Power of Debt Free (CFFL 557)
Power of Debt Free (CFFL 557)
Transcript:
Jack Butala: Jack and Jill here.
Jill DeWit: Hey there.
Jack Butala: Welcome to the show today. In this episode, as promised Jill and I will talk about the power of being debt free. Before we get into it …
Jill DeWit: It’s like the heavens open up. This is so awesome.
Jack Butala: Man, I want to hear what she’s going to say about this too. Before we do it let’s take a question, posted by one of our members on the Landinvestors.com online community. It’s free.
Jill DeWit: Okay. Joshua asks, hey guys I’m working on my second mailer but this time around I’d like to get more detailed about my pricing. Nice. I know Jack mentions he still buy, he still prices by the square foot. I’m curious as to the sources used to find land that is sold. I’ve just been using Postlets.com, Redfin for the county it covers and their contract pieces on Land Watch and Lands of America.
Jack Butala: Uh-huh (affirmative).
Jill DeWit: I was planning to mostly consider what sold numbers were, find the average and then make offers based on those. I’m also thinking about how to break counties down into individual cities and points, because obviously some parts of the county, the counties are priced higher than others. I was going to just do separate spread sheets if the amounts were way off than other cities in the county.
Jack Butala: That’s okay. We have a member who does that. Very successfully I might add.
Jill DeWit: Uh-huh (affirmative). I’m thinking, and this is where it gets more fun, some counties I will have to use Agent Pro, since they aren’t find, or Title Pro, which we have that he has, since they aren’t found on personal fact, seems to get a little pricey compared to personal fact and he suggested packages for Title Pro.
Jack Butala: Yeah, Title Pro. This is, I mean, Jill this is a testament to the intelligent members we have.
Jill DeWit: Yeah.
Jack Butala: This is an incredibly …
Jill DeWit: Totally.
Jack Butala: Intelligent question.
Jill DeWit: It is.
Jack Butala: I mean, this is like masters degree possible PHD level stuff.
Jill DeWit: Uh-huh (affirmative).
Jack Butala: Price up, as you know.
Jill DeWit: On a second mailer by the way, he’s already thinking about these things. This is awesome.
Jack Butala: As you know, pricing is so important. So, let me super clarify. I only every use pricing per square foot for better or for worse, for houses. I never use it for commercial property. I only use cap rate analysis for commercial property and for land I use price for acre or price per actual lot, like in the case of movie star ranches. Price per square foot is only for houses. So, it sounds like you’re buying land. Right, Jill? I think he’s buying land.
Jill DeWit: Uh-huh (affirmative). Totally.
Jack Butala: There’s two ways to, and you’re dead on about, you’re a hundred percent right about you look in any given county there’s some places it’s really pricey, there’s some places it isn’t. Out west it has to do with altitude and trees and stuff. Back east it has to do with what’s developed and what’s not. So, what you want to do is separate that out and there’s a few ways you can do that. You can separate it through a spread sheets scenario, through APN’s scheme as I call them.
Like, if the APN scheme in the county is 103-33-333, all the property in 103 should be priced at X per acre. All the property in 303 should be priced at Y per acre and so and so on. You can do this through mapping, which makes it easier for some people. For me, I just like the raw data in the spread sheet and you’re going to get a lot further faster there. Or you can take the Luke Smith approach and you can just say, trash it all and say I’m going to offer $500 an acre for the whole, every single property in that county and he does that with tremendous success.
Jill DeWit: Uh-huh (affirmative).
Jack Butala: I choose to be a little bit more strategic about it. You know, the trade off is that he and his staff get, they get pounded pretty good with the hate. Which he doesn’t care and neither do we. For us, we would, I would rather do fewer transactions and make more money and he, he loves to do, I mean he, I think he recently said on his show, he’s got a thousand properties on his website.
Jill DeWit: Uh-huh (affirmative). Oh, Luck does? Oh yeah, that’s available. Yeah.
Jack Butala: He has a thousand properties listed on his website.
Jill DeWit: Uh-huh (affirmative).
Jack Butala: I mean that’s truly amazing.
Jill DeWit: Yep.
Jack Butala: So, without, I mean Jill and I actually teach a class on pricing. We haven’t released it yet. We teach a live class and that’s all we talk about is, and we get really into detail. Much to Jill’s boredom.
Jill DeWit: Yeah.
Jack Butala: In fact, I’m not sure you should even be in that class. I should just teach it.
Jill DeWit: Why?
Jack Butala: I mean, you can come.
Jill DeWit: Oh, I’m there for comedic relief.
Jack Butala: You make it fun. Yeah.
Jill DeWit: Kind of like now.
Jack Butala: So I hope that answers it. Proudly a little bit long winded. I think Jill’s actually doing something else and that’s good.
Jill DeWit: Totally.
Jack Butala: If you have a question or you want to be on the show reach out to either one of us on landinvestors.com. Today’s topic, the power of being debt free. It’s the meat of the show.
Jill DeWit: Could you imagine if you could hear the pages of my magazine turning? I need a sound effect for that. That was actually kind of funny.
Jack Butala: You know what would be cool, it’s like you had an old type writer and you should just start typing because you’re just completely concentrating on something else.
Jill DeWit: Dude. Too funny. Okay.
Jack Butala: What’s this debt free business all about?
Jill DeWit: Oh, my God.
Jack Butala: You know see, I’m going to, before you get into this and I know you have a lot to say, when you go to college in a finance class you know what they say? You should never be debt free. They’d say this.
Jill DeWit: Seriously? I didn’t have that.
Jack Butala: Yeah and it’s not in personal finance but they say, use leverage to your benefit. You’re not, if you’re using up all your capital and you’re not utilizing your relationships and on and on and on, you’re cookes.
Jill DeWit: You know what, I want to share something personal on that.
Jack Butala: I say that’s malarkey, because I don’t run General, that might be true for General Motors and in fact it is or Amazon or Toyota, but it’s not for Jack and Jill.
Jill DeWit: My brother and I had an argument on this, about if you have all the cash …
Jack Butala: Your brother that’s state treasure of Arizona?
Jill DeWit: Yes, we argue, you’ve already heard this one?
Jack Butala: Redefines irony right here.
Jill DeWit: This is awesome. Here’s an argument that we always had, the same argument. Even though you can pay cash for your house, should you do that? His argument is, oh no don’t do that. You should making the payments and writing off those interest payments. You could use that interest payment money. Right? Right. That’s always your …
Jack Butala: The gesture that I just made was not allowed on radio.
Jill DeWit: Oh, yeah, yeah. That’s why I said right. You couldn’t see it but you, we all know what it was. So, that’s keeping a G rating too. So, anyway, so we all know but I but then Jack and I obviously have a different thing because we believe in paying cash for it and not thinking about it. You know, I don’t, I don’t need that particular write off. Okay. So, back to where we were. I wanted to paint the picture about debt free and not debt free, you know number one. Like, okay so in yesterday’s show I painted a picture of driving down the road and finding that beautiful boarded up mess that you can, oh, we’re going to buy this. It’s a back tax situation. I feel it. It’s, we’re going to make a fortune. Yeah, no we’re not. That’s not how they usually go and you don’t want to waste all your time on that. So, so my pictures today, Jack do you have your milk and your blanket?
Jack Butala: Uh-huh (affirmative).
Jill DeWit: Okay. Good, would you like another cookie?
Jack Butala: No, I’d like a ’69 Camaro.
Jill DeWit: Oh, yeah. Well you know what? Well I can, I can, you know what, I’m going to paint this into the picture.
Jack Butala: Okay.
Jill DeWit: Okay. So, let’s paint the picture of you want, I’m just going to do not debt free first. So, here is your not debt free existence. You have a job you have to go to everyday. Why, because you need that paycheck and it’s a, it’s a flat, you know every Friday or every other Friday or every month, whatever your pay period is, you’re going to make X amount of money and you know off that paycheck, okay this percentage is going to go to my mortgage. This percentage is going to go to my car payments. This percentage is going to go to food, groceries, whatever and if I’m lucky I have a little bit to go in the college fund. I didn’t pay the college fund the last two months in a row because we needed it, oh, and my wife has a vacation planned. How the heck are we going to pay for this? I mean, this is your non debt free normal existence. Tell me Jack, am I right or am I wrong?
Jack Butala: Yeah, I think it’s actually you’re sugar coating it. It’s a lot worse than that.
Jill DeWit: Okay, thank you.
Jack Butala: It’s your story.
Jill DeWit: Feel free to add in. You want to add in to this one or, okay, and then by the way you pray that nothing comes up like don’t, the kid breaks a leg. Okay, great, these are medical bills I wasn’t planning for.
Jack Butala: You forgot 45 thousand dollars of [inaudible 00:08:22] credit card debt.
Jill DeWit: Oh, we forgot about the credit card debt. Thank you. You’re right. I was planning an even …
Jack Butala: A hole in the roof over the garage.
Jill DeWit: Thank you, that we’ve been staring at wondering how we’re going to repair that too. This is non debt free and you know what, you’re trapped. You really are kind of trapped. You want to go to a different job and you want to make some changes. You want to be your own boss. You can’t, you can’t afford to do that right now. You’re kind of stuck. Okay, now imagine you’re debt free. You have all the, you, every paycheck, whatever comes, you’re debt free with a day job. Debt free with a day job is not a bad existence. Every dollar you get is going to the bank and you did the roof, you did the roof a month ago because you had the money you saved up the three months before and just pay for it. Big deal. Kid breaks a leg? That’s okay. That’s fine. You don’t have the credit card debt. You wanted, you know what’s interested too?
You want to take a trip, your wife wants to go on vacation and you have a budget for it and you know what? You don’t go crazy. When you’re not debt free, I don’t know about you Jack but this is how I think. Being not debt free I make totally different situation because I want to, the money that keeps growing in the bank I like seeing that money. This is how we are now in our lives right now. I’m even greedier. It’s kind of funny.
Jack Butala: Greedier?
Jill DeWit: If that’s, I don’t know if that’s the right term but I like to see the bank balance going up so much so …
Jack Butala: That’s what every man wants to hear his woman say. I’m even greedier.
Jill DeWit: Thank you, but I don’t want to, I don’t want to take that, I’m like all right well maybe we’ll do one trip but I don’t want to do two trips. You know what I mean? I do things a lot differently and you know what? Man, when you’re debt free you sleep really well at night. Now, imagine being in this situation. Not only are you debt free but you have a lot of, like for us you have assets paid for to fall back on.
Jack Butala: I’m going to pretend I’m 14. Okay?
Jill DeWit: Okay, ready go.
Jack Butala: Aunt Jill?
Jill DeWit: Yep.
Jack Butala: Why, well you’re totally right. Why do you have so much debt?
Jill DeWit: Why do I have so much debt?
Jack Butala: Yeah. Why do you have 30 thousand dollars in credit card debt? What the heck?
Jill DeWit: It wasn’t my fault. You know it’s just the market took a dive and it wasn’t my fault.
Jack Butala: I’m 14 years old and I wanted you to be happy.
Jill DeWit: Oh, i am happy.
Jack Butala: How did you, what happened? How did it get all this way?
Jill DeWit: I am happy, Johnny here. I’ll pay for that with Visa. I’m going to put my Visa down for your ice cream.
Jack Butala: What kind of crap is this? Johnny? Johnny, you asked the right question. Here’s the answer.
Jill DeWit: I’m like well how should I answer that? I wasn’t sure where you were going there.
Jack Butala: Uncle Jack is going to step in and put some voice of reason in there.
Jill DeWit: Okay. Aunt Jill’s just going to go cry. I don’t know if our listeners are confused but I sure am. I don’t know what ..?
Jack Butala: It all starts, it all starts in my opinion all of it, with the mortgage and probably one that you can’t afford.
Jill DeWit: I think it’s before the mortgage.
Jack Butala: Some type of vision. Whether you’re, this is not gender specific by any stretch. Some type of vision of a car that you define yourself by or a house in the neighborhood that you think is right and a mortgage broker telling you, oh no you can afford way more than that. It all starts with some version of putting the carrot before the horse instead of paying off your education or getting additional education if you need it or making good investments and all of that and you have to have some type of plan. People who are in a situation in general that Jill just described never had a plan or they had a plan and it got sidetracked by the person that they chose to be their mate in life. You know, they’re priorities change because they took on the responsibility of trying to please somebody in their life. I’m just about done with the book on all of this.
Jill DeWit: I thought you were going to say you’re just about done with this story. Sorry.
Jack Butala: So, I mean, that’s the truth, they just don’t have a plan.
Jill DeWit: Uh-huh (affirmative). You know what I think too, but let me back up. Where does this start? I think it even starts earlier nowadays. Come on, you cannot walk on a college campus at a freshman and not see a Citibank table there staring at you and here sign up and you get a free T-shirt.
Jack Butala: That should be illegal.
Jill DeWit: Seriously. I’ve even seen the stupidest campaigns, like newspaper delivery. I mean this is like years, not, even not that many years ago but a few years ago like, oh you get a free newspaper subscription, maybe it’s a magazine subscription by signing up for a credit card. Dumbest thing on the planet. You don’t want to do that and you know what else too? Everyone is brainwashed and I’ve had this conversation with number one that you have a credit card because you have to start building up your credit score and your credit history. So, I honestly think that that’s a lot of where it starts right there that everyone’s brainwashed in. I’m on the Dave Ramsey team, that this whole credit score thing is a bunch of bologna.
Jack Butala: Well, it is.
Jill DeWit: We’re not, not every country does this. This is one of the few countries that do this.
Jack Butala: I don’t think any of them do.
Jill DeWit: It’s ridiculous. Thank you. If you don’t have the money you don’t have the money.
Jack Butala: That’s it. Just like caveman times.
Jill DeWit: It’s dumb and you shouldn’t have to be walking around, your net worth or your worth is not, should not be tied to your credit score but in a lot of ways it is. If you say oh I’ve got a 750 versus I’ve got a 550, it’s ridiculous.
Jack Butala: Here’s the good news in all this. What do you have control over in your life? Your time. I don’t care who you are. Unless you’re, I don’t know, I guess pre-teen. Your parents have control over that and that’s usually unfortunate also but you have control as an adult of your time and if you don’t you have to really look in the mirror and figure that out. There’s something wrong. Maybe a boss is controlling it or a spouse or man maybe the litter of children that you chose to have before you were a certain age. If that’s the case you really really have to get control over how that’s all being managed and run or you’re not going to clear out your finances. So, this financial thing, this lack of debt free, I don’t know if this is how you wanted this show to go …
Jill DeWit: It’s all right. I like it to flow however it flows.
Jack Butala: It’s all a result of, it’s just a, it’s a result. Well said.
Jill DeWit: Thank you.
Jack Butala: You know, this financial strapped situation that we’ve all been there by the way, I’ve been there …
Jill DeWit: Uh-huh (affirmative).
Jack Butala: Is a result of not addressing something else in your life and it’s just a result. It’s not a, you didn’t, no one chooses it. It just happened because some other stuff happened that caused it or you allowed it to happen. So, Jill’s true, the title is perfect. You know if you want power, we all want power right?
Jill DeWit: Uh-huh (affirmative).
Jack Butala: It’s just, even if it’s just over the decisions that we make on a day to day basis. We all want that. Well, if you don’t have, if the money’s not, if you’re not thinking about money any longer, Jill and I are decades into this and you’re right Jill you start to make really good decisions.
Jill DeWit: That is my point.
Jack Butala: We started Land Academy when we were in that situation. We started doing this show as a result of that.
Jill DeWit: That was my whole number three point and I’m going to, I want to circle back around but you’re just, I’m just going to cover this too because you talked on it. When you are debt free different decisions are possible. That is huge for me and I tell this to new people, just, you know it’s all, you know, just in Land Academy, they’re like I don’t have much money and I really want to do this I’m like all right, that’s okay. Start small, flip this, flip this and okay now you have 50 thousand dollars in the bank now and now you can make some different decisions.
Ah, I get that. People understand that but I wanted to come back to how do you get debt free? So, here is reality. We all know the good, we all know what it’s like to be not debt free and we know where like it is … Well, we don’t all know it but we’re painting the picture of what it’s like to be debt free. So, how do you get there and what’s one of the biggest obstacles? I think the number one obstacle that I hear Jack is that people’s partners are not on the same page.
Jack Butala: That’s what I think.
Jill DeWit: That has to be addressed first, because one of you, if one of you is rolling along and making your lunches everyday you know, suggesting we eat in, selling your car and getting a paid for couple of thousand dollar car that runs but that way you don’t have any car payments, if you’re not both doing that that could sink the ship. It won’t, it’s next to impossible to get debt free unless you’re on the same page. Number one and then number two is you got to do all those steps like I was just talking about.
You’ve gotta, you’re just going to have to, and I am, I know it’s coming out that I am a Dave Ramsey fan and I am a Dave Ramsey fan on this stuff but I mean he’s right about you’ve got to make decisions for you. Not what that society tells you. Like, me I thought we were supposed to buy a house. I thought we were supposed to have a mortgage because that’s what everybody did and you know that was weird if you didn’t have a mortgage and it meant that you were grown up if you had a mortgage. No it doesn’t. You could be …
Jack Butala: Yeah that’s right. It meant you’re a grown up.
Jill DeWit: If you have a mortgage and a car payment you’re a grown up. No you’re not. You could be, you could raise a perfectly good family renting a house for you know …
Jack Butala: Forever.
Jill DeWit: For a long time or forever and have everything paid for until you know, rent a house. You could rent a house and raise your kids the whole time until you have enough money to pay cash for your retirement house or pay cash for something.
Jack Butala: Don’t worry about what other people think or your kids, what your kids think or what your kid’s friends think or any of that. Just tell you own it and forget it.
Jill DeWit: Uh-huh (affirmative). Exactly.
Jack Butala: So, there’s a chapter in my book called It’s Not What You Give in Life That Matters: It’s What You Give Up. So, that’s you know, you can justify buying a house that you can’t afford for a million reasons. Oh, my kid needs to go to this school. You know, I, it’ll make my wife happy or it’ll make my husband shut up. He’s finally going to get the garage that he’s dreamed of or all that stuff. Let me tell you something, it’s cheaper to rent, dollar for dollar and I mean like every month it’s cheaper to rent than it is to buy.
It’s cheaper to rent a house and save the money that you would’ve put in repairs and all the stuff that you would do to it and everything else. Save it and make a bank account, literally. If it’s two or three hundred dollars a month put it, it’s amazing how fast that put the balances there and then put %50 down on a house and you know you’re way ahead of the curve there or buy a cheaper house for you know, a hundred percent without a mortgage in a few years.
Jill DeWit: Exactly.
Jack Butala: I did a whole technical paper on this. Doesn’t make sense to have a mortgage where you put like five or ten percent down. It does, I’m sorry it does not make sense. The only time it makes sense …
Jill DeWit: Like three percent even now.
Jack Butala: The only time it makes sense is that you’re pretty darn sure the house is going to worth more five months later and you see that in California a lot. So …
Jill DeWit: Right.
Jack Butala: There’s different. Markets are different but California is its own market. Southern California I mean.
Jill DeWit: Right. Then it’s a business decision.
Jack Butala: Right.
Jill DeWit: Not an emotional decision and that’s good. Those financial decisions. So, I guess the thing is I just wanted to make everybody think and remind everybody the power of debt free and how well you sleep at night and the different decisions you can make, you know, and just think get everybody on the path of thinking of getting there. It’s not, so what if it takes five years by the way. Jack’s really good at spreadsheets. If you’re not good at spreadsheets, learn.
Jack Butala: Really?
Jill DeWit: Seriously.
Jack Butala: Wow. I didn’t think you were going to say that.
Jill DeWit: Well, ah.
Jack Butala: I thought you were going to say, if you’re not good at spreadsheets find what you’re, I thought it was going to all …
Jill DeWit: Oh, touchy feely?
Jack Butala: Like find what you’re good at.
Jill DeWit: It’s just what you’re good at. That’s okay.
Jack Butala: You’ll be fine.
Jill DeWit: You’ll do your best. No.
Jack Butala: The sun’s shining out of your bottom today.
Jill DeWit: Oh, no. No, no, no. I’m so past that. Look. Come on. Yes, I am the philosophical one, not always, you are too but I am more of that but you know what? Maybe this is Jack rubbing off on me, maybe this is me growing up or a combination of the two. You know what? There are times that golly, Jack you are right and there’s times that people need to be told shut up and suck it up and you need to do that and get your head and go on the right path and make these changes, get debt free. It’s going to pay off.
Jack Butala: I think Jill to wrap it up I mean and I know exactly the point that you’re making Jill and you’re right. When you’re debt free you think different. We would’ve never started Land Academy or any of these products and tools if we weren’t, if we were worried about making money buying and selling real estate.
Jill DeWit: Bingo.
Jack Butala: That’s not, that’s a direct and positive universal result. When you take money out of the equation you start making really good decisions in my opinion. I think a lot, rich people get a bad wrap for being mean and I think it’s all fiction. The most wealthiest people I know are the nicest people and most philanthropic people I’ve ever met.
Jill DeWit: I have a funny story on that that I can’t wait to close on this too. It’s my yacht club story, okay?
Jack Butala: The truth comes out.
Jill DeWit: I hear what Jack said about people think rich people are mean. So, I did that on accident. I was accidentally mean and so it was like that. So, because okay if I share this story …
Jack Butala: You have to now.
Jill DeWit: I have to now. Okay, so wait, I won’t make it too long so I don’t bore everybody. So, Jack and I recently joined a yacht club. It’s we all talked about the boat because you get a better slip. There’s a lot of advantages. I mean, there’s reciprocal things when you have a boat. You can go to other yacht clubs and you can park your boat for free. So, it all makes sense. There’s a financially cool reason to do this. So, anyway we joined the yacht club and they forgot to call us to let us know the night that there’s like a little announcement made at the meeting and they had you the flag called burgee and make a deal about it and you get to stand up and everything. Well, they forgot to call, and I really kind of wanted to be part of that event.
Jack Butala: Jill wanted to get her Oscar.
Jill DeWit: I did. I did.
Jack Butala: She wanted to accept her award.
Jill DeWit: I did. I was like pretty proud of that. So, anyway, so I was, we went in the next day and you know, and whatever we found out we missed it and I was not especially nice to the people at the front desk about it.
Jack Butala: Which is totally unusual for you.
Jill DeWit: Right. Jack’s like jeez.
Jack Butala: We got out of there and I’m like what the heck was that?
Jill DeWit: Exactly. I’m like well you know what, they didn’t even apologize. Nobody said we screwed up. They just passed the blame on well, Suzy’s supposed to do it and she’s on her honeymoon in Mexico and she’s late getting back. I’m like, is that my problem? So, I was not really happy about it because I was missing it. So, what was really funny was I was relaying this story to number one and number one’s response was, because I felt bad. I said, you know what, should I apologize? What should I say? She goes, oh no, don’t even worry about it. It’s a yacht club. It’s expected of you.
Jack Butala: [inaudible 00:23:39]
Jill DeWit: That was so funny. She’s like, oh you’re supposed to be a snob and I’m like, okay well I’m just going, which I’m not. That’s not how I role but I’m like you know what, I’m just going to leave it alone and that’s that. So, anyway I don’t know how we got off on that …
Jack Butala: Now more than ever I need to read this sentence.
Jill DeWit: Oh, my gosh.
Jack Butala: Join us in the next episode where we discuss the number one way to buy any piece of property.
Jill DeWit: Okay. Sorry. Sorry I drug that out and I want to answer Julianne’s question about liability insurance estimate.
Jack Butala: You are not alone in your real estate ambition.
Jill DeWit: Okay, sorry. I just thought when you said the people get a bad wrap it made me think of me and how I did that and it was, I’m, I accidentally contributed to the stereotype in a bad way.
Jack Butala: It’s important to know that there’s power in being debt free. That’s really what it was about.
Jill DeWit: Thank you.
Jack Butala: Information and inspiration to buy undervalued property.
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