Stop Milking Me! - Cow’s Journey To Financial Freedom

We probably all received the 419 scam emails or letters one way or another. These scammers from Nigeria usually make up all kinds of wild stories to lure victims’ money. At one point, I got so sick to my stomach that I fired emails back to them, “You piece of worthless shit!!! … Leave us alone! Shameless fraud… “… Of course, such reply never lands me a spot as a “potential partner” and I never heard back from any one of them…

However, I have always wondered if anyone would actually fall for their scams. Since I have been getting these emails ever since I posted my webmaster email account online (which by the way was a HUGE mistake), I guess there must be some business for them, otherwise, they would have changed ways to scam us…

I was shocked to read the following story. Not only these bastards are getting their dirty money from us, none of them was put behind the bars simply because it was a pretty lucrative business for Nigeria and the shitty corrupted government doesn’t do a darn thing about it. They even pointed fingers at us saying that if the Americans were not greedy, none of these could have happened. The sad thing is, the victims who have lost hundreds of thousands of dollars are usually the ones being prosecuted and put into our jails for money laundry, bank fraud and all other fraud counts.

Accoirding to the story published by “THE NEW YORKER”:

Eric Zahren, a spokesman for the Secret Service, the lead U.S. agency in investigating advance-fee frauds, says. The agency estimates that 419 swindlers gross hundreds of millions of dollars a year, not including losses by victims too embarrassed to complain. In February, the son of a prominent California psychiatrist named Louis A. Gottschalk—he identified what turned out to be early signs of Alzheimer’s in Ronald Reagan after analyzing his speech—filed suit seeking to remove his father from control over a family partnership, claiming that Gottschalk had lost more than a million dollars to Nigerian scammers. Some victims try to pass along their losses. The former Iowa congressman Edward Mezvinsky, who had refashioned himself as an international businessman, was caught up in a 419 scam, and during the nineteen-nineties stole from his law clients, friends, and even his mother-in-law to cover his losses. He is serving more than six years in prison after pleading guilty to thirty-one counts of fraud.

The article went into a great length to tell the story of fall of a minister who believed in God and educated people to fight against Satan. But in reality, he allowed himself to be taken over by greed and ultimately wired $600K via fraud checks to these Nigerians in addition to his personal assets worth of $80,000 hoping to receive 16 million dollars one day. He was sentenced to a 2-year prison term and ordered to pay back $600K. And he is a 62 years old man who thought he could have a happy retirement before all of these had happened.

It all goes back to the old saying, “You can’t cheat an honest man”. Indeed, there is no free lunch. If you can’t justify the money, don’t take it. It’s not yours and there is always a catch. After all, peace in our hearts is by far more important than the temporary comfort money can provide. So if it is not your money, let it go.

If you have time, read the entire story. It’s pretty sad.

I just had an interesting conversation with a friend of mine about purchasing a vacation home as an investment property. She is a young single 100% traveling consultant just like what I used to be. She makes great income and pretty much lives in hotels and on company’s dime with no other significant expenses. With all the extra cash she has saved up, she’s been toying with the idea to buy a 500K – 600K beach house in the East Coast where she vacations a couple of times a year.

On the paper, it all looked great: It’s a wonderful vacation spot! She can use it for her own benefits or invite family and friends over. She can then rent it out the rest of the year. But for some reasons, my guts feeling tells me NO.

I have always had a principle to “Start Small and Start Simple”. Real Estate investment is a tricky long haul business that involves in a lot of money, energy and time. If you are using it as your primary residence, then it is a different story. Because in worst case scenario, you have bought a piece of roof on the top of your head. But if the property is purely for investment purpose, you will have to crunch the number to see whether it suits your current situation or not.

Using my friend as an example, the reasons I think it is not a good idea to sink in $100,000 cash right now are:

1. After crunching the number, she has to spend about $15000 a year to keep up with the cost. That is, after factoring in the rental income (which is a hugely optimistic assumption), the tax benefits and other regular maintenance expenses. It’s more than $1200 a month expense! Unless she lives in it, it doesn’t make sense to throw so much money in it.
2. She is still young and hasn’t started a family yet. There will be a lot of good usages for that 100K cash. By putting so much money on one property, that’s one giant egg in one giant basket. I just don’t think it is a good idea.
3. Vacation rental home is a tricky business simply because A) You are not local B) You have to rely on management company. C) You change tenants every week or so. Without any previous landlord experiences, it could be a bit overwhelming at first

So my suggestion to her is to start small and start local. Find a cheaper rental property near where her parents live and ask them to help out to manage it. Then, after a few years, refinance it or take out the equity and buy another (or more) rental(s). Repeat the process until she is comfortable with the whole thing. Then she can buy something big and fabulous.

A few years? Doesn’t that take way tooooo long? You may ask. After all of these years investing in rental properties, I have to say that real estate business is a long haul type of thing. There is really no fast money especially in rental business. Well.. flipping business might be a different story. I will soon find out.

Your first reaction might be: how the hell can that be possible??!! It’s a God damned Money Market Fund!

Yep, I thought so too when I first saw my forgotten e-Trade Money Market fund declined from $580 to $460 in just 9 months! I was prepared to see some penny size interest earnings, but never thought that I’ve lost hundreds in less than a year! Who the hell sucked up all of my bloody money?

With lots of anger, I called e-Trade representative. The answer? I should have read the fine print:

Account Minimums

• $100 minimum initial deposit required
• $1,000 average monthly balance in the account or $5,000 in combined average monthly E*TRADE Bank deposits balances required to avoid a fee
• No account minimums if you have $50,000 or more in linked bank and brokerage accounts; or, if you make at least 30 or more stock or options trades per quarter

Costs and Fees View all bank fees

• $10 for each month your account minimums not met
• Account holders are allowed six free withdrawals or transfers from their account in any calendar month (ATM withdrawals excluded), with a maximum of three withdrawals by check

Matter of fact, since my Money Market fund was part of my old brokerage account, it was $40 per quarter instead of $10 a month. I still can’t find where the fine print is on my specific account. Bummer… Well, on the bright side, I forgot about this account long time ago. So whatever is in it, it’s extra cash, right?

From time to time, I still make this mistake. When I purchase a fund, I looked at it’s expense ratio (if it is a mutual fund), or interest rates (if it is a saving or money market fund), however, I do not always check for other fees. If you have a broker who is handling your money, do you ask how much your broker charges in addition to what the fund manager charges? It’s very tricky to figure out the total cost of one investment. So I learned my lesson about the fine print. You gotta read every single little thing before you sign up for it.

If only if I have read about e-Trade’s fine print, I could have closed this account last year after I sold my stocks. $120 is worth 3 months of my coffee fund! Damn it!