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.
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