Tax Time

It is that time of the year and we have just received the notice of proposed property taxes for our various properties in Florida.

Florida's homestead law complicates the real estate tax situation.  Florida's homestead law provides protection against forced sale of one's primary home.  One of the reasons O.J. Simpson  lives (or lived, he is in jail at present) in Florida is because of the generous protections from creditors provided for one's primary dwelling no matter how big or expensive.

For our purposes the homestead law provides a tax exemption from our real property taxes.  A family with a homestead property receives a $50,000 tax exemption for all real property taxes except for school taxes (for which $25,000 of that exemption applies).  So a family with a home valued at $200,000 would only pay taxes on $150,000 of the value and $175,000 for the school district taxes.

Even more important though is the protection provided against the rate at which taxes can increase from year to year.  For a Florida homestead property, the rate at which taxes can increase is 3% or the rate of inflation which ever is less.  For 2012 that increase is  3%.  So, that means, when we receive our proposed taxes for our primary home there are two numbers for our home, the assessed value (which is the market value for our home and land less the $50,000 homestead tax exemption) and the taxable value.  The taxable value can only rise by a maximum of 3% year over year and that is the number we pay taxes on.  For our Florida investment properties the assessed value and the taxable value are the same and there are no exemptions.

While the Florida real estate bubble deflation has been hard on our net worth, the upside (gotta look on the bright side) has been that the assessed value went down on all of our Florida properties, which means that our real estate taxes and overall carrying costs have gone down.  Now that property values are starting to edge up we have the 3% tax rate cap protection for our primary home so it will be quite few a years untill we are paying taxes at the level we were paying back in 2007 and 2008 (at least on our primary home).

For some long time Florida home owners, during the recession their real estate taxes continued to go up because there was such a huge gap between their assessed value and taxable value.  For folks like us, landlords to three Florida properties and our primary home was purchased in 2004 our real estate taxes have come down to be similar to the rate that the long term residents of our neighborhood pay.  We live in a very eclectic area so the disparity in real estate taxes is not as glaring as newer construction areas, where you could have, during the boom time, two identical sized homes with one owner paying $4000 in real estate taxes and the other non-homesteaded resident paying $8000 in real estate taxes.

Financial Poker Face

I recently ran into my former assistant out and about.  This is a sweet woman, single mom, about my age.  Because we worked closely for a few years, I have general knowledge of her financial status.

Anyways we were catching up on respective news and she proudly announced that she had a new car.  She goes on to tell me its the same brand as my car, one model level down from mine.  Of course I had to ask, new or used?  New, she tells me.  And this is where I fail, I make a face of disapproval.

When we were working together she had a late model small SUV, nothing that needed replacement in my mind.  But, I have no idea as to what happened to it, maybe she got in a car accident or maybe it required an expensive repair.  So, I start calculating how much the car cost and then I move on to calculating the cost of  a 5 year loan, and what she would have probably have gotten for her trade in . . .  and I come up with probably at least a $450 payment per month.  And, I make that face of disapproval.

And she knows me well enough to know I'm one that hates debt and that I am much more structured and conservative when it comes to our personal finances.  So she knows what I'm thinking when I make that face.

Frankly, I shouldn't be so judgmental.  Buying a new car may not be for me, but for most people it is an event to be proud of and to be excited about.  Our financial path and plan is not appropriate for most people so I need to get over it when I hear people making financial choices that are different from ours.  I shouldn't share my opinion (even non-verbally) unless someone asks for my advice.

Lease Break

Ugh, one of our tenants has decided to break her lease.  Our tenant has a job opportunity that is requiring her to move and its an opportunity that she can't pass up so she has opted to break her lease.  

Mr. Sam normally handles the interactions with our tenants, because I can be too tough and over the years he has done a better job at working and managing our tenants.  This is our plan, we will review the lease and abide by the lease.  I'm sure you are thinking, of course you'll abide by the lease, well Mr. Sam can be too nice and not charge fees that we ought to be charging.  So, because we only got notice late in the month, we will charge her the last month of rent (which we have in our tenant account) because we won't be able to lease the unit before September first.  If we rent the place quickly (i.e. mid-month) we will refund part of her last month's rent, meaning we won't collect the rent twice for the same unit.  We also will charge her the lease break fee (which we also have in our tenant account) since she is breaking the lease.  The lease break fee covers the expense of advertising the unit and any other expenses related to re-renting the unit (i.e. there is a utility fee for transferring the utilities back to our name).

Refinance - Part 8

We finally heard from the mortgage broker.  Our loan application has made it through underwriting and we have been approved.

Hooray!!

We do have to provide a few more documents.  We refinanced one of our rental properties in 2011 so we need to provide some documentation related to that refinance.  We also need to provide our most recent bank statements since more than a month has gone by since we provided the prior documentation.

We hoped to have the paperwork wrapped up shortly and then on to closing.

2012 Goals - Mid August Update

(1) Max out 401k(s) - $25,347 (75%)(goal is $34,000)
(2) Max out IRA(s) - $5123 (51%)(goal is $10,000)
(3) Add to e/r fund - $6400 (64%)(goal is $10,000)
(4) Pay down mortgage - $2490 (50%)(goal is $5,000)
(5) House projects - $800 (16%)(goal is $5,000)
(6) Trading account fund - $50 (1%)(goal is $5,000)

Total - $40,210 (58%)

At present we are about $4900 behind on our 2012 goals.  We have made progress on funding our 2012 IRAs, one is now fully funded, as I have been putting our monthly home mortgage principal prepayment of $415 towards the IRA while we wait on our Refi.  As previously mentioned, Mr. Sam will max out his 401k in September so we'll have some extra cash available to put towards our goals that are lagging behind.

Other Homework

In addition to working on getting term life insurance, we are also FINALLY working on getting our car insurance consolidated.  We have been married for five years now, and getting our car insurance consolidated with one company has been on our "to do" list since then.  Neither of us are particularly happy with our respective car insurance companies, mine is Allstate and his is Progressive, so we have a quote from a new company that will give us more coverage for less money for the two policies.

We also have a third car, an antique, which will have to stay on a separate special policy (which is very low cost).

How Charitable?

This morning I caught an NPR segment on the geography of giving.

Very interesting to learn that lower income folks actually give away a bigger percentage of their discretionary income.  

• Households with incomes of $50,000-$75,000 donate on average 7.6 percent of their discretionary income.

• That's compared with about 4 percent for those with incomes of $200,000 or more.

Also, "red" states give more than "blue states.  Religion seems to play a large factor in this division.  Red states are more religious and citizens of those states give more to their church.   Utah ranks number one in giving, and that is due to the high Mormon population and the tithing to their church.  Personally, I'm not sure giving to church, in general, should count as charitable giving.  Certainly some of those funds goes to the church's charitable mission, but a good chunk of it goes to support the church on an administrative level (the upkeep of the church, heating and A/C, the pay for the preacher, etc.)

The Chronicle of Philanthropy has some great data that you can drill down into.  Some of the data is restricted to those that subscribe, but much of it is available to the public.

Florida ranks  # 15 in giving for percentage of discretionary income.  And, I think that is an interesting way to measure giving.  We rank fourth for total giving, which makes sense when you think of Florida population.  Overall, Florida's population is older and we have pockets of great wealth.

Thinking about our own level of giving, I think we could do better.  I know, because I've kept track of my personal finances for years and I used to give more when I was less focused on my (now our) personal finance goals.  Now that we set regular and focused goals, if we have "extra" cash available, I am much more likely to put those funds towards our personal goals rather than charitable giving.

This is how we give:  First, I make a monthly regular contribution to the children's charity that I am involved in.  This giving is set up to go automatically to our credit card and then I pay it off each month.  We give $40 a month, which is $480 a year.  I have to say, that automatic giving, like automatic savings is really a great way for me to give because I don't have to think about writing a check.  Once the giving is set up, I don't think about it all.

We also give money at Thanksgiving for our turkey give away (same organization), we normally give $100 in November.  We also give $100 to the annual fundraiser (same organization) which is also in November (I am on the board, so we strive for 100% board participation for our annual fundraiser, because that level of participation helps with grant writing).  We also normally sponsor a family at Christmas time, which means buying basic supplies and a few gifts for the family (same organization) which runs around $200.  So, to one organization we normally give close to $900 a year.

Second, we have two health/disease focused charities that we give to.  These are organizations that focus on support, research and finding a cure to two diseases that impact my family.  We normally give at least $100 a year to both, for a total of $200.

Third, I'll give $20 here and there to support friends that are fundraising.  Plus, we always buy Girl Scout cookies and support the kids in our neighborhood that are doing fundraising.  Finally, at Christmas time we have, for the past few years, bought everyone in our family a Christmas wreath which is shipped to them as part of the local marching band fundraiser (that normally runs $100+).  So with miscellaneous giving and the Christmas wreaths, that adds another $200 to our yearly total.

So, our grand total runs us about $1300 in giving. I've decided that I am going to increase my monthly giving from $40 to $50.  How about you, how much do you give and how do you give?

Recycling Bandits

Today, Friday, is recycling day in my small City.  We utilize a single stream collection system.  Which means that all our recycling, paper, cardboard, plastic, glass, cans, etc. is put into one large bucket.  Then the City utilizes an automatic pick up truck system that grabs the bucket and dumps it into the truck (which looks like the below image from another city).

The recycling program doesn't cost anything to the City, or the tax-payors, because the recycling program pays for itself by recycling and selling off the higher value recyclables.  In fact, there has been some discussion about a program in which the City will start tracking the weight of each household's recycling and eventually provide rebates (that will go to cover cost of waste removal) based on higher levels of recycling.

As you know, we live in South Florida.  South Florida has a large immigrant population (both legal and illegal).  I have general objection to the Federal government not enforcing our immigration laws and the fact that the illegal immigrant population strains our tax funded resources.  However, on a personal level, I generally have no problem with the illegal immigrants that make their home in our City.  Most of these folks are hard working, family orientated, peaceful folks who are doing their best to make a better life for themselves and their children.

But, every Friday I see, without fail, a group of immigrant women who goes around and collects the cans from the recycling buckets.  As far as I'm concerned this activity is theft from the City and from the citizens, because it is undermining our recycling program.  On the other hand, I'm sure these folks probably don't see any harm in their efforts since what they are stealing from is trash.  Some municipalities have criminalized recycling theft or scavenging  but I can't find that our City has done so.  As such, if there is no ordinance against the activity I'm not sure anything can be done at this point.

At this point, I'm thinking about reaching out to my local commissioner, what would you do?

Diamonds and Dollars

Have you ever received mail alerting you to the fact that you are a presumptive member of some class action lawsuit?  If yes, what did you do?  Did you ignore the mail, toss it, investigate and then toss, respond, file a claim, opt out?

Maybe you have heard news reports about the Nutella class action lawsuit (over the issue of whether chocolate nut spread is nutritious or not), wherein the settlement to the class was for coupons to buy more delicious, but not nutritious, Nutella.  In fact, many class action settlements involving retail wrong doing involve discounts or coupons for future services or products.  As a result, in some class action settlements, response rates are lower than 25%.

Yesterday, Mr. Sam received follow up mail from the Diamonds Claim Administrator for the DeBeers diamond price fixing settlement.  While neither of us have any recollection of submitting a claim, I assume I filled out the paperwork and submitted it back in 2008 (my research indicates that claims were due in 2008).  I have been prone to submit class claims ever since I received a check for almost $200 for a test prep class I took years ago in advance of professional school.

So, now the claims administrator is looking for actual proof of purchase for the engagement ring diamond that Mr. Sam purchased back in 2005.  Since my engagement ring is our most expensive piece of jewelry I do have a detailed file.  I have the GIA grading report and the Gemprint Certificate of Registration for the center diamond.  I also have the documentation regarding the wedding band and insurance paperwork, but nothing in my files that documents how much Mr. Sam paid for the main diamond.

Part of the problem is that Mr. Sam went through a diamond broker and bought the center diamond from a wholesaler and then had the engagement ring designed by a jeweler. As such, there is no receipt for the ring as a whole.  Thank goodness for Yahoo email, after I dug through our hard copy file and came up empty, he was able to go back to his 2005 e-mail records and find a receipt.  Hooray!!

Today, I will copy all of the diamond material and will send it off to the claims administrator.  Who knows how much we will get, but something is better than nothing.

eBay Errors

So, like many brides, when Mr. Sam and I got married, we registered for fine china.  I registered for a brand and pattern of china that has been around for 100+ years.  But, like many brides, I didn't end up receiving a full set of china, since the fine china I registered for was and is expensive (think $150 for a dinner plate).

Now, five years later I have discovered that since my china has been around for so long, I can find it on eBay for prices that are much more favorable.  So, what do I do, I get excited and start bidding on my china.  Three soup bowls for $30, that sounds like a bargain, bid away.  $10 for an egg cup, deal!

Guess what, I am not an eBay expert and I've realized that I've skipped over a very important part of eBay bidding process . . . and that is actually reading the item description.  Because, as you may have guessed, I now have three soup bowls, but all three have chips on the rim.  And my egg cup has a crack.  Luckily, I've only spent $40 on this experiment.  But, its certainly a wasted $40 because really, I can't do much with chipped and cracked fine china.  

So, what have I learned.  I need to make sure I click through and actually read the description, because based on my two purchases, both sellers fully disclosed that the items I was purchasing had flaws.  But, since I had bid before I read, that information wasn't particularly helpful.  Additionally, a very low price likely indicates a flaw.  How did I win the auction for three soup bowls at $30, no one else wanted them because of the rim chips.  

At present, I am watching six dinner plates (no flaws) and the auction price is up to $305.  I don't expect to bid on the plates since it outside my budget but six perfect plates would be a deal since at retail cost they would run $900.

How about you, have you had success on eBay?   

Headboard Project

Working on my headboard project today.

A few weeks ago, on bulk trash day, I spied an old, painted, wood headboard that had been set out for trash pick up. Since we needed a headboard for our guest room, when I returned home from my early morning walk, I made Mr. Sam get up and go pick it up in his truck.

 Today, I sanded the headboard utilizing Mr. Sam's handheld sanding machine. I started off with 50 grit sandpaper, then used 80 grit and finished with 120 grit. In between rounds of sanding, I washed off all the dust.  Once I was done with sanding, I then primed the headboard with white primer spray paint. At present, I'm waiting for it to dry and then I'll paint it with a bright white high gloss paint.

Total cost for new headboard will be zero dollars. With all the projects Mr. Sam does, we already had all the necessary supplies.

The Zen of Personal Finance

Zen Habits is one of my favorite personal philosophy web sites.  It is chocked full of great ideas for productivity, de-cluttering, exercise, mindfulness, etc.

Recently, I came across this article about not automating personal finance, which is actually by the Man vs. Debt blogger.

I go back and forth on this issue as I'm a big fan of automating retirement savings, bill paying and budgeting to make life easier.

First, I'm a big proponent of automating savings.  For us, our 401k contributions are automatically deducted by our respective employers.  As such, we never see that money and therefore never get a chance to spend it.  Furthermore, our 401k contributions are undertaken, in general (we also each have a Roth 401k option) pre-tax which is one of the significant benefits of a 401k plan.  I can't see a way to or a reason to unautomate 401k contributions, but I'm all ears.  However, we are mindful of the amount we are contributing to our 401k plans each year.  We are mindful to adjust the amount withheld by our respective employers in order to max out our plan each year.

When it comes to our other savings, I find that our automated savings work better than our unautomated savings.  For example, we are putting $400 per pay period towards our emergency fund, as such we are generally on track to meet our goal of adding $10,000 to our emergency fund in 2012.  For other savings goals which are not automated, i.e. our 2012 IRA savings or our trading account savings goal, we are lagging behind in part because I making those savings decisions after I pay bills, allocate allowance, etc.  Meaning, that if I have a decision making process when it comes to savings, I might not transfer that money to savings. Often, I'm not spending it on other things but I get nervous having our day to day checking account get so low.

When it comes to debt repayment, if you are struggling with debt, I think a measure of automation can help.  If you can get all of your minimum payments set up and automated (where you are pushing payments, I don't think its a great idea to allow banks access to your checking account) you know you won't miss any more payments and incur late fees and penalties.

But, I also recognize the importance of being mindful with one's spending and personal finances.

We use the $100 and $300 rule to keep engaged with our spending.  The $100 rule provides that for every "want" purchase over $100 we must wait one day per $100.  Which means if we are faced with a $500 want, we must wait at least 5 days.  The $300 rule provides that for every purchase over $300 we must discuss the purchase and agree between the two of us (bribing the dog to your side doesn't work).
We also don't use credit cards for day to day spending.  Using debit cards tied to our respective checking accounts in tandem with our adult allowance system requires each of us to think before we swipe since we each have a limited amount available to us for spending.

How do you maintain mindful spending?

Life and Death

Mr. Sam and I have been married for more than five years now.  But one of the personal finance tasks that we have not addressed since marriage is life insurance.  Life insurance and stream lining our other insurance has been on our "to do" list for years now.  We do, both have a life insurance product through our employment, but as you may or may not know, that policy is often not portable after you leave employment.

We have met with folks over the last few years, but we have never committed to buying life insurance.  Most of the folks we have met with have focused on whole life insurance  or some hybrid of whole life insurance.  Whole life can be very expensive since, as the name implies, it provides life insurance for your whole life and pays out upon death.

Life insurance is a very personal matter and how much you need or want depends on lots of factors.  We have generally decided that we want term life insurance.  Term life insurance means it lasts only for a certain number of years.  At present, we are looking at 20 year term insurance.  What do we want the insurance for?

Our general thought is that we want enough life insurance to retire any debt, at present we have @$580,000 in mortgage debt.  We don't have any other debt and our plan is to avoid incurring debt for the rest of our lives (ignore the fact that we have @$1500 in Home Depot debt at 0%, it will be paid in full shortly).  We expect that in the next 20 years we will continue to pay down our mortgage debt, with the plan of completely paying off our primary dwelling within 15 years, as our tenants pay down our investment property mortgages.   We may incur additional mortgage debt when we build our retirement home, but the plan is to fund that project when we sell our investment properties.  

So, we want at least $580,000 in life insurance for both of us to cover our debts.  Secondly, we want enough life insurance to ease the transition for either of us since we each rely on our joint income to maintain our current lifestyle.  What does that mean for us?  Well, we want enough life insurance money so that upon death, neither of us has to start liquidating assets right away in order to maintain current lifestyle.  On the other hand, we are not looking at this life insurance to be a "lottery" influx of cash.  There is a balance between how much we should pay on a yearly basis for term insurance vs. risk vs. pay out.  So, at present, we have settled on that magic number of $1 million in term life insurance for each of us, $580,000 in debt coverage and $420,000 in transition monies.  We have a pre-medical quote and we are also going to shop it around a bit as well.


How about you, do you have life insurance, what kind, how much and how did you settle on same?