I Got An Extra $1,000!

I recently have heard folks talking about what they would do with some unexpected additional money. J Money asked his readers “What Would You Do With an Extra $1,000?” I generally don’t spend too much time thinking about these type of hypotheticals, but this week it became my reality. I got a call out of the blue informing me that a $1,000 check was on the way to me!

This clearly isn’t something that happens frequently, and sadly isn’t something I’d recommend anyone try to replicate. There is a story with a lesson that goes along with this check.

Rewind to 2014

In the second half of 2014, we were doing a lot of home renovation projects. We had a large bonus room we were converting to a bedroom and adding a bathroom to it. At the same time, we were also remodeling an existing bathroom. The project started in last August and by early December we were getting close to being done. Normally we’re a bit faster, but my wife had a baby in this window and she’s the handier one in this duo.

Part of the bathroom work involved moving the toilet to a different part of the bathroom. Shortly after the toilet was installed in the new location, we went on a week-long vacation to introduce our new baby to our family. We had a great time on the trip but when we got home, we were greeted by water running out of the garage. Not good.

The brand-new supply line for that newly repositioned toilet sprung a small leak. Normally this wouldn’t be a big deal, but it must have gone on for several days. This was also an upstairs bathroom, right above the kitchen, and when I entered the kitchen the ceiling had fallen to the floor. Welcome back from vacation, right?

The Cleanup

This was a pretty emotionally draining time for us. We had a newborn, and weren’t getting much sleep already. We were so close to having our house put back together and then this. Now we had to rip out carpet and worry about replacing warping wood floors. We had some money saved up, we just didn’t really want to spend it on all these additional projects. I spent that first night and the entire next day ripping out soggy carpet and trying to dry things out.

Submitting an insurance claim wasn’t actually my first thought. After all, I was the one who installed the toilet supply line. What if I did something wrong and they said they wouldn’t cover the damage? I went back and forth for a day or two before a co-worker reminded me that this is exactly why you have insurance. It doesn’t matter whose fault it is, so long as it was an accident. We called our insurance and they stepped in were a huge help.

If you’ve never had to deal with a homeowners insurance claim, here’s how it goes. They first bring in a restoration company. In our case, because the water was clean water and not sewage, the cleanup was mostly just drying things out. This involved several dehumidifiers and fans placed throughout the house running 24/7 for almost a week.

Our kitchen was a pretty much unusable as they tried to salvage the wood floors by sucking out all the water. This was our kitchen for a week or so:

The Repairs

Once our house was completely ‘restored’ and dry, we were ready to start actually fixing things. The adjuster had come through and identified the cause and everything that had been damaged. He ran some fancy software that quickly spit out an estimate of how much it would cost to repair/replace everything.

In pretty short order, we got deposits to our bank account and were able to start putting things back together. We ended up spending a little bit more than our insurance gave us since we upgraded some things from what they were before the damage. For example, we upgraded one room from carpet to hardwood floors, and ended up replacing the majority of our carpet instead of just the section that was damaged. As much as possible, we did work ourselves. Placing rolls of insulation in the floor joists in the crawl space is simple and only took three hours, but I saved $500 doing it myself.

Our insurance policy had a $1,000 deductible, meaning we had to pay $1,000 before the insurance kicked in. I didn’t actually have to pay anyone, the insurance just paid us $1,000 less than what they estimated the damage to be. As part of the adjuster’s research, he also took the faulty braided supply line with him to send to a lab to see what went wrong. At the time, we were told that the insurance company was going to attempt to recover costs from the manufacturer if they found it to be improperly made. If they were successful in getting anything back, the first $1,000 would go to pay us back our deductible.

3 Years Later

I don’t talk to my insurance company often. Whenever I did, I would ask about the status of getting this $1,000 back. A few months after the incident, I was told that it was tied up with lawyers in a class-action suit. Having been involved in other lawsuits at work, I knew this meant it would take a long time.

Maybe 18 months after the event, I was told that the company that made the supply line had gone bankrupt and the odds of recovering anything had gone down substantially. At that point, I mentally wrote it off.

Imagine my surprise then, when my insurance company called me the other day and asks how I wanted to receive the payment. I was like, Cash Please!

Image result for wayne's world cash gif

So Now What?

So, I’ve got an extra $1,000 I wasn’t expecting. Now what? For me, it’s pretty simple. I’m not going to go out and buy anything I wasn’t already planning on getting. If I want something bad enough, I fit it into the budget and I buy it. I don’t need an excuse of having extra ‘found’ money to do so.

In this regard, I like Dave Ramsey’s baby steps, which says that you focus on whatever step you are on in the wealth building process. We are on baby steps 4, 5, and 6 (save 15% towards retirement, save for kids college, and pay off the house early), but are taking a quick breather to beef up our emergency fund (baby step 3). We have enough cash in our emergency fund for any typical emergency but want to make sure we have enough to buy a new car on top of our normal emergency fund amount.

All that to say, this money is just going into our savings account since that’s our area of focus. Once that’s beefed up enough, every extra amount goes straight to the mortgage.

So that’s my recent surprise and my boring plan for what I’m doing with it. I hope you can find some extra money, too, I just don’t recommend this path for finding it.

5 Unexpected Benefits Of Living In A Good Neighborhood

Welcome readers from TheSavvyCouple!

If you’ve been reading for a while, you may recall that we have moved around the country a bit and are currently living in our third house. Each time we’ve moved, we’ve learned a little bit more about the home buying process. Some of the latest lessons learned in real estate are not things that I was expecting to learn.

When we bought our last house, we really were focused on the house itself and the cost. We thought the location was ‘good enough’, but we really didn’t know the area. During the time we lived there we had our house broken into, learned that the public schools were unaccredited, and even heard gunshots from a nearby area that we didn’t realize we lived so close to. Location, location, location. Got it.

As we searched for our current house, we focused on having the things our previous neighborhood lacked. We now live in a great neighborhood that was built about 20 years ago. Although the houses are starting to get a little bit older, the architecture is very traditional and the homes and yards are all very well maintained. Curb appeal. Got it.

We were attracted to this neighborhood because of the large lot sizes, the awesome school district, low crime, and overall privacy. Each time we’ve moved, we have learned a little bit more about what is important to us in a house and neighborhood. In our current house I’ve realized that there are actually some really great benefits of living in a nice area that you may not be thinking of.

An Established Neighborhood Is Better Than A New Neighborhood

Our last house we built brand new in a new subdivision. The house we live in now is 20 years old. When all the houses in a neighborhood are new, it’s expected that the everything will look great. But until they are all maybe 5-10 years old, you really don’t know how well people are going to maintain them. This can impact your property value and have an impact on how quickly you can sell when that time comes.

One other interesting observation is that where we live, your typical first-time home buyers are priced out of our area. I have a theory that neighborhoods are better maintained by people who have previously owned homes. First time home buyers might bite off more than they can chew financially, which can limit the ability to perform maintenance. They might also underestimate the time commitment needed and grow complacent with neglecting proper maintenance.

That’s not to say that no one in our neighborhood is living beyond their means, but people are established enough so that they know what is needed to maintain their homes physically and financially. One piece of evidence I can point at to support this theory is that the foreclosure and short sale rates seem to be inversely correlated to home price in our area.

An HOA Can Add Value

Contrary to popular belief, HOAs can actually add value. But that isn’t always the case. Our last neighborhood had an HOA where we paid around $350/year and I really don’t get anything for it. We had an embarassingly large percentage of homeowners who never paid their dues, and the HOA didn’t have the power (or money) to enforce collections. If people didn’t mow their lawn or adhere to other covenants, the HOA really had no enforcing ability. It was useless and a waste of money.

Contrast that with our current neighborhood and it is night and day different. Here we pay $700/yr, but have access to incredible neighborhood amenities (pool, tennis, etc.). Our HOA sponsors tons of social events and has newsletters and communication that really help build a great community. 95% of homeowners pay their dues on time and the HOA finances are managed very well. The HOA has almost $200k in cash reserves for major repairs so the odds of a surprise assessment are virtually zero.

Schools Matter

In The Millionaire Mind, Thomas Stanley surveyed households with net worths exceeding $10M to observe differences and similarities to households with net worth between $1M and $5M. One thing that stood out to me was that people in that demographic tended to buy homes in established areas with great schools so they didn’t have to pay for private schools.

I think I always knew that schools mattered, but now that I have a child in school I have been very impressed with the experience we are having. This is especially true when compared to stories I hear from friends with kids in the neighboring counties schools.

Informal Mentoring

One thing I really didn’t expect when I moved into a nicer area was the career benefits. When I go to the neighborhood pool, church, or the grocery store, I often run into people I recognize from work. I’ve had that happen before, but being in a nice neighborhood surrounded by even nicer neighborhoods, pretty much all the people from work who live near me are higher in the org chart than me (our CFO even used to live not far from us).

Because of my proximity to company leadership, I have had a lot more personal interactions with people who can be intimidating at the workplace because they might have several thousand people under them. I’ve done things like campouts, Sunday dinner, and carpool with people I consider friends, who just happen to be officers of a Fortune 100 company. Even those who don’t work at the same company are often in very senior positions in their companies.

I don’t ever want to abuse my relationships to advance my career but have found these friendships provide a lot of opportunities for me to be mentored, especially on navigating my career.

Free Stuff!

We get offered so much free stuff from our neighbors, we have to say no. We’re talking about really nice stuff too. One friend gave us $1,000 worth of Thomas the Train toys his son had outgrown. He also gave us a 55″ TV that he didn’t want anymore (which ended our 6 year stretch of having no TV). The same friend offered us almost new furniture that wasn’t big enough when they moved to a new (very large) house.

We’ve received clothes, toys, playsets, you name it. Not only do our neighbors tend to buy nice stuff, but they also don’t have very many children. This means that things don’t get too beat up before we have our four kids do their handiwork.

In our area, we have donation centers for Goodwill/Salvation Army, etc, but none of the corresponding Goodwill/Salvation Army stores to actually buy things. I’ve found many people would rather give things to people they know than a faceless organization for a tax writeoff they’ll probably forget to take.

Every time we move, I’m sure I’ll learn more about what is important to me in a house. Recently I’ve learned that living in a nice neighborhood has benefits I hadn’t considered. An established neighborhood has had time to mature and you can know what to expect. HOA’s can add value when done right. Paying extra to live in a good school district may actually save you money over time. People buy and give away a lot of stuff. Being on the receiving end in a nice area you can get a lot of great stuff for free. The most unexpected thing I’ve learned is that living in a nicer area can create opportunities for informal mentoring.