Transcription
John Schwartz:
My father-in-law said, "You have to file for bankruptcy." I contacted a couple of bankruptcy lawyers and the one that I ended up with said, "You don't need to file for bankruptcy, you need to get out from under the single debt that's killing you."
Bobbi Rebell:
You're listening to Financial Grownup. With me, certified planner, Bobbi Rebell, author of How To be a Financial Grownup. You know what? Being a grownup is really hard, especially when it comes to money, but it's okay, we're going to get there together. I'm going to bring you one money story from a financial grownup, one lesson, and then my take on how you can make it your own. We got this.
Bobbi Rebell:
Hey everyone, before we get into today's interview, I want to do a quick thank you to all of you for supporting the show. Our numbers are going up, which is really cool. The show is being discovered and I have all of you to thank for it. I also want to thank some of our friends in the media that have highlighted Financial Grownup, including Forbes, which named Financial Grownup one of five podcasts that are getting it right. We were up there with some really big names like TheSkimm and Masters of Scale with Reid Hoffman and Powderkeg and a Rent the Runway related show, so it was pretty incredible to get that recognition.
Bobbi Rebell:
I also want to thank Business Insider for highlighting our recent episode with The Muse's co-founder Kathryn Minshew. Her story is pretty incredible, so I'm glad more people got to learn about it. Thank you to all of you and I hope you guys are enjoying the show. Okay. Now to the show. Many of us bring our A game to our professional lives. I certainly try to, but then we don't always make the effort at home. Think of the chef that whips up these gourmet, amazing meals at their fancy restaurant, then they go home and they can barely scrounge together maybe a grilled cheese or some leftovers. Who knows? New York Times correspondent, John Schwartz, is that guy. No, he's not a cook. He's obviously a journalist, but he does research for a living.
Bobbi Rebell:
He's written four books and he's also been a journalist at a number of prestigious publications. Right now, as I mentioned, he's at The New York Times, but in his personal life, he messed up and it cost him, and it kept costing him for years. It was really bad. But, the story of the author of his new book, This is the Year I Put My Financial Life in Order. Sensing a theme here, he got it together. Does have a happy ending. Just maybe not what you were thinking. Here is John Schwartz. Hey John Schwartz, you are a financial grownup. Welcome to the podcast.
John Schwartz:
Well, thanks it's great to be with you.
Bobbi Rebell:
Congratulations. Your new book, This is The Year I Put My Financial Life in Order is coming out right now. I whipped through this book by the way in a day and a half, which is pretty amazing, cuz I can be a bit of a procrastinator, but I couldn't put this down. It was a great book.
John Schwartz:
God, I'm glad to hear that. Thank you so much.
Bobbi Rebell:
How long did it take you to write it, by the way?
John Schwartz:
It was a little more than one year.
Bobbi Rebell:
I brought that up, because within the book is this gem of a money story that, I don't know, at first when you told me it I was disappointed in you, but when I read it in the context of the book, I respected you and I felt like, wow, this could happen to anyone. Tell us your money story.
John Schwartz:
Well, we bought an apartment in New York, which is either a success story or the beginning of a horror story. In our case, it turned pretty bad, because I got a job in another city.
Bobbi Rebell:
Which should be good-
John Schwartz:
Which should be good. Again, career advancement? Exactly. But, we got there and not only could I not sell the apartment in New York, because we had bought at the top of the market, but when we had a tenant, which also seemed like a pretty good idea, that tenant decided to stop paying. And, knew his rights, as he told me over the phone. I was either gonna have to spend a tremendous amount of money on lawyers to get him out or as the super in the building suggested, kill him.
Bobbi Rebell:
Yeah, no.
John Schwartz:
No, exactly.
Bobbi Rebell:
He is alive and well. Let's just make that clear.
John Schwartz:
Right. Well, at least, last I checked. Then, over time all our savings were gone. We were faced with near bankruptcy and ended up defaulting on the apartment and losing it. As a little side note, that apartment's worth more than a million dollars today.
Bobbi Rebell:
Wow. Can you give us some of the numbers involved and how this happened?
John Schwartz:
Well, it was $136,000. I believe, it might have been 138, my memories not perfect. We were able to pull together the down payment in part, because my wife had a little inheritance from her grandfather and I'd been making pretty good money at Newsweek. We were able to make the payments, but we were not able to make those payments and pay our rent in Washington. That's where the money really started to kill us.
Bobbi Rebell:
And the tenants weren't paying.
John Schwartz:
And the tenants were paying nothing. Well, we have the first tenant, I finally got him out at the suggestion of a very kind lawyer who said, "Send him a letter telling him that you won't pursue him legally if he just leaves."
Bobbi Rebell:
So, you forfeited money.
John Schwartz:
He was never gonna pay. I was gonna spend more money pursuing this guy in court and the lawyer, very intelligently said, "Don't throw good money after bad. Just see if this is enough of an incentive to get him out." It was and he left. Then we got the next tenants in. Again, just as with the first guy, we did a credit check, looked good. We tried to do eyes open transactions here. The second couple was very nice, but a few months in the woman called me and said, "My husband's left and I can't pay." I said, "Okay. Get out." That's when my father-in-law said, "You have to file for bankruptcy."
John Schwartz:
I contacted a couple of bankruptcy lawyers and the one that I ended up with said, "You don't need to file for bankruptcy. You need to get out from under the single debt that's killing you. Everything else, you're banking all your other payment. You're living right, but you have this one unsustainable debt, this mortgage." He walked me through the default process.
Bobbi Rebell:
What is the lesson for our listeners here?
John Schwartz:
The first lesson is failure, really crushing failure, as much as it hurts, is not the end of your life. It's not even the end of your financial life. We went through this, more than 20 years ago. You gotta imagine I was devastated by it, but over time we were able to rebuild. Before doing the default, I had been able to get a mortgage on a place in Maryland. So, we had a home that we could not lose.
Bobbi Rebell:
So you were smart with your timing. You did this very thoughtfully. You didn't just let it default. You thought, "Okay, before we let this happen, what financial things can we put in order?"
John Schwartz:
Right. How can I fix this to the extent that I can fix it? So, we were in the house. We went through the process on the other place. It was our new beginning and that's the message. That you can take failure and turn it into the next step of your life. In fact, when we sold that house five or six years later, we were able to sell it at twice the purchase price. Now, we bought it, it was a wreck and we really had to fix it up. That's-
Bobbi Rebell:
You put in the work.
John Schwartz:
... sort of the way we do things. We put in the work and we found a place that was seriously underpriced in the market. Largely, because it was such a wreck, but that turned around everything for us. We went from total failure to in a house, to a pretty good success.
Bobbi Rebell:
I love a happy ending. Looking back though are there things that you would have done differently or looking back, it just happened. Would you have not taken the job in Washington had you known what a debacle the New York apartment would be or really, it just happened and this is the way your life is?
John Schwartz:
I think I could have done things more intelligently. The way that I was looking for an apartment was more about feel than really working through the numbers and understanding what I was up against. I didn't know and might have been able to figure out that this apartment, which was part of a co-op conversion was happening in a building where the for rent apartments were not shifting to co-ops quickly enough.
John Schwartz:
One of our big problems was that we couldn't sell it, because banks didn't want to lend money in a down market in an undersubscribed co-op. Now, those were things I only learned after the fact, but wouldn't it have been smart to learn them before putting money down? Research counts. I mean, I do research for a living, right? I do the research and I type.
Bobbi Rebell:
Your job, but not your personal life sometimes. That's what happens to all of us, right?
John Schwartz:
That's right and that's the story of this book. Learning to do for myself what I do in my job.
Bobbi Rebell:
Part of my enjoyment in reading this book was getting some of your little tips in life. Tell me the money tip that you are gonna share with us that everyone can put in place. Hopefully, they're already doing it, but it actually is a money tip even though people may not think of it that way.
John Schwartz:
Okay. If you're ready for this, it's flossing. Now I sound like that dentist from Sesame Street. Could I just say a few words about flossing? Flossing's important not just because it helps keep your gums healthy and all that stuff, it is something that I started to do in my late-20s regularly, after I had a bout with a periodontal condition. I needed a procedure. After that, there was not a day I missed flossing.
John Schwartz:
What flossing does, more than helping your gums, but I'll get back to that. Is that it establishes a daily habit. Establishing daily habits is the foundation stone for all sorts of good things. If you can floss every day, then you can exercise every day, if you can find the time. Then you find how to make the time. If you can exercise every day, maybe you can save a little money.
John Schwartz:
You can show discipline in other parts of your life, but even more than that, your teeth and gums are gonna be healthy. You're gonna have a much smaller chance of running into the kind of mouth problems that I had in my late-20s, which are expensive. Even if you've got insurance, you've got deductible and everything else. It's part of using good habits to prevent, preventable problems.
Bobbi Rebell:
It all goes together. The book, This is The Year I Put My Financial Life in Order. I love it. Tell our listeners a little bit more about it.
John Schwartz:
Well, it's coming out on April 3rd. It is part guide and part memoir, which is a sort of weird blend, but you know. Reese's put together chocolate and peanut butter and that worked. The idea is that I put my financial life in order by applying research to the problems of my life and the issues that were still undone. Like, I was in my late-50s and I didn't have a will, which is idiotic. I hadn't looked at my retirement to understand whether I was gonna live comfortably, or whether I needed to do more, whether it was a disaster.
Bobbi Rebell:
But you are okay, by the way.
John Schwartz:
Yes.
Bobbi Rebell:
Spoiler alert. You're fine.
John Schwartz:
Yes, spoiler alert.
Bobbi Rebell:
Good to hear.
John Schwartz:
Largely because I started putting money away in my 20s. The first time I got a significant raise, I opened a 401k and put the money in. There are no financial secrets in this book, but there are a lot of fundamentals like, start early and make your contributions. These were the lessons that got me through. The idea behind the book is, I would hope that by reading what I went through, people could figure out what they can do too.
Bobbi Rebell:
Where can people find you, John?
John Schwartz:
I am on Twitter at @jswatz, J-S-W-A-T-Z. There's a Facebook page for the book, This is The Year Schwartz.
Bobbi Rebell:
Love it.
John Schwartz:
It's fun, but the Facebook page is there to talk about the book and for people to talk about their own financial issues. The book is gonna be in stores or you can get it anywhere.
Bobbi Rebell:
Awesome. Well, I am a huge fan, John Schwartz. I highly recommend everybody read it. It is a page turner, which is not typical of personal finance books. So, definitely everyone check it out. Thank you so much, sir.
John Schwartz:
Thank you.
Bobbi Rebell:
Here is my take on what John had to say. Real estate investment glorified in our society, but make no mistake, it is a high stakes proposition and sometimes life and the macro economy gets in the way. Financial Grownup tip number one, buy what you can sell later on. Always think, how will this sell? You can read more in John's book, but in short, that apartment that he bought, because he could afford it, to be fair, was not in a great family neighborhood. He got a good deal, he thought, but when the apartment went for sale in tough times and he needed to sell, it just wasn't selling.
Bobbi Rebell:
Case in point, when my husband and I went to buy our current apartment, there were two identical apartments for sale in the same building, same layout. You get the idea. One was a lot cheaper, like 25% cheaper, a lot. We could have really used the savings, but there was a catch. A giant flashing orange neon parking sign right across the street. You could see it through what would be our son's bedroom window.
Bobbi Rebell:
We rationalized a little bit. Many apartments in New York face brick walls, so this at least was facing open air, just at night there would be this giant flashing parking sign. We could get blackout shades though, right? You know what? We ended up going for the other apartment on a higher floor, not a great view, but an okay view and no parking sign, because we knew that the pull of buyers when we went to sell would be limited even in an upmarket and it could be nonexistent in a downmarket, if we went to sell that apartment where people just would not buy it. Some people, no matter what, they are not buying the apartment with a flashing orange parking sign that would be in their child's room their whole childhood. So, John found out that sometimes an apartment that's a deal, is not really such a deal.
Bobbi Rebell:
Financial Grownup tip number two, don't give up on real estate. John kept at it and had a great experience the second time around. I'm a big believer in owning your own home. The tax breaks are not as good as they used to be, but you're not gonna live in fear of a landlord raising the rent, or simply asking you to leave.
Bobbi Rebell:
Friends, be sure to check out John's new book, This is The Year I Put My Financial Life in Order. You will learn from John, but you will also laugh along with John. It is a fun and readable memoirish personal finance guide well worth your time. Thank you all for spending a little bit of your day with us. Keep up the great feedback. I am on Twitter @bobbirebell, on Instagram @bobbirebell1. I hope you enjoy this episode with John Schwartz and that it brought us all one step closer to being Financial Grownups. Financial Grownup with Bobbi Rebell is edited and produced by Steve Stewart and is a BRK Media production.
