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[WILLIAM <billymegab AT yahoo.com>]

Here's some food for thought!  Found on Yahoo yesterday.  As far as I'm 
concerned the single best investment is to own your home (however modest)  
debt free. That gives you the flexibility to weather all manner of financial 
storms.
  _____________________________________________________________________
   
  Americans' Debt: Worse Than You Think?
  You've probably heard that the American savings rate for 2005 was negative 
0.5 percent, the lowest since the Great Depression. The annual savings rate 
has been negative only twice -- in 1932 and 1933, during the Great Depression.
  But Americans may be saving even less than the government reports. Consider 
the way the Commerce Department's Bureau of Economic Analysis calculates the 
savings rate: It takes a household's after-tax income (wages, salaries, 
interest income, rental income, dividends, social security, unemployment 
benefits, etc.) and subtracts spending on consumer goods and services (food, 
clothing, entertainment, etc). Whatever's left over is savings. But the 
government doesn't figure housing expenses into the spending-saving 
calculation since it views housing as an investment.
  That's problematic, according to Paul Kasriel, director of economic 
research at Northern Trust in Chicago. "I see a lot of people buying houses 
that seem to have a very large consumption element to them -- like granite 
kitchen countertops and the huge increase in square footage per person."
  Uncovering Higher Spending
  So Kasriel does his own calculation of the savings rate. He subtracts not 
only outlays on goods and services, but also spending on a line item called 
"residential investment." It represents the value-added in housing -- the 
kitchen renovation, the family-room addition. (It also includes commissions 
paid to real estate brokers.) 
  According to Kasriel's calculation, last year Americans spent approximately 
$472 billion more than they earned after taxes -- a negative savings rate of 
5.2 percent. That spending is double the previous year -- and a record high.
  Going back to 1929, Kasriel found just a dozen years in which households 
spent more than they earned by his calculation. Two were during the Great 
Depression. Three were in the decade following World War II, when consumers 
unleashed pent-up savings accumulated during the war (when there was little 
available to consume). The other seven years of negative savings have 
occurred since 1999. 
  "What's amazing is that my generation, the rapidly aging Baby Boomers, are 
entering their prime saving years," Kasriel says. Most of the Boomers, 
representing nearly a quarter of the population, are in their peak earning 
years (42 to 60). Many are becoming empty nesters, so their expenses should 
be declining. They already own the durable goods one acquires in the early 
stages of adult life. "But however you slice or dice it, we aren't saving," 
Kasriel says.
  Others economists disagree. They argue that retirees typically spend from 
their savings, which skews the savings rate lower. They point out that the 
government's calculation doesn't account for the rise in real estate values 
(and home equity). And while it captures things like 401(k)s and Individual 
Retirement Account contributions, the calculation doesn't include the capital 
gains on these accounts. 
  "If You Can't Afford It, You Can't Buy It!"
  Whichever reality you believe, it's clear that Americans are highly 
leveraged. The ratio of debt to assets hit a near record 18.2 percent in the 
third quarter of 2005, the most recent data available from the Federal 
Reserve's Flow of Funds Database. This ratio, tracked since 1952, measures 
the amount of debt Americans have, relative to the market value of all their 
assets -- savings accounts, stocks, bonds, real estate, etc. In the early 
1980s, the ratio was around 13 percent; in the early 1950s, 7 percent. 
  Meanwhile, the debt service ratio -- the percentage of after-tax household 
income that goes to cover required principal and interest payments on debt -- 
hit a record high of 13.75% in the third quarter of 2005, the most recent 
data available. 
  David Rosenberg, Merrill Lynch's North American chief economist, estimates 
that approximately $2.5 trillion dollars of adjustable-rate household debt 
will re-price in 2006. That works out to 23 percent of total household debt. 
At the same time, income growth is trending lower, Kasriel says. Put the two 
together, and you will end up with Americans paying an even bigger chunk of 
after-tax income to debt service.
  By holding short-term interest rates below the inflation rate in recent 
years, the Fed offered juicy incentives to borrow and spend, and little to 
save. Low rates coincided with the advent of "creative" new mortgage 
instruments -- like the option ARM -- which in its simplest terms asks the 
borrower to send in whatever they feel like once a month, even if it barely 
makes a dent in the interest due (much less the principal). 
  The leveraged life has even become fodder for "Saturday Night Live," which 
recently mocked a "get out of debt" infomercial. A salesman appears in a 
couple's kitchen with his magical solution: "If you can't afford it, don't 
buy it!"
  The befuddled couple responds: "I'm so confused. I don't have any money 
saved. Can I buy a boat?"
  "No!" he booms. "If you can't afford it, you can't buy it!"
  A Free-For-All That Ends Badly?
  In the land of leveraged living, I'm a dinosaur. I dutifully follow the 
old-fashioned financial rules of the road: No revolving credit-card debt. Pay 
cash for your auto. Max out your annual retirement savings. Start socking 
money away for college when your kids are born. Put 20 percent down when you 
buy your home. Take out a low-interest, 30-year mortgage. Make an extra 
mortgage payment every year. (I know, I should probably put the extra payment 
in my retirement savings. It just feels good to cut years off your mortgage.)
  There are a few of us savers left out there. We scratch our heads and 
wonder how you can buy stuff you can't pay for (or pay for twice on credit 
over time) and still enjoy it (see "Why It Pays to Live Within Your Means"). 
We're like the character in the "Princess and the Pea" fairy tale -- put the 
smallest credit-card bill or auto loan under a pile of mattresses, and we 
suffer sharp pains. We can't sleep.
  Mostly, we can't help wondering if the lending and spending free-for-all of 
recent history will end badly -- for all of us. Imagine interest rates 
continuing to rise amid an employment downturn. The option ARM holders and 
other over-leveraged consumers put their homes on the market, or hand the 
keys to their lenders. The housing market experiences a sharp decline. 
Commercial banks, Fannie Mae, and Freddie Mac require a taxpayer bailout (a 
la the early 1990s) -- increasing either the current or future tax liability.
  "A Marathon, Not a Sprint"
  Maybe I'm paranoid. But I'm not alone. As one reader e-mailed me, "Whether 
we like it or not, our government has ultimate control over our financial 
future. In the coming years, the government will be grasping at any source of 
cash that they can get their hands on.... I think people sense this, 
consciously or subconsciously, and figure that they might as well spend now. 
I do worry that all my hard work and effort in being frugal will be 
confiscated by the government, which would make me feel foolish for not 
adopting a 'spend until you drop' attitude all along."
  I hope the reader is wrong. Kasriel offers some consolation, suggesting 
savers will be the ones buying cheap foreclosures when the storm hits. "It's 
a marathon, not a sprint," he says, "and the people who are saving
  

"Lisa K. V. Perry" <lkvp AT floydva.net> wrote:
  Okay homestead gang, here goes:

Hubby and I purchased our home on 36 acres going on six years ago, then 
built an addition in the last two years with the intention of taking 
care of a live-in client with disabilities. Our client finally moves in 
late June. 

We're concerned about the economy, the falling dollar and our debt 
(mostly in mortgages (farm and house in town) a small car loan and 
consumer debt.) We have tossed about the idea of selling our home. We 
could get top dollar (or close) for it now then would buy a house of 
similar size (a bit smaller but with room for the client) and less 
land. If we sell, after paying off debt we'd have enough left to put 
20-30% down on the next home purchase. The idea of being debt free 
other than a smaller home mortgage is very appealing. This has been our 
goal all along, but we're years away from achieving it as is.

How much land would you consider the bare minimum to have a small garden 
(to feed 4/5 people), 4 or 5 fruit trees (semi-dwarf or reg. 
apple/peach/pear), 30-40 blueberry bushes and a dozen +/- chickens? The 
book _Five Acres and Independence_ by Kains comes to mind, but can you 
get by with less land or is that not enough? We love our farm and 
aren't certain we'll sell, but we've struggled with the maintenance and 
harvest of 40+ fruit trees and 50 blueberry bushes while the boys 
(almost 16 and 10.5) are at active in sports and we work full-time in 
town (self-employed.) In a frank discussion, my husband confided that 
he doesn't enjoy this much pruning and doesn't want to spend the rest of 
his life maintaining the farm. He used to love working outside before 
we moved here. I love to garden, but have figured out that I can't take 
care of a gigantic garden. A smaller garden would grow less weeds and 
provide plenty of veggies. I'll work only part-time after the client 
moves in, but I have to agree with my husband that I don't want to spend 
every spare moment of my life taking care of the farm. This place would 
be great for an organic farmer (especially a fruit farmer), but we've 
learned that isn't us. 

Now that I've bared my soul...how much land is necessary? We won't keep 
any animals other than chickens and pets. We don't intend to grow 
fields of grain either. The move we're considering is something I didn't 
think we'd do for 20 years--if ever, but we're tired and overwhelmed, in 
debt and mostly ready to lighten our load and move on.

Lisa
sw VA

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From: "Lisa K. V. Perry" <lkvp AT floydva.net>
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Subject: Re: [Homestead] Minimum acreage and thoughts
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Gene GeRue wrote:

>>How much land would you consider the bare minimum to have a small garden 
>>(to feed 4/5 people), 4 or 5 fruit trees (semi-dwarf or reg.
>>apple/peach/pear), 30-40 blueberry bushes and a dozen +/- chickens?
>>    
>>
>
>All that and more can be accomplished on a fertile half-acre with intensive 
>gardening. But it sounds like it would be more work than you and your 
>husband want to do. I would let those boys develop a work ethic, contribute 
>to the family larder and learn about self-reliance. If they are healthy 
>enough for sports they are healthy enough to take care of chickens, rabbits 
>and some of the garden.
>  
>
We're willing to do some work--but what we now have is too much.  
Perhaps we need to hire someone to do the pruning and  miscellaneous 
large chores, the going rate for an arborist is $300 per day!  That 
would feel like a complete cop-out, not to mention the expense.  But 
maybe that's what we need to do, especially this year.  I didn't mean to 
imply that the work on the farm is done exclusively by my husband and 
myself.  Our oldest son began mowing at twelve and now mows all of the 
open land around the house and in the fenced garden.  He also helps my 
husband haul, cut and stack firewood.  Actually, we have all worked on 
the firewood project together over the years.  Both boys take care of 
the chickens and all pets and have since the oldest was nine, they now 
equally share the responsibility.  They help as needed or as required.  
We have all worked in the garden on/off, but it's mostly my job.  My 
husband used to help me quite a bit, but since he opened his store 
almost two years ago and he has less time for gardening.  Since the 
oldest has taken on mowing, he's off the hook for gardening duty and our 
youngest (11 this summer) helps and naturally enjoys gardening more than 
the oldest ever did.

>Land is a good investment. Rather than sell, I would seek a way to cause it 
>to carry the payments. Is it close enough to a market that would allow a 
>CSA operation? Are there zoning restrictions? Can the land be subdivided?
>  
>
The price of most land in our area has tripled in almost six years.  
There are two CSA's in our county, one is just a few miles away.  That's 
a good idea to market our land for their use.  I know they were looking 
for more land for to use for potato and squash fields.  There is 
practically no zoning in all of Floyd County.  The natives don't want 
it, the people new to the county do and there has yet to be a meeting of 
the minds.  A pig farm, not that there's anything wrong with that, can 
be built right next door to a brand new McMansion.  Most people here buy 
as much land as they can afford and build right smack in the middle to 
insulate themselves, unless they move into the existing farmhouse like 
we did.  Unfortunately, our land can not be subdivided.  We were not 
smart when we bought this place, a restriction had just been passed that 
you must have 50 feet of state road frontage to subdivide and we only 
have 35'.  We can give sell or divide land to family members only.  We 
could log, we have marketable timber, mostly poplar, but that is a last 
resort.  Neither of us can stand what logged property looks like for the 
next dozen years.  There is a large stand of poplars by the pond and the 
cabin (on the property) and in addition to being beautiful, there is 
also a spiritual, peaceful feeling there there that isn't present up by 
the house and garden.

>Why have you been keeping the city house so far?
>  
>
It's for our businesses.  We bought this small home February 2003.  I 
rented an office in town for my mortgage business for three years prior 
to purchasing and the mortgage isn't much more than what I paid for 
rent.  My business occupies the back 1/4 and my husband's almost two 
year-old business, The Pickin' Porch, an acoustic instrument and 
musician's supply store, occupies the rest.  We feel this was a good 
investment.  The few remaining houses in this part of town are being 
converted into stores or offices.  I'm moving out of the office this 
summer to a small home office (our former bedroom closet--it has a south 
facing window overlooking the old apple tree) and my husband's store 
will take over the whole house.  His business is officially out of debt 
having paid off the bank loan this past December and he will be in a 
position to take money out of the business for income by summer, as well 
as hire a part-time employee (our son and another person).  Our oldest 
son had worked in the store while home schooling, but since he just 
enrolled in high school in January (10th grade), he is here less.  Also, 
my husband gives guitar lessons and is up to 20+ per week.  He also lets 
other musicians give lessons in the lesson room and takes 20% of their fee.

Financially speaking, things will ease up for us after the client moves 
in.  We decided to become Foster Care Providers in part because I needed 
to do something that fed my soul more than slinging mortgage loans ever 
has done, but also because the income would be steady and reliable. 

Sorry to be late with this reply, watched men's curling last night--my 
new favorite addiction--and came in late to work today.

Lisa