Yearly Archives: 2009

REITs as Investments

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Okay, I decided to take the money from my Lunch Budget (Experiment) and put it into a REIT (Real Estate Investment Trust).  Now, I don’t expect the stock price of the REIT to rise much higher than the levels that they are currently at.  So you might be wondering why am I doing this?  …The dividend!

REITs historically pay a dividend percentage payout of about 6% to 7% for their dividend.

Why? Because they get special tax treatment if they do so.

To qualify as a REIT tax structure, a company has to:

  • invest at least 75% of total assets in Real Estate
  • deriving at least 75 percent of gross income as rents from real property or interest from mortgages on real property
  • distributing annually at least 90% of taxable income to shareholders in the form of dividends

So why would a company decided to be classified as a REIT?  Because they are able to pass the taxes to the shareholder instead of paying it themselves.  So these investment would be great in a Roth IRA, or in a child’s UTMA account where they don’t earn much money or the tax consequence is minimal.

I’m hoping that the addition of a REIT company while the fed interest rates are low will benefit me by the REIT stock appreciating and by receiving the juicy stock dividend that is higher than normal at this time!!!

Bests,

Don

Lunch Budget Experiment Update

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Hurray!Woo Hoo

This past friday, I’ve accumulated my first $1,000 by cutting back on my lunch expenses…

Now , I’m looking at stocks that will pay at least a 5% dividend (and preferable around 6 or 7%).  After the fourth quarter passes (I get my first dividend after the fourth quarter), I’ll be able to go out to lunch 1 extra day each month.   Then after 25 more days, I’ll have another $1,000.  After I have $2,000 dollars invested in dividend yielding stocks,  I’ll be able go out ever other week.  After another year passes, I’ll have enought money saved up to go out and entire extra day per week.  That’s all I need, going out 3 time a week is plenty.  If I keep the experiment up past 2 year, I’ll just keep saving the money in the lunch fund.

I’m kind of excited about this, I’ve always wanted to have a dividend fund like this since I was 19 years old.  Of course, I’m not considering taxes, but I’m hoping that if I get a 6% or 7%, that will make up for my lack of tracking the tax.

Lunch Savings to date:

Savings from int. rate: 5%
Lunch Budget
Amt Cumultive Yearly Monthly Weekly
6/5/2009 40 40 2.00 0.17 $0.04
6/12/2009 40 80 4.00 0.33 $0.08
6/19/2009 40 120 6.00 0.50 $0.12
6/26/2009 40 160 8.00 0.67 $0.15
7/3/2009 40 200 10.00 0.83 $0.19
7/10/2009 40 240 12.00 1.00 $0.23
7/17/2009 40 280 14.00 1.17 $0.27
7/24/2009 40 320 16.00 1.33 $0.31
7/31/2009 40 360 18.00 1.50 $0.35
8/7/2009 40 400 20.00 1.67 $0.38
8/14/2009 40 440 22.00 1.83 $0.42
8/21/2009 40 480 24.00 2.00 $0.46
8/28/2009 40 520 26.00 2.17 $0.50
9/4/2009 40 560 28.00 2.33 $0.54
9/11/2009 40 600 30.00 2.50 $0.58
9/18/2009 40 640 32.00 2.67 $0.62
9/25/2009 40 680 34.00 2.83 $0.65
10/2/2009 40 720 36.00 3.00 $0.69
10/9/2009 40 760 38.00 3.17 $0.73
10/16/2009 40 800 40.00 3.33 $0.77
10/23/2009 40 840 42.00 3.50 $0.81
10/30/2009 40 880 44.00 3.67 $0.85
11/6/2009 40 920 46.00 3.83 $0.88
11/13/2009 40 960 48.00 4.00 $0.92
11/22/2009 40 1000 50.00 4.17 $0.96

 

For those of you who might not have seen the earlier post about my Lunch Budget Experiment (I called it an Adult Allowance Experiment for the initial post), this is what I”m doing:

I’m cutting $40 out of my weekly lunch expenses by packing cheap (but still health) lunches.  Then after the savings amount hit over $1,000 dollars, I taking the money saved and investing it into a stock that pays a dividend.  I then use the dividend money to pay for the lunches I use to pay directly out of pocket.  IMHO, the beauty of this is I don’t actually carve extra money from my earned income to pay for lunch.  I’m just spend the dividend money I would have spent on lunch anyway.  So after the first 2 years, I get a free weekly lunch via the dividend payments.

The next dividend producing funds that I’ll try to start are:

  • Christmas fund.
  • Home Improvements fund.
  • Kids Allowance fund
  • Vacation fund (this will be a hybrid approach, because it would take too long).

I would like to include a Car fund, but I don’t think I can build up a dividend producing fund quick enough…

 

Tell me what you think, and do you have any suggestions?  Do you think I should stick to the experiment for 2 or  more years?

-MR

Related Posts:

Paying An Adult Allowance

Lunch Budget Experiment #2 – Buying the Stock

Cash For Clunkers Program

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I had to think long and hard about not buying a new car, after hearing about the “Cash for Clunkers” government program.

 

Is this wasteful?

Disposable cars...

 

In the end I decided not to because:

  • My car was worth (a little) more than the government exchange amount.
  • My car is paid off.
  • I don’t have the cash in hand, to pay for it outright.
  • I would have to take out a car loan.
  • It kind of seems wasteful for me to throw away a perfectly good car.

For some negative effects for our governmental stimulus programs. and why they may not have been such a great deal for you, go to “GetRichSlowly.org” and read Adam Baker’s writeup.

If the program came out in 2011 or maybe even at the end of 2010, I most assuredly would have jumped on it.  If your car was from the 90’s, well this was a great bargain…

My Middle Class Lifestyle

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This is a glimpse of a typical day in my middle class life.

Phase 1) Waking up.  I wake up to my alarm clock that I’ve had since I was in high school.

The alarm clock is about the size of a small child’s shoebox, and the plastic is factory painted to look like it’s wood.  The edge of the alarm clock got to close to my goose neck desk lamp and the plastic has warped, but just to a small degree.  I know that I can buy a cheap $10 dollar one, but this ones still works, and I’m comfortable with it…

Next, I go into my master bathroom and get a quick shower, because I hate to waste water (and also to make up for the amount that other family members use).  .  I do the typical routine to get ready for work…  No magic here, not much to describe.

My house is a little over 2100 square feet, and was built in 1998,  the shower isn’t too fancy, but the room looks nice enough.  The style of the house is a colonial.

Phase 2) I walk down the stairs quietly (the dog is asleep), and pack my lunch.  Since I’m currently doing a lunch/allowance experiment, I pack the following items in my small insulated lunch bag: eggs and sometimes peanuts.  The ramen noodles that I eat are already at work in my desk drawer…  Before starting my experiment, I would typically go out for lunch at a number of different restaurants.

What types of foods do I eat?…

  • Cajun Chicken spinach salads with hot bacon dressing (yum),
  • Sushi (mostly the spicy types: spicy crab, spicy tuna, eel…),
  • Chinese food (Chicken with Cashews, Hunan Shrimp, etc),
  • Mexican food: Chicken quesadillas, etc.
  • Italian foods (sort of), in particular from Olive Garden and Macaroni Grill (both have different but great bread)
  • and Fast foods: Subway (spicy italian heated sandwich), McDonalds (Quarter pounder with cheese), Taco Bell (varies), etc…

Phase 3) After getting dress in jeans and a polo shirt (I use to have to dress more professionally at work, but now we just dress casually).  I drive my 20 minute to work listening to an audio book playing in my card CD player, the radio, or nothing – preferring to think on those nothing days.  I’m a Gen Xer, so I have an eclectic manner with respect as to what I listen to… ex.) alternative, rock, classical, rap, country and others.

What car do I drive in?  A 2003 malibu (my friends say that I drive a grandma’s car), that I bought new for $11,000 back in 2003.  This was a great price considering the sticker price was listed at $21,000.  I’ll post about how I got it so cheaply at a later time 🙂

I’m a computer technician, and my wife is a stay at home mom.

I have a BA in computer science.  Every year I think about going for a MBA (the company I work at would even provide money for it), but life for me now is busy enough…

Opps, I digress, back to my middle class lifestyle.  At work my cube is the standard type… nice comfortable chair, 2 (soon to be 3 or 4) monitors attached to a newer PC, a ibm laptop to do work at home, a blackberry, etc…

I arrive at work an hour earlier and leave an hour earlier to avoid rush hour, so I work 7 to 4 with an hour lunch in between.  Although these last few years, it seems that more and more people are changing to the same work schedule…  the roads are definitely busier this year than they use to be at those times.

Phase 4) Once at home, it’s time to rush the kids to the sports that they are playing in at the moment.  Typically Soccer, Basketball, Cheerleading, Baseball, Tee-Ball, Flag football, swimming lessons, gymnastics, etc…

Phase 5) Once I get a free moment, I use to randomly surf the net more, but lately, I’ve been reading blogs and writing in this blog.

We do have a designated movie night on Fridays, where I’ll pop in a DVD that I got at the library.  We still have an old 36 inch CRT tube TV.   We can afford a new flat screen LCD (or Plasma, or LED-LCD…) TV and in fact have the best buy gift cards in a drawer waiting for our current model to break (it’s close to doing so).  The gift cards are from the rewards point from our rewards credit cards.

Phase 6) Then at bed time, I do watch a little bit of TV in our queen size bed (King of Queens and Frazier reruns).  Our bedroom set is wooden, with an armoire, and set drawers with a fancy mirror on top…   Both cars were bought new and are both 2003 models (crazy, I won’t do that again!  Used cars is the way to go).

Next day I do the same routine again, just like the NIN song, “Every day is exactly the same”

My life = Repeat Phase 1 thru 6 😉

After I’m debt free, I’m going to alter the above routine a bit, maybe throw in a health phase, or a 2nd job phase, or a community service or coaching my kids sports coaching phase…

So what do you think? …  Tell me about your lifestyle or ask me additional questions about mine…