The process of starting a financial plan

Don’t wait to get started with your financial plan


After years of managing my own finances (and starting to get serious about retirement), I decided it was time to get a professional look at how I’ve been doing.  It had been over 20 years since meeting with a planner for the first time who suggested what I felt, was an impossible plan.  I couldn’t have afforded what he suggested and he gave me no direction or support in doing something.  In the end, it made me take no action at all and I suspect that that situation is true for many of us, who ultimately, bury our heads in the sand rather than take any action that may at least start the process.


I got referrals to four or so financial planners, had a phone conversation about my goals with three of them, then selected one to do the final plan.  I went into the process with eyes wide open, a flexible mind and hopes for a silver bullet investment.  I selected a fee-based planner so that I would not be solicited to buy investment vehicles


What I found:


There is no silver bullet.   My planner suggested my main investment should be an IRA.  I was very lukewarm about that because of how volatile the stock market has been.   If you can invest in an IRA over the long-term, it may work alright for you, but the closer you are to retirement, the harder it is throw the dice given the market’s volatility.


Getting a projection of expenses and retirement contributions up to retirement helps set priorities and is absolutely crucial in staying focused.  Once you know that, the after retirement income and expenses can be calculated.  The planner I worked with looked at this projection each year up to the time I thought my heirs would take over.  This component was probably the most important thing that came out of my meeting.  If that doesn’t spur you into action, I don’t know what will.


The planner gave me an annual financial goal that I felt was too unattainable (just like 20+ years ago!).  You have to make your saving attainable, or you won’t do it.  Just get started with what you can and watch it grow.  Once you see progress, you may be able to commit to more.


Social security is not likely to be enough income in your retirement.  The time to start saving could have been a long time ago, but that time is gone, so get started now.


Consider looking at a whole-life insurance policy taking an indexed-strategy in mind as an investment tool.  The income will grow and can be withdrawn when needed after retirement.  The other nice thing is that your principal is protected, which is not true in an IRA.


Pay yourself first.  This can get set up as a automatic payment into an online bank account, which has a higher interest rate than the brick and mortar banks.


Take a careful look at the tax implications of your choices.  IRAs are a key part of retirement savings, however the taxes can be high when you are required to start taking distributions.


Plan for big purchases like a principal residence, rental property, or car.


Take a look at long term disability insurance to protect your income during your earning years.  My planner did not have a high opinion of it, because it took away from money that could be used toward investments.  I felt strongly that I should maintain such a policy.


Take a look at long-term care insurance to take care of you if you cannot take care of yourself.  Health care costs are astronomical and can deplete all you have worked for pretty quickly.  You should look at how you plan on financing your incapacity as well as your capacity.


Do challenge your planner.  You are the one that must live with the choices you make.  Read information on the internet, talk to friends and get their opinions.  The more you read and talk to people, the more your own plan will start to materialize.

Who pays closing costs?

Closing costs are the moneys necessary to pay off all expenses incurred by buyer and seller on a property.  This will include an accounting of all funds spent and received in the transaction for both the buyer and seller.  Following is a partial list for items generally paid for by either buyer or seller in San Francisco.


  • Escrow fees
  • Title insurance
  • Loan fees, including points
  • Appraisal fee
  • One year’s hazard insurance premium (if not a condominium)
  • Deed recording fees
  • Notary fees
  • Prorated property taxes split between buyer and seller
  • Pre-paid interest to your lender
  • Prorated homeowners dues is you are purchasing a condominium.


  • Transfer tax
  • Real Estate agent commissions
  • Loans and loan fees (to close out existing loans)
  • Prorated property taxes split between buyer and seller
  • A portion of the taxable gain if above allowed limits
  • Prorated rents and security deposits if an income property
  • Deed and recording fees

The estimate of closing costs is generated when both the agents in the transaction, provided to the escrow officer that reflect the terms and conditions of the purchase contract.  The escrow officer will then compare the two sets of instructions and, if they match, the escrow holder will execute these instructions, disbursing funds and recording the deed which marks your ownership of the property.

Scared to buy your first home

Avoid paralysis in deciding whether buying real estate is for you

Eric Castongia  It’s normal to be nervous about buying your first home.  Buying real estate will likely be the biggest purchase you will make in your lifetime, so making a good decision is important.  Here are a few questions to help you determine if buying real estate is right for you:

Why do I want to buy a home?


No rent in retirement?

A home you can personalize?




What are my long term goals? 

Stay in the area?

Move out of the area?

Build a nest egg for retirement?

Am I prepared to buy a home?

Do I have the necessary down payment?  If not, what is my plan to?

Good credit?

What can I afford?

Is my job steady?

What do I want to buy?

Can I afford what I want to buy?

Where do I want to buy?

Will I compromise if necessary?

What is the real estate market like?

I have always felt that owning my own home was the right thing; I knew that long before I started selling real estate.  The bottom line is that owning real estate is not for everyone.  Don’t feel guilty if you don’t want to own property because of societal or peer pressure.  Be happy you made the decision that is right for you.   If you are not going to buy, make sure that you still have a financial plan in place to get ready for retirement.

On the other hand, if it is the right thing, get a good real estate professional to assist you, be knowledgeable about the market and make the best decision you can.  And enjoy the process!  It will probably be a heck of a story.

What are the elements of a purchase offer?

The real estate purchase contract, also known as a purchase offer, or offer, is meant to be binding and spells out in detail your obligations and responsibilities. Some key points are:

Purchase Price

  • The purchase price should be looked at as part of the strategy for negotiation.
  • Are there multiple offers?
  • Is it priced low?
  • Is it priced high?
  • How long has it been on the market?
  • What have other similar homes sold for?
  • What is the condition of the property?
  • Is it unusual in the marketplace (i.e. is this a one-of-a-kind property)?

Ratification / in contract / in escrow
These are the terms used to convey that you are in the process of purchasing a property.  It means that buyer and seller have agreed to price and terms and are moving toward transferring ownership of the property.

Deposit / Good faith deposit / Earnest Money Deposit
A good faith deposit is most often a personal check made payable to a title/escrow company, which accompanies your offer; an offer must have ‘consideration’ to be valid.  The check is deposited after you get into contract and is applied toward your down payment and closing costs.  You will generally make three deposits to escrow prior to closing.

Your offer should be made contingent upon your obtaining, reviewing and approving thorough and professional inspection reports so as to be satisfied with the properties condition.  These may include reports by inspectors such as licensed pest control and general contractors, underground storage tank specialists, and additional reports by structural engineers, roofers, sewer inspectors, and chimney sweeps if applicable.

Most sellers of residential properties and involved agents are required by law to disclose any information, which may materially affect the value of your property.  A few exceptions to this requirement are probates and foreclosures.

Loan Contingency
If you are obtaining a loan to finance the purchase of your property, you will most likely need time to obtain a loan from a lender at terms acceptable to you.

Close of Escrow and Physical Possession
Close of Escrow (COE) and physical possession of the property are negotiable and may not occur on the same day.  A typical COE is scheduled for 30 to 60 days after the contract is accepted.  If the property is tenant occupied, or if the sellers request to rent back the property after the COE, your possession of the property would occur after your ownership begins.

Liquidated Damages, Mediation, and Arbitration of Disputes
These three sections of the purchase contract address what happens if the buyer and seller get into a dispute and have difficulty coming to agreement.  You should review these paragraphs prior to writing a purchase offer.  If you are unclear as to what they mean, or how they may impact you, please consult with a real estate attorney to better understand these clauses.

How to save on property taxes

Over 55 Exemption may save you money on your property tax bill

If you own a home you have been in for a long time and are paying low property taxes under California’s Proposition 13, you may be able to keep that tax base when you sell your home and buy another.  This great financial tool was made possible by the passage of two ballot propositions in the 1980’s; 60 and 90.  60 makes it possible to keep your tax base within your home county, and 90 makes it possible to take your tax base to reciprocating counties, of which there are eight.  Of course, it isn’t quite as easy as all that-there are some rules and forms to be completed for making that happen:

  • You must be 55 years old or older at the time of sale or purchase, whichever comes first.
  • This is a one-time exemption (married couples can only do this once).
  • Both the sale (old) and replacement (new) properties must be owner occupied.
  • You must purchase the new house within two years of the sale of the old house.
  • The purchase price of the new house must be the same or less than the sale price of the old house if purchased before the sale of the old house.
  • If the purchase of the new house takes place within one year after the sale of the old house, the purchase price may be 105% of the sale price; if it happens between 1 and 2 years, it can be 110% of the sale price.
  • Practically speaking, this means scaling down in order to make the purchase prices work out-for instance you may move from your single family home into a condominium.
  • Prop. 90 allowed reciprocity between eight California counties.  They are Alameda, Los Angeles, Modoc, Orange, San Diego, San Mateo, Santa Clara and Ventura.
  • A representative at the San Francisco Assessor’s office said they still reciprocate with the eight counties; but please check before you make any sale or purchase.   With the budget crisis many counties may no longer participate in reciprocity, so please contact them before making any moves.
  • Check out the Board of Equalization’s website to get more information at or call (800)400-7115
  • Also see the San Francisco Assessor’s website at  see form BOE 60-AH or call (415)554-7915

This is a pretty nice financial tool.  It is worth exploration if you have any desire to scale down and the expense of more expensive property taxes has stopped you.  This could be the beginning of your New Year’s Resolution list.

Special loan programs for buyers in San Francisco

“MCC” – San Francisco Mortgage Credit Certificate Program

Essentially is a tax credit on your mortgage payment.

Program Limits:

  • First-time homebuyer (cannot have owned for past 3 years)
  • Purchase price limits
  • Income limits-this changes year to year because it is based on median income

For more information:

MCC Program Highlights


Down payment Assistance Program (DALP)

This program is very cool.  It is for low to moderate income buyers.  The city makes a second on any property in San Francisco that is silent, meaning that there are no payments made on the loan by the borrower for 40 years.  The loan must be paid off in 40 years along with 20 percent of the appreciation.

  • Income limits
  • Purchase price limit
  • Loan amount limit
  • First time buyer
  • Must be owner occupied-unless approved by Mayor’s Office of Housing (may allow temporary rental)

DALP Program


“BMR”  – San Francisco Redevelopment Agency Below Market Rate

This program is for specific properties in the program.  The units are intended to always remain in the program, so you wouldn’t get the benefit of appreciation as you would in market rate housing.

Program Limits:

  • First-time homebuyer
  • Income limits
  • Limited equity program: You cannot resell at market price, essentially cannot sell for a profit or build equity except for mortgage pay downs
  • Must enter a lottery for chance to submit an application

For More Information:

Below Market Purchase Program

FHA Financing

A federally backed loan program that allows buyers to make smaller down payments. Pre-approved lenders have this program available.  You do not have to be a first-time buyer, but you do need to be an owner occupant.

  • Allows 3.5% down payment
  • Allows lower credit scores
  • Loan limits
  • Requires upfront mortgage insurance premium (which can be financed) plus monthly mortgage insurance premium (adds about .5% to the interest rate)

Many mortgage brokers can help you with this financing.  If you need a referral, please let me know.