2008 goals:
(1) 2007 IRA - $8000 (this goal is now closed)
(2) Car fund - $17000 (this goal has been completed!)
(3) E/R fund - $10000 (this goal has been completed!)
(4) Baby fund - $5000
(5) 2008 IRA - $10000
Total: $50,000
Current numbers:
(1) $4000 (50%.)
(2) $17000 (Progress - 100%.)
(3) $11813 ($19,813*) (Progress - 118%)
(4) $192 (Progress - 4%)
(5) $0
Total: $33,005 (Progress - 66%)
* Our emergency fund already had $8000.
Nused car account, goal #2 for 2008, is now fully funded. Whoo-hoo!!
Friday, August 29, 2008
Tuesday, August 26, 2008
Updates to Net Worth and Savings Goals
Net Worth
We have received our 2008 appraisal and real estate tax information for our Florida properties. Not surprisingly, our appraised values are down by about 5%. It is surprising that the appraised values are not down more than 5%. But, our official appraised values are quick to rise and slow to fall because the bulk of taxes in Florida are based on real estate (no income tax).
I have updated our Net Worth IQ chart if you want to see the dirty details.
2008 Savings Goals
2008 goals:
(1) 2007 IRA - $8000 (this goal is now closed)
(2) Car fund - $17000
(3) E/R fund - $10000 (this goal has been completed!)
(4) Baby fund - $5000
(5) 2008 IRA - $10000
Total: $50,000
Current numbers: (1) $4000 (50%.)
(2) $15787 (Progress - 93%.)
(3) $11280 ($18,972*) (Progress - 113%)
(4) $5
(5) $0
Total: $31,072 (Progress - 62%)
* Our emergency fund already had $8000.
We have received our 2008 appraisal and real estate tax information for our Florida properties. Not surprisingly, our appraised values are down by about 5%. It is surprising that the appraised values are not down more than 5%. But, our official appraised values are quick to rise and slow to fall because the bulk of taxes in Florida are based on real estate (no income tax).
I have updated our Net Worth IQ chart if you want to see the dirty details.
2008 Savings Goals
2008 goals:
(1) 2007 IRA - $8000 (this goal is now closed)
(2) Car fund - $17000
(3) E/R fund - $10000 (this goal has been completed!)
(4) Baby fund - $5000
(5) 2008 IRA - $10000
Total: $50,000
Current numbers: (1) $4000 (50%.)
(2) $15787 (Progress - 93%.)
(3) $11280 ($18,972*) (Progress - 113%)
(4) $5
(5) $0
Total: $31,072 (Progress - 62%)
* Our emergency fund already had $8000.
Wednesday, August 20, 2008
Sam's Dumbest Financial Move
Fascinating article in The New York Times (as part of the interesting Debt Trap series) on how banks used advertising to change the way Americans talked and thought about second mortgages (now rebranded as home equity loans or home equity lines of credit). And how Americans responded:
One complaint about the article was that it failed to mention the Tax Reform Act of 1986 and that pursuant to that law interest on consumer loans, such as credit cards and car loans, was no longer deductible. Although the article did mention that the banks' advertising campaign took advantage of the fact that these loan products were tax deductible.
Back in 2000, I had some smart more experienced friends tell me I ought to take out a HELOC on my first house (bought in 1999) to consolidate some higher interest credit card debt that I ran up in professional school. And I fell for the idea that it was "smart" to trade higher interest credit card debt for lower, tax deductible, debt. So I got myself a HELOC of $21,000 and I made minimum payments on the loan until I sold the house in 2004 (luckily for double what I bought it for).
I made a lot of smart financial choices during this time period. I bought my first house in 1999, I created my first spending plan (budget) in 2001 and I paid off my car and student loans. But, taking out the HELOC was dumb, dumb, dumb. I traded unsecured credit card debt for secured debt (risking my home) and while I never ran up my credit cards again I continued to use the cards and my spending, while better than most of my peers, was still above what it should have been. Bottom line, I didn't change my spending habits when I consolidated my credit card debt and as a result I ended up with more debt.
Since the early 1980s, the value of home equity loans outstanding has
ballooned to more than $1 trillion from $1 billion, and nearly a quarter of
Americans with first mortgages have them.
One complaint about the article was that it failed to mention the Tax Reform Act of 1986 and that pursuant to that law interest on consumer loans, such as credit cards and car loans, was no longer deductible. Although the article did mention that the banks' advertising campaign took advantage of the fact that these loan products were tax deductible.
Still, Elizabeth Warren, a professor at Harvard Law School who has studied
consumer debt and bankruptcy, said that financial companies used advertising to
foster the idea that it is good, even smart, to borrow money.
Back in 2000, I had some smart more experienced friends tell me I ought to take out a HELOC on my first house (bought in 1999) to consolidate some higher interest credit card debt that I ran up in professional school. And I fell for the idea that it was "smart" to trade higher interest credit card debt for lower, tax deductible, debt. So I got myself a HELOC of $21,000 and I made minimum payments on the loan until I sold the house in 2004 (luckily for double what I bought it for).
I made a lot of smart financial choices during this time period. I bought my first house in 1999, I created my first spending plan (budget) in 2001 and I paid off my car and student loans. But, taking out the HELOC was dumb, dumb, dumb. I traded unsecured credit card debt for secured debt (risking my home) and while I never ran up my credit cards again I continued to use the cards and my spending, while better than most of my peers, was still above what it should have been. Bottom line, I didn't change my spending habits when I consolidated my credit card debt and as a result I ended up with more debt.
Tuesday, August 19, 2008
Zen and the Art of Lower Dry Cleaning Bills
In the past 30 days we have spent $249 on dry cleaning. Yikes!! Over a year, we could end up spending $3000 on dry cleaning. Double yikes!! $3000 could be a fabulous vacation for us or a good chunk of our new furniture fund.*
So, I have been thinking about how to lower our dry cleaning bills. I have been investigating the home dry cleaning products like Dryel and plan to pick up a kit to use on our clothes to lengthen the amount of time between dry cleaning. But, what I have found best for lowering our dry cleaning bill is to simply change out of my work clothes as soon as I get home and to promptly hang up my clothes. I've found that I end up dry cleaning clothes simply because they have sat in a heap on a chair and have gotten horribly wrinkled and covered in Snarfle hair (Snarfle is the dog).
But, I get home after 10-12 hours at the office and I'm pooped. I just want to change, have a spot to eat and crash on the couch. Bottom line, I don't feel like hanging up my clothes (which probably takes at the most 5 minutes) because I'm worn out. I'm thinking about how to take care of present Sam and present Sam wants to crash out. But, and this is where the Zen comes in, if I take a second and think about future Sam (the Sam that has to pick up the clothes later or the Sam that has to take the clothes to the dry cleaner on Saturday or the Sam who has to pay the dry cleaning bill) I want to be kind to future Sam and I hang up my clothes. Basically, when I procrastinate to help out present Sam I've come to realize, and remind myself, that I'm only hurting my future self. This mind set helps in any situation, work, home, etc., when there is an opportunity to procrastinate.
*And don't get me started on the higher dry cleaning prices for women's clothes! Ugh!!
So, I have been thinking about how to lower our dry cleaning bills. I have been investigating the home dry cleaning products like Dryel and plan to pick up a kit to use on our clothes to lengthen the amount of time between dry cleaning. But, what I have found best for lowering our dry cleaning bill is to simply change out of my work clothes as soon as I get home and to promptly hang up my clothes. I've found that I end up dry cleaning clothes simply because they have sat in a heap on a chair and have gotten horribly wrinkled and covered in Snarfle hair (Snarfle is the dog).
But, I get home after 10-12 hours at the office and I'm pooped. I just want to change, have a spot to eat and crash on the couch. Bottom line, I don't feel like hanging up my clothes (which probably takes at the most 5 minutes) because I'm worn out. I'm thinking about how to take care of present Sam and present Sam wants to crash out. But, and this is where the Zen comes in, if I take a second and think about future Sam (the Sam that has to pick up the clothes later or the Sam that has to take the clothes to the dry cleaner on Saturday or the Sam who has to pay the dry cleaning bill) I want to be kind to future Sam and I hang up my clothes. Basically, when I procrastinate to help out present Sam I've come to realize, and remind myself, that I'm only hurting my future self. This mind set helps in any situation, work, home, etc., when there is an opportunity to procrastinate.
*And don't get me started on the higher dry cleaning prices for women's clothes! Ugh!!
Tropical Storm Fay
Blustery, rainy day today in South Florida due to Tropical Storm Fay.
This is damage at one of the horse facilities that are inland in South Florida. This is a barn, luckily no horses (or people) were hurt.
Most people are at home today. Schools, government offices and most offices are closed today.
Monday, August 18, 2008
Life Insurance - Term vs. Whole??
One of the tasks on our 2008 to do list is to buy more life insurance. We both have small life insurance policies through work, but we have decided that we would like at least $750,000 coverage on each of us. We decided on $750,000 because we have @$657,000 in mortgage debt. If either of us died the other would be able to pay off the mortgages on all of our real estate and would not be forced to sell in a bad market.
For me a 20 year term life insurance policy of $750,000 would have an annual premium of $705 ($14,100 total cost). For Mr. Sam, he would have an annual premium of $557 ($11,140 total cost). The upside of term life insurance is that its pretty cheap and you can get a lot of up front protection. But the down side is that term life insurance only provides a death benefit and only during the term (in this case 20 years). You pay, in our example $25,000+, but if neither of us dies in the next 20 years we don't get any of that money back.
I think of life insurance as just insurance so I've been more in favor of simple term policy. Mr. Sam doesn't like the idea that we don't get any of that money back so he wanted to consider whole or some variable life insurance product.
Accordingly, we met with a very nice life insurance agent that came recommended from a friend. We looked at a blended life insurance product that provides an immediate $700,000 death benefit. This product is really an investment product with a cash value and a dividend, etc. plus the death benefit
The annual premium for this product is $5000 a year (for both of us $10,000 total).
At the end of 10 years, after $50,000 in premium payments the policy has a cash surrender value of $45,736.
At the end of 20 years, after $100,000 in premium payments the policy has a cash surrender value of $152,343.
At the end of 20 years, after $150,000 in premium payments the policy has a cash surrender value of $356,789.
After 30 years of premium payments the death benefit also starts increasing. At 40 years of premium payments ($200,000), the death benefit is $1,046,800 and the cash surrender value is $741,500. After 50 years at age 86 (my grandparents are in their mid 80s), the death benefit is $1,678,700 and the cash surrender value is $1,405,400 based on premium payments of $250,000. This is just for one of the two policies, we would have about $3.3 million in combined death benefits.
One benefit of life insurance is that the death benefit passes tax free to the beneficiary and there are also ways to structure the policy so that it falls outside an estate.
There are a lot up upsides to the insurance product that we discussed with the agent, but the big down side is the annual cost ($10,000 a year for both of us). We could buy the term insurance for under $2000 a year and invest the remainder $8000 in an IRA and I wonder whether or not we would come close to the cash surrender value. According to a simple calculator if I invested $333 a month ($4,000 annual) for 50 years with a 6% interest rate I would end up with $1.2 million which isn't too much less than the cash surrender value for one policy. Clearly we would not have the $3.3 million in death benefits, but we should have other monies to leave to our heirs.
Thoughts, what would you do??
For me a 20 year term life insurance policy of $750,000 would have an annual premium of $705 ($14,100 total cost). For Mr. Sam, he would have an annual premium of $557 ($11,140 total cost). The upside of term life insurance is that its pretty cheap and you can get a lot of up front protection. But the down side is that term life insurance only provides a death benefit and only during the term (in this case 20 years). You pay, in our example $25,000+, but if neither of us dies in the next 20 years we don't get any of that money back.
I think of life insurance as just insurance so I've been more in favor of simple term policy. Mr. Sam doesn't like the idea that we don't get any of that money back so he wanted to consider whole or some variable life insurance product.
Accordingly, we met with a very nice life insurance agent that came recommended from a friend. We looked at a blended life insurance product that provides an immediate $700,000 death benefit. This product is really an investment product with a cash value and a dividend, etc. plus the death benefit
The annual premium for this product is $5000 a year (for both of us $10,000 total).
At the end of 10 years, after $50,000 in premium payments the policy has a cash surrender value of $45,736.
At the end of 20 years, after $100,000 in premium payments the policy has a cash surrender value of $152,343.
At the end of 20 years, after $150,000 in premium payments the policy has a cash surrender value of $356,789.
After 30 years of premium payments the death benefit also starts increasing. At 40 years of premium payments ($200,000), the death benefit is $1,046,800 and the cash surrender value is $741,500. After 50 years at age 86 (my grandparents are in their mid 80s), the death benefit is $1,678,700 and the cash surrender value is $1,405,400 based on premium payments of $250,000. This is just for one of the two policies, we would have about $3.3 million in combined death benefits.
One benefit of life insurance is that the death benefit passes tax free to the beneficiary and there are also ways to structure the policy so that it falls outside an estate.
There are a lot up upsides to the insurance product that we discussed with the agent, but the big down side is the annual cost ($10,000 a year for both of us). We could buy the term insurance for under $2000 a year and invest the remainder $8000 in an IRA and I wonder whether or not we would come close to the cash surrender value. According to a simple calculator if I invested $333 a month ($4,000 annual) for 50 years with a 6% interest rate I would end up with $1.2 million which isn't too much less than the cash surrender value for one policy. Clearly we would not have the $3.3 million in death benefits, but we should have other monies to leave to our heirs.
Thoughts, what would you do??
Snarfle
Snarfle just had his yearly check up - $232 vet bill. Very happy to report that a year after his cancer surgery for fibrosarcoma he appears to be cancer free. I say "appears" because the report is based only on manipulation of the surgery site (back right paw). But its good news regardless.
Snarfle is 11 and a half and I expect his care to start getting more expensive. The vet suggested that Snarfle start taking Phycox for his arthritis. Phycox is $35 a month, plus the cost of monthly dog food and treats, plus the cost of vet care (estimating $1000 a year) and I'm thinking that I ought to open an ING Snarfle escrow account.
Snarfle is 11 and a half and I expect his care to start getting more expensive. The vet suggested that Snarfle start taking Phycox for his arthritis. Phycox is $35 a month, plus the cost of monthly dog food and treats, plus the cost of vet care (estimating $1000 a year) and I'm thinking that I ought to open an ING Snarfle escrow account.
Sunday, August 17, 2008
Finally - Half Way Post
We have been behind all year on our 2008 savings goals. But, I'm happy to report that we finally have reached the 50% mark. While goal #3, increasing our emergency fund to $18,000, has been completed we continue to add a small amount each month to our emergency fund.
2008 goals:
(1) 2007 IRA - $8000 (this goal is now closed)
(2) Car fund - $17000
(3) E/R fund - $10000 (this goal has been completed!)
(4) Baby fund - $5000
(5) 2008 IRA - $10000
Total: $50,000
Current numbers:
(1) $4000 (50%.)
(2) $13787 (Progress - 81%.)
(3) $11280 ($18,972*) (Progress - 113%)
(4) $5
(5) $0
Total: $29,072 (Progress - 58%)
* Our emergency fund already had $8000.
2008 goals:
(1) 2007 IRA - $8000 (this goal is now closed)
(2) Car fund - $17000
(3) E/R fund - $10000 (this goal has been completed!)
(4) Baby fund - $5000
(5) 2008 IRA - $10000
Total: $50,000
Current numbers:
(1) $4000 (50%.)
(2) $13787 (Progress - 81%.)
(3) $11280 ($18,972*) (Progress - 113%)
(4) $5
(5) $0
Total: $29,072 (Progress - 58%)
* Our emergency fund already had $8000.