’m holding on for dear life. I want to somehow minimize my interaction with others… I’ve been far to personally invested in my work projects. I get too emotional. I care too much. That’s the problem. I need to care less and do more.

There has to be a way.

And the Depression Fog Rolls In… How to Cope?

I want to be an organized, has-her-shit-together mom for my son. But let’s face it, just because I managed to squeeze a 7lb human out with relatively minimal complications doesn’t mean I suddenly am I sane, stable individual. Spoiler alert: I’m not.

I’m sitting in my one bedroom apartment living room watching my son finally in a good mood, on his back, in the little empty carpeting in the room, cooing and laughing, looking at… something? It’s nearly 7pm and I don’t know where the day went. We did a lot of me not sleeping as he snacked on my breasts and slept on me. When I tried to put him down for a nap in his pack & play he, as always, freaked out. I put a pacifier in his mouth and he spit it out, then started fussing, then started screaming. And repeat.

Exhaustion has new meaning with a newborn. I’m so grateful that I bailed on my plan to go back to work after 6 weeks and with my depression was able to get a disability extension (something I didn’t want to have to do, but I give up) and I have an extra eight weeks, plus another six that will be semi paid that is usable next year, and six weeks unpaid if I want them. The amount of stress I’ve dealt with just managing the guilt and logistics of orchestrating my maternity leave has been immense. I still don’t know how I’m going to go back to work, and then take my 6-12 weeks off throughout the next couple of months. While those weeks are “job protected,” the time in between them is not… which means my company could decide to let me go before I get to use this time off. I hope they don’t, but every single day I will be extra paranoid that I have to prove my worth and then some to maintain my employment…

That’s not good because I already feel like I don’t know what the heck I’m doing, as always. I mean, I am in a better spot in this job than others I’ve had before… but I’m by no means in the clear. I’m scared, and much more scared now that I have a kid. We have a cushion and all, but I need to work. I need to work full time for a long time to afford being a mom. And while I WANT to work, I also want to see my child grow up. I don’t have a choice either way. It’s challenging to hang out with other moms who are changing their minds about going back to work and deciding to quit their jobs and stay home. I don’t want to do that, but then again, part of me does. I can’t, and so that makes it an easy decision for me. But being that I can’t, I also can’t lose my job. And my husband get so annoyed at me when I constantly say I’m going to get fired–and I know that’s not the most productive thing to tell myself, but I just feel so lost and hopeless. I’m almost 35 and I haven’t the faintest idea how to do my job well. Fortunately my boss seems to like me, but that can change at the drop of a hat. If I make her look bad, even by accident, even if I try my best, why would she like me anymore?

Being this exhausted is not ideal for returning to a job that I don’t know how to do. I’ll just hang in as long as I can… which may be months and may be years… and try to save as much as possible. But I’m on a whole different wavelength of reality than my husband right now, which isn’t good. He earns $85k a year without benefits, and I’m making somewhere between $170k and $300k, and I carry the family benefits as well. If he lost his job, it wouldn’t be great, but we could survive. If I lose my job, that’s another story.

The stress was added to this week when I found out it’s unlikely I can qualify for term life insurance because of my history of depression. That’s plenty to be depressed about. I’m not sure how much life insurance I should get, but I was thinking a $3M policy… $150k for my son’s college, plus 30 years at $300k of salary. I could probably do less than that, but it doesn’t matter since I can’t qualify. I’m screwed because I tell my doctor that I occasionally think about killing myself. How am I supposed to get help if I can’t tell my doctor things like this when they ask me? Thank goodness we have a ban against refusing healthcare for pre-existing conditions these days (though who knows if that will last) but life insurance has no such rules. I feel like such a failure for my son and my family.

Meanwhile, I don’t know how to get into a routine of being a mom. I want to give my son a good childhood, I want to engage him and help him develop, and right now I’m not working and my husband is, so that’s really on me. But we barely sleep at night… I’m lucky if I get 4-6 hours of non-consistent sleep which isn’t even good sleep because of my son’s grunting and whimpering. It’s getting. little better but it’s still not good, and it won’t be for a long time. How on earth will I be able to be a great employee on this little sleep? I’m already daydreaming about the catnaps I’ll take in my office parking lot at lunch after pumping.

I’m not complaining here because this is a choice I made, and I’m so lucky to have more time off and protected than many other women in this country. And for now I only have ONE kid to take care of… I can’t imagine what it’s like with more than one (though I’d like to have at least one more when I’m ready–and by then maybe I can do the stay at home mom thing for a year or two? Wishful thinking.)

My kid does get to stay home with my husband’s parents while I’m at work and not go off to a daycare at this young age, which would be much harder. Still, I’m missing the opportunity to be my son’s mother, or that’s how it feels. But, then again, as I glance at him now fussing on the floor, clearly over this once nice position for solitary play time, coos, and giggles, I also think how grateful I am that I will be going back to work and that this isn’t going to be my full time life. So clearly, I’m torn. I just don’t know how to do both, or even this alone, but I’m going to have to figure it out.

On Being A Mom, Financially Speaking

My son is a good kid, so far. He doesn’t sleep much at night, but we’re working on that. Despite telling myself I will not buy frivolous things for my child I have bough frivolous things for my child… mostly clothes, some toys, and a few overpriced items like a swing that he uses on occasion that last a few months. If my spending patterns in the last two months tell us anything about how much this kid is going to cost me, my whole “I will NOT spend $250,000 on my kid before he goes to college” motto might as well be thrown out the window.

At the moment, living in this one bedroom apartment makes me feel OK about spending some amount of frivolous money on my son (I mean, gosh, those 3 month old clothes on sale at Gymboree are just TOO CUTE.) And, I feel rather hopeless around being able to afford big ticket items at this point, so the $10 shirts are fun to buy. I have hand-me downs from a number of friends (benefit of being one of the last to have kids) but the styles are so, bleh. It doesn’t matter AT ALL but I want my son to look not just nice, but appropriately styled to be my (/our) son. And, $5-$10 for an outfit just seems so cheap, even it it only lasts 3 months. Hey, I’m breastfeeding so at least he’s food is free, right?

What’s most challenging is this massive fear that I will never have a stable job. No job is really stable, but I’ve been in this industry/role type for over 10 years now and I still feel like I have no idea what I’m doing, and that I don’t deserve my paycheck. in fact, I’m half convinced when I go back to work from maternity leave my boss will see how horrible I am in the role, wait until she’s safe from firing a “new mom” and then poof, I’m gone. I’ve gotten to the point where I think I can probably get another job, but it could take months, and who knows what it would pay. This job happens to pay a lot, especially with my bonus (if I get my bonus), but that’s temporary. How could I ever commit to a monthly mortgage payment for 30 years (!!!) when I can’t imagine holding and keeping a job for longer than 6 months at any given time?

It would be nice if my husband’s income was enough to support our family just in case  I can’t get a job… but that’s not how it is either. He makes $85k a year in consulting income, which is pennies for an area where a basic mortgage with PITI will cost us $5k-$7k a month, and that’s with a hefty downpayment. I know people do it here on “low” incomes, but certainly not as home owners. I’m somewhat ok with renting, especially in a good school district once my son is old enough to go to public school, but my husband really wants to buy. I’d rather buy–for the stability and to feel like I’ve “made it” but I don’t know, I don’t know if I have it in me to make that kind of terrifying commitment.

My networth right now is about $620k and should be closer to $700k by the end of the year, depending on stock market performance (and if I can stop myself from buying more cute things for my son.) For most people, that should be more than enough to provide comfort in financial security, at least enough to buy a house. But it feels like pocket change to me. I’m pretty sure once I get to $1M I’ll start to feel like I an afford to buy a house. That’s still what I think about my home purchase plan… but I’m worried I’ll wait to long as housing prices have already doubled in the last 10 years here and interest rates are going up. Or have I really already missed my opportunity to buy here and the smart thing to do would be to leave?

Besides buying a home, there are lots of things I want to purchase for my son over the years, including a sibling or two. 🙂 Even if I have only one kid, there’s enrichment activities (especially since the school systems do not offer arts education here), summer camps, traveling, etc. We don’t have to spend a fortune but I’d like to give him some semblance of a middle class childhood–one that I had when I grew up. And–if I can keep my current income of $170,000 a year, give or take, and we rent or find a home that is somehow cheap enough to go in on with my husband’s parents (and live with them) that our monthly payments aren’t, like $9000 a month (which I guess we could qualify for but WTF how could we spend $9000 a month on a mortgage when we take home about $10k a month after taxes. Something doesn’t add up.

Well, I feel all sorts of shitty… knowing I’ll probably never make enough money (*consistently, for the next 30 years*) to give my son the life I want to give him. We’re saving now on daycare since my husband is working PT from home and his parents are helping out (which is great) but I still want him to experience preschool at some point in the next few years. If I can keep this job I may be able to make over $300k for this year and the next 3 years. That’s amazing. I don’t want to count on it, but it will be nice. After tax, it’s still not a lot… it would be great if I make $300k a year for the next 30 years of my life, but let’s be real… that’s not happening.

…A big chunk of that income is in options which happen to have increased in value a lot–but they can also decrease in value before I get them and after my options are all acquired, I won’t have any worth that much. I’ll be back to my $170 salary… or less, if I need to find another job (although I made $200k at my last job, when I was interviewing this time around offers were more in the $150k range at startups–where I’m more likely to get hired.) If my husband made $150k and I made $150k, we’d be doing ok… I feel like one can live on $300k joint here, and even on $150k should one partner lose their job for a while. But… $250k, and, $80k (should I lose my job) is not doable. Better yet, we’d both be making $250k consistently… but he hasn’t asked for a raise in years and refuses to take on any other clients (now at least it makes sense since he’s taking care of our son during the day)… and I, well, I’m not moving up at work ever. My title and likely pay is already inflated. I’m just trying to stay where I am and not rock the boat.

I’m scared. Scared, but not too scared, as long as we are renting a one bedroom for $2450 a month. No matter what happens, I feel like we can afford that. We can afford that on his $85,000 self employment income. We can afford that on a job I can find for $100k if I lose other jobs. But any more than that? Even renting a two bedroom for $3200+… I just, don’t feel ready for that. I don’t think I ever will.

Real Estate: Buying Property with Mother-in-Law?

The costs of home ownership in the Bay Area are, well, terrifying. My husband and I (and now my husband, his mother and I) have been visiting open houses each weekend –just to get an idea what, if anything, is in our price range. The short answer is–not much.

Although we’re definitely not wealthy, we now have the benefit (?) of his mother joining us in our home purchasing endeavor. And, by joining us I mean joining us to live with us in an in-law unit (or second unit of a duplex) that we purchase together. should be super-duper grateful that she’s offering a $1M cash downpayment to make this possible. I am. But I’m also super-duper nervous because the other $1M (since the properties we are looking at are about $2M) will come from my husband and I (mostly me myself and I) – and the way their family communicates is practically non-existent so I’d be wrapping my future everything up in a property that’s co-owned by his mother (or, she “gifts” him the money so it’s fully owned by us, but the ownership then is a lifetime of debt to her in other means.)

Do I like my mother in law? Good question. She is, for all intents and purposes, a quiet person who keeps to herself. She marches to the beat of her own drum, but we get along. Would I prefer not to live on the same property as her? Yes, of course. But she’s also willing to help out with childcare and as much as I am nervous about her providing childcare to my kid(s) once they’re of walking age (she’s doing a fine job now with the 10-week old), it’s certainly nice to not have to spend $20k+ a year on daycare, and it’s extra nice keeping it in the family.

The actual scenario we’re looking at is that his mother gifts us the $1M, we get a mortgage for $1M, then his father (who is not married to his mother–never has been–but who is friends with her) gives us $2k a month in “rent” to bring down the monthly costs. All-in-all, financially, doing this with a ~$2M duplex or a reasonable single family + in-law unit makes a hell of a lot more sense than spending $1.5M+ on a single family home with no future rental potential. Even if our mortgage is $7k a month, my husband’s father’s contribution of $2k brings that down to the $5k that is that max I feel comfortable paying monthly for our PITI. I’d like it to be less than that, but at this point realistically it’s not going to get under $5k for what we need to make this work.

I’m just struggling with the lack of fiscal communication here, and how it feels like I’m dealing with a bunch of elementary school students in handling a very serious, very costly purchase, should we make it. That said, what right do I have to ask for any sort of special communication when it’s my husband’s mother who is making this purchase possible at all… shouldn’t I just roll with it? He’s an only child, his mother has practically put her income after very low expenses under pillows her entire life, and she seems to want to offer that to my husband and my child(ren) more than spend it on herself… I mean, for a women who has never owned a home, car, or pretty much anything “new” in her life, I doubt she’s going to change suddenly and spend that money. If I thought she would, or even would enjoy spending it on something else, I’d refuse the cash. I don’t want to be responsible for destroying her retirement. But all she wants in her retirement is a small place to live with a backyard and, most importantly, to spend as much time with my child(ren) as possible.

The entire situation makes me so uncomfortable because even though I grew up with a lot of privilege and my parents providing for me, I have been extremely independent since I graduated college (outside of my wedding.) I feel guilty for the privilege I’ve had, but have always told myself that as long as I make my own money for the life I want to live once I graduate college, I’m doing right by the world.

There’s a very long post I will write one of these days regarding my own parent’s financial mess (my father passed away this summer and let’s just say the family networth went from $1M to $400k in about 4 years–again, that story will be saved for another post(s))–but I’ve been struggling too with coming to terms that I always thought there’d be something left to provide backup should I financially fall on my face one day–but the reality has sunk in that nothing will be left. I am in a much better financial situation than my sister who is 28 and still earning a little higher than minimum wage with no benefits, so I can’t complain. It’s still a scary feeling, nonetheless (to be written about in another post.)

But I’ve also saved up now $650k, give or take, in retirement and investment accounts, and I feel like I’m capable of buying my own property without the help of others. Well, I would be, anywhere else in the country. Here… anything under $1.5M is pretty terrifying, at least with a 30 minute commute from my job south of the city.

That leads me down the road of… why buy now? The prices are coming down a bit (I’ve seen a bunch of $100k price drops in the last few weeks which seems substantial), but do we really need to buy this year? Our 1 bedroom, 1 bath apartment lifestyle isn’t that horrible, especially given the size of our apartment (800 square feet) provides rather large rooms compared to 3br, 2ba houses for sale (some of those “master bathrooms” are masterly tiny.)

His mother doesn’t have to move now either. She’s still living in her parent’s house (I believe, for free, which she’s done her entire life), so she is ok there until her mother, who is in her 90s, passes away (clearly not wishing this on her at all, but there’s the reality that few humans live past 100.) Once she passes away, we don’t know what will happen with the property other than that it will be sold and, we think, his mother will get 1/3 of its value (possible that won’t be the case but no one talks in the family about things like that.) Even without that inheritance, though, she will still have the $1M waiting its use for a home purchase with or without us.

Part of me wants to power through the next few years in our 1br/1ba and enjoy the rent control we have with our $2450 rent. I’m 45 minutes from my office in rush hour, but maybe I can work out an alternative travel the where I get that sweet 30 minute each way drive. I’ve considered moving us closer to my office… but we can’t get anything near nice enough at $2450 a month. We could pool resources and live with his dad for $4450 a month… but we know without a private unit / in law that would be a mess. We’re not even going to try that…

So, we may just wait it out as long as we can. When his grandmother passes away, that will make everything happen faster, since his mother will have to move. Until then, nothing is making us leave this place. Our son can easily manage to live in a 1 bedroom with us until he’s at least one, and maybe longer. It does suck not being able to invite people over, but heck, what people would I invite over? I don’t really know anyone. And I work all the time anyway, or at least I will when I get back from maternity leave.

That seems like the right option– even though we could qualify for a loan that, with his mother’s cash, would enable us to buy a property now. Yet I’m not sure buying is right at all anyway… home ownership is a hot mess from what I can tell… it’s costly, it takes all your time, there are issues you don’t know about when you buy that pop up later… and in the Bay Area you have to buy “as is” with no contingencies which just sounds like a recipe for financial ruin. Why bother?

Well, why bother because I have a kid and I want him to have a stable life… both my husband and I grew up in houses from the day we were born until adulthood, and we value not moving around every couple of years, especially for our family. So there’s that.

Leave the Bay Area? Maybe. If we don’t buy now… and if I can keep my current job for the next 3.5 years to collect my stock, and that stock remains valued at what it’s worth now or more, then who knows… we could pick up and move. His parents won’t want to, but we could buy a place on our own. He wouldn’t want to be far from his parents, so–I’m not sure it’s really an option, but if we can have another kid (or two more kids) it may be the best one.

In any case, I’m not sure what to do… as always… but after looking at probably 100 open houses over the last year… all I can say is I really don’t want to buy anything I’ve seen. That’s not a good sign.

Rich Dad, Poor Dad, Poor Con

Recently a good friend of mine made me a proposition that was too good to be true–she had signed up for a real estate investing class and as part of this, she received free enrollment to a three-day seminar on stock/commodity trading. Not only did she receive a free three day ticket to this educational event, she also was offered a free guest pass–and she was looking for someone who would be interested in attending with her.

Normally I wouldn’t be able to take work off to attend such an event, even if it was free, but my current situation on leave enables provided ample opportunity to join her. My thought process was–I want to learn more about stock trading and it will be a really good test run for going back to work, both for me (attending an all-day event and pumping throughout the day) and notably my husband and his father, who will be taking care of our son when I return to work.

What I didn’t do, that I normally would do, was research the event at all before attending. I mean, free is free, and I thought it would be interesting as I’ve never attended any financial education events. I thought maybe my friend had paid enough for this fancy real estate class that the additional programming would be of quality. And, if not, I would get to spend time with this friend who I never see, and maybe I’d still pick up a thing or two that I don’t already know.

The only thing she mentioned regarding who was running the event was that it was from Rich Dad, Poor Dad. I’ve never read the book, but I’ve heard of it, so sounded credible enough (for a free guest ticket.) What I didn’t know was that I was in for a rather brilliantly depressing seminar which surely conned many individuals out of $20k to $60k. It managed to be both highly educational (if you know nothing about the stock market and trading commodities) all while managing to make it sound like it’s both incredibly easy AND incredibly hard to make massive % gains in short turns using Puts and Calls and Covered Calls and Naked Puts and Options and the Futures Market and so on.

Now, as a “buy and hold” investor, I know better than to believe I can beat the market consistently enough in day trading to end out ahead. Perhaps their “mentors” they sell for a heck of a lot of money can help one learn the ins and outs of day trading and their strategies may be legit to some extent–but do you really need to spend $40,000 to hire a mentor and license their software to do them? Of course not.

But, there was indeed brilliance in their pitch. I watched the audience (well most of the audience) fall for it. The show (and I call it a show because it was that, not a class) was hosted by a clean cut, attractive 23 year old dressed wise for his age. He was good. At his job. He negged the audience and filled them with hopes and dreams at the same time. Every concept was taught in a way where it felt extremely complicated but also easy to grasp, if only there was more time. It was crazy how each subject and topic was thrown out in a way like we were going got get back to it later… but we never did. Questions were not welcomed. The few that were asked may have been plants. He moved so fast it was impossible to ask anything.

My friend was quick to scold me on how I wasn’t paying attention on the first day and that my comments were rude and negative (admittedly I was wondering what I got myself into and half paying attention, and I did sent her a slew of links to articles on why this educational brand is a scam that night) and I apologized to her for being so rude and made a valiant effort to be positive and engaged the remainder of the seminar.

The second day was a bit better, in the sense that I learned something–though I learned something in a way that made me want to hire someone to teach me how to do it better because clearly your can’t do this on your own (I wouldn’t hire them, but they certainly were working me as much as anyone else in the audience.) Luckily as a guest I was ignored, mostly. Those who were class attendees each received a free 15 minute meeting with their “advisors” to come up with a “trading plan” — which, from what I overheard, was just an opportunity to hard upsell everyone on their very expensive classes. Before these meetings, the attendees had to fill out a form which listed ALL of their financial information including their assets, salary, etc. It seemed their target was people who have $100k+ in their 401k/IRA, who want to get better returns from it–especially those who have old 401ks they never rolled over. (The whole series started out with a very, very brief talk about how mutual fund fees are horrible and ETFs are better, to plant that idea in everyone’s mind early–even though $40k for a class is some fee.)

I could see a lot of people were falling for it. “Don’t leave here without a trading plan,” they coached us. Everyone lit up each time the instructor told “someone’s” story of how they got rich. I sat biting my tongue, wondering how everyone would believe these stories that may very well be completely made up. (Then I remembered Trump is our president, and it made sense.)

During day 2, they also had everyone in the room go to a peer-to-peer lending site and figure out how much money they could borrow for what rate. The general idea was borrow other peoples money and invest it to make money. Red alarms went off in my head, but everyone else seemed cheerful to learn they could take out $20,000 for 20%. I cringed thinking how many of the P2P loans I’ve made over the years have defaulted. The “instructor” let us know, pointedly, that putting in our information to find out how much we could get at what rate would be a soft credit pull, and would not impact our credit score. He failed to go into what happens if we cannot repay the loan because we’re making risky trades.

Risk was talked about only as something you have when you are sitting on the sidelines, not actively trading the market. My friend loved the seminar, and felt she learned a lot. We left day two with her telling me she is going to keep reminding me to “get insurance” on my stocks. That, of course, is because they did a very good job of scaring us all into thinking if we don’t own covered calls on our stock, we’re taking on too much risk. But, they failed to mention how covered calls cut our gains, and how the market over time goes up… so far.

My major issue with all of the ideas was that taxes were not mentioned at all. So even if you “won” more often than lost, you would be paying income taxes on gains and not able to deduct losses if you buy same stock within 30 days. When I mentioned this to my friend she didn’t want to hear it, She was so enamored with their show she could not imagine these folks were telling lies or that taxes should even be considered.

The big, big takeaway and fear mongering centered on the upcoming market crash. They showed the tech bubble and the housing bubble and now the bubble of capital being injected into the markets. The discussion on the economy centered on how money used to be backed by gold and now it’s backed by nothing. This means, supposedly, the market will crash, and it’s important to be trading not the up of the market, but its ebbs and flows. Making money when it goes up, down, and even sideways.

Sounds good.

But then the logic started to fall apart. Their risk formulas, which I think are actually somewhat legit, still seem more risky then they implied. Basically you look at a stock’s trailing volatility and do a basic formula to figure out how much it might go up, if it’s starting to go up, and how much you’re willing to risk on this bet. So, you’re willing to risk $1 to make $9… a good bet. I’m still a little fuzzy on how they come up with their odds (and how charting really works since past performance rarely predicts future gains or losses of a stock), but maybe there’s something to it. If you can take less risk for more gains… as they put it in their illustration of a coin toss… as long as you win 60% of the time, you win. You’re the casino. If you can do better than 60%, you can win big.

Ok, sounds… great… but if that’s the case, why aren’t there a billion stories on the internet of people who took their class and are now bazillionaires? Why are they spending time teaching this class in the first place when they can all be enjoying the lavish lifestyle sure-bet, rapid investing provides them?

The “instructor,” and his directors behind the curtains, clearly knew this was a question that would come up and gave him a quick answer… he is wealthy, for sure, but he is still acquiring wealth and to do this he wants to be around all of these smart people all the time, which he has access to as an instructor (and we can have access to if we spend $60,000++ for a mentorship!) Hey, seems like a reasonable enough answer (not really, but then again, was anything reasonable enough in this “class?”)

Well, as PT Barnum reportedly said, “There’s a sucker born every minute.” This organization clearly knows it. I’m sure they aren’t looking for people like myself to attend these seminars, but they get plenty of takers anyway for their slick con business. It’s amazing these types of programs are legal, all under the guise of education.

 

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