After one month, our bill dropped from $118 with MegaCorp Insurance to just under $72 with Metromile. So far so good.

If you are like us and front drive very much, Metromile may be a god option for you.

The post Metromile Auto Insurance Revisited appeared first on Sundry Miscellanea.

I’ve been interested in electronics for some time now but I’ve never done anything to cultivate that interest or increase my knowledge. That changes today.

Come along with me as I chronicle my journey, from complete beginner to…something more than that. I’m calling this series Electronics for Beginners and I hope it can be a resource for others that want to learn about electronics.

What I’m sharing in this series is essentially my notebook from the basic studying that I have done to this point. I’ll publish a list of resources at the end of this series.

Words that are in bold italics are important words and worth remembering.

What is Electricity?

Electricity. Electronics. Both of these words are rooted in the word electron. Together with proton and neutrons, electrons form atoms, which make up everything around us in the world. Protons and electrons contain an electrical property known as charge. Protons are positively charged and electrons are negatively charged; similar charges repel each other and opposite charges are attracted to each other.

Current is simply the flow of electrons. There are two types of current that you’ll typically here people talk about: alternating current (AC) and direct current (DC).

Alternating current gets it name from the fact that the flow of electrons is constantly alternating, many times per second. The flow is constantly reversing. Direct current, on the other hand, flows in only one direction.

AC is what you get from the wall outlets in your house. It’s generally used for large appliances. DC is what you use for things like the batters in your phone or your laptop. When you plug your phone charger into the wall outlet and then into your phone, the charger is converting the AC into DC so that the battery can use it to store energy.

Current is often represented by the symbol I and is measured in amperes or amps, which is often represented by the symbol A.

How Does Current Flow?

Current flows from negative points to positive points. In order for the current to flow from one point to the other, a circuit must be completed.

To help think about this, let’s imagine a battery with a negative terminal and a positive terminal. We’ve all seen a battery with a minus sign (- the negative terminal) and a plus sign (+ the positive terminal). Now let’s imagine that one wire is protruding from the negative terminal and connects to a light bulb, and another wire is protruding from the positive terminal, but it doesn’t quit reach the light bulb. You could call this an open circuit. The current will not flow and the light will not turn on. Even though there is a wire connecting the negative terminal of the battery to the light bulb, the other wire that connects the bulb to the positive terminal and completes the circuit is not connected.

Now, if we connect the wire from the positive terminal to the light bulb…voila! A closed circuit — the light is now on and we have built a simple circuit!

We’ve connected the negative and positive terminals via wires that are connected to a light bulb. Pretty cool.

Now, remember that we said electricity is simply the flow of electrons? There are a few things that impact just how that flow flows. I’m going to lay out some terms that we’ll need to know and then I will share an example that helps me to think about how this all works.

Voltage is the pressure of electrons flowing through a wire, or whatever conductive material is carrying the electrons. Voltage is often represented by the symbol V. If current is the flow of electrons, then amps (how you measure current) represents the rate of that flow.

In order to regulate the flow of current, we need something called resistance, which is often represented by the symbol R, and is measured in Ohms, which is often represented by the symbol Ω (omega).

Got that? Let’s try an example.

Imagine a water tower that supplies water to your city. There’s a large pipe extending down from the bottom of the tower and into the city’s water supply. The tower is full of water. In our example, the water in the tower is our current. The water pressure that is generated by gravity pulling the water down through the opening in the pipe is the voltage. The size of the pipe is resistance. If we change the pipe to one with a smaller opening, the flow rate of the water, or the amperage (measure of current), will decrease even though the voltage (amount of pressure being applied to push the current) has not changed. By increasing the resistance, we require more electrons to overcome that resistance resulting in less current flowing through the circuit.

This represents my full knowledge of electronics at this point. Like I said, I’m a complete beginner. I’m excited to learn more and will continue to share as I gain more knowledge. I hope this series of posts on electronics for beginners proves valuable for other out there that want to being learning about electronics.

The post Electronics for Beginners – Part 1 appeared first on Sundry Miscellanea.

Perhaps the most basic and prolific piece of personal financial advice is this: establish an emergency fund of at least $1,000. Most people recommend doing this even before paying off debt?

Why?

It’s simple: if you’re trying to pay down your debt and put every available dollar toward that goal, what happens if something comes up that you don’t have the money to pay for? It goes on the credit card and you’re right back where you started. By creating a $1,000 buffer, you are making it possible to absorb some of life’s little emergencies without completely derailing your debt payoff progress.

Ok, so that makes sense but it’s also pretty basic. Super simplistic.

Many of you probably don’t have any debt (except for maybe a mortgage). Many of you probably have significant cash savings set aside for an emergency. How should you think about your emergency fund?

Why Have An Emergency Fund?

If this is you, you’re probably ready to think about some advanced emergency fund strategies. Today I’d like to tell you how I think about my emergency fund and why it might be advantageous for you to think about advanced emergency fund strategies.

So, let’s start with a basic question: why have an emergency fund? As we said above, the main purpose of an emergency fund is to handle life’s bumps without completely derailing your financial well-being. If a minor medical emergency or missing work for a month or a blown transmission is going to completely destroy your financial life, it’s super important that you have cash available to handle that situation.

An emergency fund is designed to be liquid and easily available so that you can quickly access that money when needed. An emergency fund can be cash, money in a savings account, an investment in the equity market — anything that allows you access to cash within 24-72 hours can be counted as part of your emergency fund.

Most financial advice says that you should keep 3-6 months of cash in a savings account and there ya go – you’ve got a well-funded emergency fund. If that helps you sleep well at night and makes you feel good then I say go for it. Stash the cash and call it a day.

But, if you’re interested in your money maybe doing a little bit more for you perhaps it’s time to rethink that advice.

Advanced Emergency Fund Strategies

I think it makes sense to have some cash on hand to handle little things that might come up — things that go above and beyond your day-to-day budget. That might look different for each person, but keeping a couple months of spending in your checking account probably makes sense.

Here’s one way to think about it: go back and analyze your spending for the last year or two, including any “emergencies”. What the average you spent per month? Did you remember to include any emergency spending? Ok, so whatever that number is, put 2-3 months of that in your checking account. Boom, you’re funded for most of your life’s reasonable emergencies.

Reasonable Emergencies?

Yes, reasonable emergencies. If you’re trying to keep enough cash on hand to handle every possible thing that  could happen, you’re doing it wrong. Most of the stuff that comes up can be handled with a couple months worth of cash. Anything beyond that  probably won’t require that much cash in that short of a period of time. Sure, it’s possible you get kidnapped and need to come up with tons of cash in a hurry, but c’mon. It’s probably not worth your time to plan for hostage situations. So, plan for your life’s reasonably anticipated emergencies, based on what actually happens in your life. Make sense? I think so.

What’s Next?

Ok, so after you’ve got a couple of months of spending stashed in the checking account what should you do? I think it makes sense to move excess cash into an investing account. I myself am in the process of making this change in my life. I’m no longer funding a traditional savings account. My savings account has cash in it still, enough to last for several months. But excess cash is now being funneled into my taxable investment account.

Why do this?

For starters, I have access to cash in the investment account via a debit card. I still earn interest because of the way the money is invested by my custodian. Additionally, if I need money in a pinch I can quickly sell an investment and have access to the cash within a couple of days — when the trade settles. Remember, this is money I would be accessing after I’ve used the cash already in my checking account. So if it takes a few days for the trade to settle and for me to have access to the cash, that’s really not a problem.

Now, someone might make the argument that by keeping most of this money invested, I’m risking losing up to 50% of it if the market really goes in the crapper. Also, it’s likely that I would need that money when the market is tanking because that often goes hand in hand with job losses and more widespread economic bad news. That’s true and not an unreasonable argument. This can be mitigated through asset allocation/diversification (a topic for another day) and by building up a war chest that is large enough to handle these swings without being completely obliterated.

How am I handling this?

Remember when I said I still have several months of expenses set aside in a savings account? While my taxable investment account is growing, I am maintaining the savings account as a bit of a hedge against that risk. I’ll probably shift money from the savings account into the investment account as I get closer to having an equivalent amount in the investment account. By maintaining a reasonably large cash balance in the savings account, I am also giving myself the opportunity to make a move should the market take a real nosedive.

So there you have it – a very quick and dirty rundown of advanced emergency fund strategies. Here’s the tl;dr:

1. Keep a couple months of expenses in your checking account.
2. Rethink the savings account — do you really need it?
3. Put your excess money into a taxable investment account.
4. Build the investment account to the point that even if it drops 50%, you’ll be able to cover several months of lost income or a somewhat major emergency.
5. Keep on going. Now that your excess cash is really working for you, you’ll be able to look up in 10+ years and be pleasantly surprised at the progress you’ve made.

The post Advanced Emergency Fund Strategies appeared first on Sundry Miscellanea.

• An in-depth article on how to set up your phone for productivity and eliminate unnecessary interruptions – this is a long read
• A pizza marathon!
• What My Harvard College Reunion Taught Me About Life
• How I Accidentally Wound Up Running an Outlaw Biker Gang in Ohio
• If you’re a fan of the game Risk, check out Landgrab

The post Interesting Items – November 20, 2018 appeared first on Sundry Miscellanea.

• Understanding the HUD-1 settlement sheet
• Setting up your rental property in QuickBooks
• Making the journal entry in QuickBooks

After purchasing an investment property, one of the most confusing parts of setting up that property in QuickBooks is correctly recording the information that is contained on the HUD-1 Settlement Sheet. Typically, any real estate transaction is going to include a HUD-1 which details the transaction for both the buyer (referred to as the borrower on the HUD-1) and the seller.

For every real estate investor, properly accounting for the items included on the HUD-1 statement is critical. The HUD-1 includes all of the information necessary to properly get your new property set up and established in your accounting system. I’m going to show you the steps I take in order to complete this task accurately. Let’s go step by step through a real transaction.

One quick note: This article was written based on using QuickBooks Desktop Pro for Windows. FYI, that’s an Amazon Affiliate link — if you click on it and make a purchase, a little bit of money comes back to me to help keep this site going. Unrelated, I 100% recommend using and learning QuickBooks!

Understanding the HUD-1 Settlement Sheet

The first thing we need to do is walk through the HUD-1 so that we understand exactly what is represented on this form. After we go through the form, we’ll take a look at how to make the appropriate entry into our accounting system.

Here’s an example of a real life HUD-1 from a transaction that I participated in:

As you can see, there is an awful lot of information included on the HUD-1. The buyer’s transaction is detailed on the left side of the form, and the seller’s transaction is detailed on the right side of the form. Let’s go through this transaction as the buyer, which was true when I completed this transaction.

The first thing we notice is the gross amount due from the borrower. This number represents the amount of money that the buyer needs to bring to the deal, before accounting for any credits or amounts paid on behalf of the borrower.

This amount comprises several items, the bulk of which is the contract sale price, or the amount that was agreed to as the sales price for the property. After all negotiations, this is the final price that was agreed to by the buyer and seller. In this case the price was $48,000. In addition to the contract sales price, any personal property that the buyer is paying for (if furniture was included in the deal, for example) would be detailed here, as well as any settlement charges that the buyer is paying — we’ll talk more about these later. Additionally, the buyer is responsible for reimbursing the seller for any items that the seller paid in advance. This is typically some sort of pro rata reimbursement for property taxes that the seller has paid. If the seller paid the full year’s taxes, the seller gets reimbursed for the portion of the year which s/he will not own the property — the portion of the year after the sale closes.

Using our real life example, the total gross amount of money I was required to bring to this deal was $50,662.79 — this is shown on line 120, here:

To recap, that amount includes the $48,000 sales price, the $817.08 in taxes I reimbursed to the seller, and $1,845.71 in settlement charges that I paid.

Now, if we take a look at the seller’s side of the transaction, we’ll see a gross amount due to the seller of $48,817.08. This represents the contract sales price plus the reimbursement for taxes that the seller paid in advance. Here’s what that looks like:

So, at this point, we’ve established the gross amounts for the buyer and the seller. The buyer in this transaction is required to bring $50,662.79 to the table (before accounting for any credit) and the seller will receive $48,817.08 (before accounting for any reduction in the amount due to the seller). The difference between those amounts represents the total amount of settlement charges being paid by the buyer. Let’s take a closer look at those charges now.

The $1,845.71 in settlement charges being paid by the buyer largely consists of items such as recording fees, title insurance, transfer taxes, etc. These items are detailed on the second page of the HUD-1, which you can see above. In this case, I was responsible for paying the following settlement charges:

• $500 for a broker’s commission
• $698.96 for title insurance
• $166.75 in recording charges
• $480 for transfer taxes

At this point, we’ve essentially cleared all of the items represented in the Gross Amount Due from the Borrower and Gross Amount Due to the Seller sections of the HUD-1.

Now let’s take a look at the amounts that impact the net amounts that are due from the buyer and due to the seller. These can be found in the 200 and 500 sections of the HUD-1:

Let’s start with the buyer’s side of the transaction. These numbers effectively reduce the amount of money that the buyer is required to bring to the table for closing.

The first item to note is the earnest money amount. This is often called a deposit or hand money. This amount is deposited with the broker when an offer is made on a property and is used to essentially show good faith on the part of the buyer. When a buyer makes this deposit, the amount remains on the buyer’s balance sheet as an asset, it has simply shifted from cash in a checking account to money on deposit with the broker. This is an important point to remember when we talk about making the entry in QuickBooks. For now, it’s important to know that the buyer has previously given this money to the broker — so now at the closing table, this amount is credited to the buyer against the total amount required to bring to the closing. In this example, I made a $1,000 earnest money deposit so at closing I am being credited back that $1,000.

The next amounts being credited back to the buyer are under the heading Adjustments for Items Unpaid by Seller. The buyer is responsible for paying all bills that are received after closing. In this section, the seller is reimbursing the buyer for charges that have been incurred but did not yet require payment — this includes items such as partial year’s real estate taxes, any monthly bills, etc.

In our example, the seller is reimbursing to the buyer the following amounts:

• $26.73 for city/town taxes
• $15.80 for county taxes
• $6.69 for annual assessments
• $515 for the tenant’s security deposit the seller was holding
• $356.45 for a partial month’s rent

These items total to $920.67. Taken in conjunction with the $1,000 earnest money deposit, I was credited back $1,920.67 which reduced the total amount of money I was required to bring to the closing from $50,662.79 to $48,742.12.

If we take a look at the seller’s side of the transaction, we’ll notice several entries which similarly reduce the amount due to the seller. Much like the buyer, the seller pays settlement charges related to the transaction. Typically, the seller pays the bulk of these charges, and that is true for this transaction. The seller is paying a total of $5,771.31 in settlement charges, broken out as follows:

• $4,200 for commission
• $150 for closing fee
• $200 for document prep
• $20 for notary fee
• $110 for lien letters
• $15.50 for overnight mail
• $480 for city/county/stamp tax stamps
• $595.81 for a home warranty

The seller in this case also had an outstanding mortgage in the amount of $31,828.20, so this further reduces the amount of money the seller will receive. The next item we see is the same $1,000 earnest money deposit that showed up on the buyer’s side. After this is a number of adjustments under the heading Adjustments for Items Unpaid by Seller which mirror the items from the buyer’s side — these entries essentially transfer these amounts from the seller to the buyer.

All told, the amount due to the seller was reduced from $48,817.08 to $9,296.90. So even though they sold the house for $48,000, the seller walked away with less than $10,000 after closing on the sale.

Ok. Tired yet? That was a lot of information but it’s important to understand what’s happening on the HUD-1 statement so we can properly record it in QuickBooks.

Setting up your rental property in QuickBooks

Let’s talk about QuickBooks now and how to make this entry.

We are going to enter all of this data on one journal entry, but before we can do that we’ll want to make sure we have our property set up in the system.

The first thing to do when setting up the property in QuickBooks is to create the needed account. Generally speaking, a handful of fixed asset accounts will need to be set up for the property. In my case, I established the following accounts:

• Real Estate Assets – this is a fixed asset account with sub-accounts for each property.
  • A building fixed asset sub-account
    • A cost fixed asset sub-account for the building
    • An accumulated depreciation fixed asset contra account for the building
  • A land fixed asset sub-account
    • A fixed asset sub-account for the land specific to the property

That might sound confusing, so let’s look at what this actually looks like in QuickBooks. Open QuickBooks and press CTRL + A to open the Chart of Accounts. Here’s what these accounts look like in my Chart of Accounts:

As you can see, the Total Real Estate Assets accounts encompasses both improvements (building) and land. It is necessary to break out the building from the land because the land associated with a rental property is not depreciable. The building will be depreciated over a period of 27.5 years, but the land cannot be depreciated and must be held on the balance sheet at cost.

The other main point I’d like to make about setting up the rental property in QuickBooks is about using classes as a way to provide property-specific reporting. Here’s how to create classes in QuickBooks:

Click on the Edit menu and the select Preferences. That will bring up a window that looks like this:

Click on the “Company Preferences” tab. In the Class section, check the box next to “Use class tracking for transactions”. I also like to check “Prompt to assign class”. That way, if I forget to assign a class, the program will prompt me to do so.

Next, you’ll need to go to the Lists and select Class List:

This will bring up the Class List dialogue box. When this box appears, press CTRL + N to enter a New Class. You should see the following box:

At this point simply type the name of the class and click OK. This will create the class in QuickBooks. Now the next time you make any entry related to that class, in this case our class is a specific property, make sure that you include that class in the expense entry. This will allow you to run class-level, specific reporting. Trust me, it’s a super handy feature and you’ll be glad you set it up from the beginning.

Now that we have our accounts set up and have established a class for the property in QuickBooks, it’s time to get to the point: how am I supposed to make this entry into QuickBooks to properly record all of the activity on the HUD-1 settlement sheet? Let’s talk about how to make the journal entry.

Making the journal entry in QuickBooks

Now we’ve finally come to the heart of the matter: how do we record all this information in QuickBooks? Get ready to make friends with the journal entry.

To being making this journal entry, click on the Company menu and then select “Make General Journal Entries”. This will bring up a window that looks like this:

This journal entry window is fairly simple but includes all of the items we need to make sure the HUD-1 gets recorded correctly. In order to help make the process a little more understandable, let’s look at the actual journal entry I completed to record the HUD-1 for the purchase we’ve been discussing:

Looking at this journal entry from left to right, the first thing we notice is the list of accounts that are impacted. There are seven accounts in total that are impacted in some way by this single journal entry. We’ve already discussed some of these accounts when we talked about setting up QuickBooks for rental properties above (land, building, etc.). The other accounts we have not explicitly discussed, but similar accounts will likely need to be established (operating account, taxes, security deposit, etc.). Some of these will be asset or liability accounts, some will be income or expense accounts. The first one to talk about is the checking account.

We’ll talk about debits and credits in another post, but for today you need to understand that the checking account is an asset account and that asset accounts are increased with a debit entry and decreased with a credit entry. The credit entry for $48,742.12 exactly matches the amount from the HUD-1 that was owed from the buyer. This is the money that I brought to the closing. In this entry I am recording that money leaving my checking account.

The next three entries are also being made to asset accounts: land, buildings, earnest money deposits. We are debit the land account in the amount of $9,200. This amount was taken from the county assessor’s website. You’ll need to decide how you want to arrive at a fair value for the land portion of your real estate. Using the assessed amount from the county is one reasonable approach. The building account is being debited in the amount of $41,462.79. This amount includes the purchase cost less the amount for land, as well as some other initial expenses that can be included in the cost of the building and depreciated over the same 27.5 year period. More on that in another post.

The last entry to an asset account is a credit for $1,000 to the earnest money deposit account. If you’ll recall earlier, I mentioned that we made a $1,000 deposit for earnest money, or hand money. This money was held in trust by the broker until closing. When that money left my checking account and went to the broker, I credited my checking account for $1,000 and debited the earnest money account for $1,000 – this created a balance of $1,000 in the earnest money account on the balance sheet. By crediting the earnest money account for $1,000 here, I am recognizing that the money has left my balance sheet and gone to the seller – I’ve zeroed out the account on the balance sheet.

Next we see three credit entries for tax expenses. These might look a little funny, after all a credit entry decreases an expense account. But if you recall from the HUD-1, I received credit from the seller for these tax expenses. By credit the tax expense account, I am recognizing that “income”. Essentially, we are showing a negative expense. Later in the year when I pay the full tax amount, the net is what my property tax deduction should be.

After the tax entries, there is an entry to credit the security deposits held account. Security deposits are a liability and liability accounts are increased with a credit. So this entry increases the security deposits liability on the balance sheet.

Finally, we have a credit to increase the rental income account by the amount received from the seller for part of the month.

There you have it! You should now have a basic understanding of how to understand a HUD-1 settlement sheet, how to set up QuickBooks for rental properties, and how to make the journal entry to record the information on the HUD-1. Every situation is unique and each purchase will be a little bit different, but this should allow you to have a solid foundation.

The post QuickBooks for Rental Properties appeared first on Sundry Miscellanea.

I was looking back at some old portfolio activity, and I first started buying Microsoft stock when it was trading around $28. It’s now trading in the $105-$115 range.

Needless to say, I no longer have those shares.

Don’t be like me. Buy smart, rarely sell.

The post Buy and Hold appeared first on Sundry Miscellanea.

So here we go. In September, I received $367.01 in dividends. That includes dividend payments from the following companies: Hershey (HSY), Johnson & Johnson (JNJ), Kraft Heinz (KHC), Realty Income Corp (O), and Pepsico (PEP).

All told, not a bad month.

For a period of time, I shifted away from my dividend strategy but I’m back now. I had some success trading small cap companies, but I find that dividend investing is where I’m more comfortable.

The post September 2018 Dividends appeared first on Sundry Miscellanea.

But I really wanted to post an update after a full month of Metromile auto insurance. We just got our first monthly bill. Grand total: $71.88. Our previous insurance with MegaCorp Insurance was $118/month – so I’m pretty happy. Metromile charges by the mile and we don’t really drive very much. I think we had in the neighborhood of 750-800 miles this month, and that included a trip across the state to visit the in-laws. If you are not a heavy driver, I would recommend checking out Metromile. I haven’t yet needed to file a claim, so I can’t comment on that process. I’ll be sure to update again if/when I do that.

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