Started the April 1, 2010 NetWorthIQ update today and happily realized that our total retirement savings, 401K and IRA monies, totals more than $350,000.
At present our retirement savings is at $354,943. Our 401K accounts have recovered much of the losses from 2008, although we have not yet recouped full losses.
Tuesday, March 30, 2010
Audit Update
Audit process is just about over. Generally good news, liability reduced from @$20,000 to @$4,000.
I plan to provide the gory details soon.
I plan to provide the gory details soon.
Sunday, March 21, 2010
Inspired
Caught a replay of Dave Ramsey on the ride home last night (I'm working all weekend, major project due Monday).
I was totally inspired by Debra and John a couple in their mid-40s (Debra is 45) who paid off all of their debt, including their home on 100 acres, in six years. They are debt free at 45!! Debra explained that they paid off $230,000 in debt on a yearly income of $100,000 a year. At the same time they paid for their son to also go to college and graduate school so he doesn't have any debt either.
Impressive! $230,000 over six years is $38,500 a year, which is also 38% of their gross income. I always want to know more about these folks that call into Ramsey's show, like are they also saving for retirement, or do they have an emergency fund, etc. In this instance, Debra at least told us that they were also paying for college/grad. school during this time. I would assume that education costs would run at least $10,000 a year (if not more).
When I got home, I told Mr. Sam and he said "sure, we could put more towards paying off our home, if we cut out more discretionary spending."
While I like to think we live on a pretty lean budget, we could do better (Mr. Sam mentioned something about shoes and how many I seem to own).
Anyways, something to think about.
I was totally inspired by Debra and John a couple in their mid-40s (Debra is 45) who paid off all of their debt, including their home on 100 acres, in six years. They are debt free at 45!! Debra explained that they paid off $230,000 in debt on a yearly income of $100,000 a year. At the same time they paid for their son to also go to college and graduate school so he doesn't have any debt either.
Impressive! $230,000 over six years is $38,500 a year, which is also 38% of their gross income. I always want to know more about these folks that call into Ramsey's show, like are they also saving for retirement, or do they have an emergency fund, etc. In this instance, Debra at least told us that they were also paying for college/grad. school during this time. I would assume that education costs would run at least $10,000 a year (if not more).
When I got home, I told Mr. Sam and he said "sure, we could put more towards paying off our home, if we cut out more discretionary spending."
While I like to think we live on a pretty lean budget, we could do better (Mr. Sam mentioned something about shoes and how many I seem to own).
Anyways, something to think about.
Saturday, March 20, 2010
To Be Or Not To Be Debt Free?
The New York Times has a good overview of when to prepay on a mortgage and when not to.
Basically if you've got a good mortgage rate, like we do at 4.78% fixed, the NYT advises that you should not be throwing extra cash at your mortgage if: (1) you have other higher interest debt (i.e. credit cards); (2) you are not investing enough in your 401k to get the employer match*; (3) you don't already have a good size emergency fund saved up.
I agree, generally good advice, our only debt is mortgage debt (although we've got more than one mortgage with our investment properties), we are maxing out our 401ks and we have a $30,000 emergency fund. So we have got the green light, according to this advice, to pay extra on our mortgage.
The NYT article also runs through the tax benefits of a mortgage (although I'm not in fan of debt for tax benefits), better returns elsewhere (i.e. investments) and the general need most people have for liquidity these days.
I'm always a little skeptical of not paying off debt to get a better return in the market, but I would assume that an individual who is disciplined enough to pay down a mortgage is also disciplined enough to invest or save that money rather than spending it. I also agree that msot people these days are in need of greater liquidity due to the general economic uncertainty facing many.
*I always find it interesting that almost all personal finance articles, advice, blogs, etc. assume that all employers provide a 401k match. I've never worked for a company that provides a match. I also don't agree that one should only invest in a 401k if one receives a match, invest in a 401k so you can take care of yourself in retirement.
Basically if you've got a good mortgage rate, like we do at 4.78% fixed, the NYT advises that you should not be throwing extra cash at your mortgage if: (1) you have other higher interest debt (i.e. credit cards); (2) you are not investing enough in your 401k to get the employer match*; (3) you don't already have a good size emergency fund saved up.
I agree, generally good advice, our only debt is mortgage debt (although we've got more than one mortgage with our investment properties), we are maxing out our 401ks and we have a $30,000 emergency fund. So we have got the green light, according to this advice, to pay extra on our mortgage.
The NYT article also runs through the tax benefits of a mortgage (although I'm not in fan of debt for tax benefits), better returns elsewhere (i.e. investments) and the general need most people have for liquidity these days.
I'm always a little skeptical of not paying off debt to get a better return in the market, but I would assume that an individual who is disciplined enough to pay down a mortgage is also disciplined enough to invest or save that money rather than spending it. I also agree that msot people these days are in need of greater liquidity due to the general economic uncertainty facing many.
*I always find it interesting that almost all personal finance articles, advice, blogs, etc. assume that all employers provide a 401k match. I've never worked for a company that provides a match. I also don't agree that one should only invest in a 401k if one receives a match, invest in a 401k so you can take care of yourself in retirement.
Monday, March 15, 2010
Updated March 15th Numbers
(1) Max out 401ks - $33,000
(2) Max out IRAs - $10,000
(3) Prepay mortgage - $1200
(4) Add to baby fund - $3500
(5) Add to emergency fund - $7000
(6) House/Furniture fund - $3000
Total - $57,700
(1) - $6900 (21%) (goal is $33,000)
(2) - $3200 (32%) (goal is $10,000)
(3) - $300 (25%) (goal is $1200)
(4) - $600 (17%)($7122 in our baby fund, goal is $10,000)
(5) - $5000 (71%)($30,163 in our emergency fund, goal is $32,000)
(6) - $3000 (100%) (Completed)
Total - $19,000 (33%)
We put $4000 of Mr. Sam's bonus into our emergency fund and we will keep it there until we hear from the IRS. Some, or all, of that $4000 may eventually be transferred into our IRA accounts. Another $1000 went into Mr. Sam's 401k. He is going to use $500 for something fun. The rest went to taxes, with-holdings, and a little extra into our regular checking account.
(2) Max out IRAs - $10,000
(3) Prepay mortgage - $1200
(4) Add to baby fund - $3500
(5) Add to emergency fund - $7000
(6) House/Furniture fund - $3000
Total - $57,700
(1) - $6900 (21%) (goal is $33,000)
(2) - $3200 (32%) (goal is $10,000)
(3) - $300 (25%) (goal is $1200)
(4) - $600 (17%)($7122 in our baby fund, goal is $10,000)
(5) - $5000 (71%)($30,163 in our emergency fund, goal is $32,000)
(6) - $3000 (100%) (Completed)
Total - $19,000 (33%)
We put $4000 of Mr. Sam's bonus into our emergency fund and we will keep it there until we hear from the IRS. Some, or all, of that $4000 may eventually be transferred into our IRA accounts. Another $1000 went into Mr. Sam's 401k. He is going to use $500 for something fun. The rest went to taxes, with-holdings, and a little extra into our regular checking account.
Sunday, March 14, 2010
Historic Homes
Historic home question:
Our primary home, rental #2, and rental #3 are all historic homes, built in the 20s and 30s. My prior home was also historic.
We ended up with two historic rental homes mostly by chance. Our home is historic and we live in a historic area (mixed, there is some 50s, 70s and newer construction too). When we were shopping for rental homes we wanted homes close to us (easier to manage, easier to work on) and we wanted the best bang for our buck. Historic homes that have not been dramatically upgraded are generally cheaper than similar size newer construction homes. We can cover the mortgage if the rental home is empty without too much pain and we don't have to charge as much for rent (very helpful in this economy).
But there are also negatives. First, insurance for a historic home is more expensive (big issue here in Florida). Second, historic homes can be more difficult to maintain, repair, etc. Third, when it comes to selling, I think historic homes generally sell for more (better profit) but appeal to a more limited segment of the population. And finally, yes, the historic preservation board can limit dramatic changes to the property (since we don't plan to add an addition or second floor, etc., this is not a big issue for us).
I think you mentioned in the past that your rental properties are historic... what are the challenges and benefits to owning historic versus non-historic properties, and what caused you to choose historic? (Example of a potential challenge: An experienced real estate investor depicted on a television program was preparing to remodel the historic home he had just purchased, only to find out that the project required approval by a local gov't agency... and ultimately his original plans were modified to accommodate their requests.)
Our primary home, rental #2, and rental #3 are all historic homes, built in the 20s and 30s. My prior home was also historic.
We ended up with two historic rental homes mostly by chance. Our home is historic and we live in a historic area (mixed, there is some 50s, 70s and newer construction too). When we were shopping for rental homes we wanted homes close to us (easier to manage, easier to work on) and we wanted the best bang for our buck. Historic homes that have not been dramatically upgraded are generally cheaper than similar size newer construction homes. We can cover the mortgage if the rental home is empty without too much pain and we don't have to charge as much for rent (very helpful in this economy).
But there are also negatives. First, insurance for a historic home is more expensive (big issue here in Florida). Second, historic homes can be more difficult to maintain, repair, etc. Third, when it comes to selling, I think historic homes generally sell for more (better profit) but appeal to a more limited segment of the population. And finally, yes, the historic preservation board can limit dramatic changes to the property (since we don't plan to add an addition or second floor, etc., this is not a big issue for us).
Saturday, March 13, 2010
Ides of March
(1) Max out 401ks - $33,000
(2) Max out IRAs - $10,000
(3) Prepay mortgage - $1200
(4) Add to baby fund - $3500
(5) Add to emergency fund - $7000
(6) House/Furniture fund - $3000
Total - $57,700
(1) - $6900 (21%) (goal is $33,000)
(2) - $2200 (22%) (goal is $10,000)
(3) - $300 (25%) (goal is $1200)
(4) - $600 (17%)($7122 in our baby fund, goal is $10,000)
(5) - $1000 (14%)($26,163 in our emergency fund, goal is $32,000)
(6) - $3000 (100%) (Completed)
Total - $14,000 (24%)
Increase in progress due to Mr. Sam's bonus, 401k deductions applied to bonus so he is well ahead on his contributions for the year. We are about $2,900 ahead on our 2010 savings goals.
(2) Max out IRAs - $10,000
(3) Prepay mortgage - $1200
(4) Add to baby fund - $3500
(5) Add to emergency fund - $7000
(6) House/Furniture fund - $3000
Total - $57,700
(1) - $6900 (21%) (goal is $33,000)
(2) - $2200 (22%) (goal is $10,000)
(3) - $300 (25%) (goal is $1200)
(4) - $600 (17%)($7122 in our baby fund, goal is $10,000)
(5) - $1000 (14%)($26,163 in our emergency fund, goal is $32,000)
(6) - $3000 (100%) (Completed)
Total - $14,000 (24%)
Increase in progress due to Mr. Sam's bonus, 401k deductions applied to bonus so he is well ahead on his contributions for the year. We are about $2,900 ahead on our 2010 savings goals.
Friday, March 12, 2010
By Any Other Name
A little psychological trick, I title our emergency fund account, which we keep at ING, as "Vacation Home Fund." By doing so, I am less likely to transfer money out that account because each time I look at our ING accounts I think about our long term goal of building a vacation home.
Wednesday, March 10, 2010
Time to Buy Citi?
Fortune says it might be time to buy Citi stock.
We bought some Citi stock a few weeks ago, in our IRA, when it was trading in the high $2 range. We'll see if it pays off.
Other smart money has recently been speculating on the stock. Hedge fund legend George Soros bought nearly 100 million shares in the fourth quarter of 2009; John Paulson of Paulson & Co. added more than 200 million shares; and Daniel Loeb's Third Point bought shares worth $83 million.
But Berkowitz says investors can't ignore the Treasury's move to allow Citi to repay its Troubled Asset Relief Program (TARP) funds. "The only way the government was going to allow repayment was if they thought the bank was recapitalized," he says.
We bought some Citi stock a few weeks ago, in our IRA, when it was trading in the high $2 range. We'll see if it pays off.
More Good News!
More good news. I am receiving a 14% increase in my compensation which should be reflected in my March 31 pay check.
Half of that increase is compensation that was cut back in July (everyone in my company took a pay cut). I got back some of that compensation in January 2010 and at the end of March will receive the rest (of course, I lost 6 months of receiving that money, but I'm happy to have it back 9 months later).
The other half of that increase is pay increase that should have kicked in as of January (i.e. step increase).
The last little bit of good news, is that the company is re-instituting the bonus plan, so there is a bonus opportunity at the end of 2010 (there were no bonuses in 2009). Although, I'm not going to hold my breath that anyone, including me, will actually receive bonuses.
Expect that any and all extra compensation will go towards our 2010 savings goals.
Half of that increase is compensation that was cut back in July (everyone in my company took a pay cut). I got back some of that compensation in January 2010 and at the end of March will receive the rest (of course, I lost 6 months of receiving that money, but I'm happy to have it back 9 months later).
The other half of that increase is pay increase that should have kicked in as of January (i.e. step increase).
The last little bit of good news, is that the company is re-instituting the bonus plan, so there is a bonus opportunity at the end of 2010 (there were no bonuses in 2009). Although, I'm not going to hold my breath that anyone, including me, will actually receive bonuses.
Expect that any and all extra compensation will go towards our 2010 savings goals.
Tuesday, March 9, 2010
Retirement Calculator
Interesting article on the Money Magazine site regarding the fact that 43% of American workers have less than $10,000 in retirement savings. I'm hoping that the bulk of those folks are very young and have time to save.
While reading the article I ran my numbers through the retirement calculator and was told that I needed to be saving @$25,000 a year. [I'm not sold on the rules they use but I gave it a go.]. Right now, I'm doing my best to max out my 401k at $16,500 and my IRA at $5,000. So, at present, I am short $3,500 for retirement savings although we are saving other monies for other goals so perhaps we could divert more of our savings to retirement.
On the other hand, Mr. Sam only needs to save @$11,300 according to the calculator so he is saving $10,000 more per year than he "needs" to. Maybe he'll be kind enough to lend me some cash when we are 65.
While reading the article I ran my numbers through the retirement calculator and was told that I needed to be saving @$25,000 a year. [I'm not sold on the rules they use but I gave it a go.]. Right now, I'm doing my best to max out my 401k at $16,500 and my IRA at $5,000. So, at present, I am short $3,500 for retirement savings although we are saving other monies for other goals so perhaps we could divert more of our savings to retirement.
On the other hand, Mr. Sam only needs to save @$11,300 according to the calculator so he is saving $10,000 more per year than he "needs" to. Maybe he'll be kind enough to lend me some cash when we are 65.
Monday, March 8, 2010
Good News
More good news, Mr. Sam received a 3% raise at work and a $10,000 bonus.
Most likely, we will add the bonus money to our emergency fund until we get a final determination from the IRS. If we get a positive result from the IRS audit, most likely, we will use the bonus money to finish funding our 2010 IRAs.
Most likely, we will add the bonus money to our emergency fund until we get a final determination from the IRS. If we get a positive result from the IRS audit, most likely, we will use the bonus money to finish funding our 2010 IRAs.
Thursday, March 4, 2010
Biggest Loser
Over on NetWorth IQ, our $200,000 loss in November 2009 put us top loser, by amount, in December 2009.
Wednesday, March 3, 2010
Updated 2/28 Numbers
(1) Max out 401ks - $33,000
(2) Max out IRAs - $10,000
(3) Prepay mortgage - $1200
(4) Add to baby fund - $3500
(5) Add to emergency fund - $7000
(6) House/Furniture fund - $3000 (Completed
Total - $57,700
(1) - $4554 (14%)
(2) - $2200 (22%)
(3) - $200 (17%)
(4) - $450 (13%)($6972 in our baby fund, goal is $10,000)
(5) - $800 (11%)($25,963 in our emergency fund, goal is $32,000)
(6) - $3000 (100%) (Completed)
Total - $11,204 (19%)
About 1 week ahead on our savings schedule.
(2) Max out IRAs - $10,000
(3) Prepay mortgage - $1200
(4) Add to baby fund - $3500
(5) Add to emergency fund - $7000
(6) House/Furniture fund - $3000 (Completed
Total - $57,700
(1) - $4554 (14%)
(2) - $2200 (22%)
(3) - $200 (17%)
(4) - $450 (13%)($6972 in our baby fund, goal is $10,000)
(5) - $800 (11%)($25,963 in our emergency fund, goal is $32,000)
(6) - $3000 (100%) (Completed)
Total - $11,204 (19%)
About 1 week ahead on our savings schedule.
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