Finance – Page 6 – Frugal Living

It’s Official – Free and Clear Deed!

December 10, 2015 by Andrew Leave a Comment

I wrote exactly one month ago about how we had paid off our mortgage (see here). Simply sending in the last payment to a mortgage is not enough however. To truly be finished with a loan, whether that be a student loan or a mortgage, you need the paperwork to back it up. For mortgages, that comes in the flavor of a Release from Mortgage. Basically the lender says, “Yup, they done paid in full” except in writing and usually in a more educated manner.

That piece of paper does more than just give you a warm fuzzy feely. When it comes time to sell your house, the buyer is going to want proof that no one else has a legitimate claim to the property. A mortgage after all is just a secured loan, with the security being the property. So I took that nicely worded piece of notarized legalese and went down to our county clerk/recorder’s office to have it filed for $33. The clerk/recorder’s office keeps a record of all property deeds, mortgages, liens, and foreclosures. These public records are commonly available online for easy searching. It makes it very easy to research properties and also to be very nosy. 😉

Anyway, we now officially own the deed to our house free and clear. No other parties have any legitimate claim on it and the process of selling will be slightly simpler.

screenshot from county recorder’s website

Shae’s name is on the deed. I don’t know why it isn’t listed on the Grantees list, but it is where it counts.

Do People Really Fall For This?

December 8, 2015 by Andrew Leave a Comment

It is a rhetorical question because savvy reader, we already know the answer. I was listening to the radio this morning while driving Frugal Boy to the babysitters when an ad came on. It was for a local credit union advertising their “Lifestyle Loans”. Wow, how thoughtful of them to lend some money right before Christmas time. I turned up the volume because I knew this was going to be rich. After hearing the terms and conditions I made a mental reminder to look up the offer online when I got home.

Here is what their website had to say.

Lifestyle loans can be up to $20,000 at a *low*, *low* rate of only 9.5%. The term is maxed out at 36 months. If those terms aren’t *good* enough for you, they are also nice enough to throw in a %1 cash back on the amount you take out (e.g. $200 on a $20,000 loan).

Using a simple loan calculator, I can see that a $20,000 loan at 9.5% for 36 months will have a monthly payment of $640.66 and cost $3,063.72 in interest over three years.

If you factor in the 1% immediate cash bonus and applied that against the interest the “real” loan rate would be about 8.9%, an absolutely abysmal rate.

Out of their proposed list of items and services I only see a handful that might qualify for taking on a shark type loan. Even then you could probably work out a payment plan with a funeral home, HVAC company, or hospital that would be cheaper than a 9.5% loan.

Anyway, I just had to stand up on my soapbox. This is a local credit union that sells a crappy product to people in our community. Obviously people gobble it up because they just NEED golf carts, cosmetic surgery, or honeymoons. Christmas isn’t about those things, and people don’t need to take out loans for Christmas.

Replacing a Key FOB Battery

November 29, 2015 by Andrew Leave a Comment

The two key fobs to our car died a long time ago and we have just used the key ever since. Last week I decided to do something about that. The battery type is listed right on the back of the fob (CR2032).

I searched online and saw one forum saying that Dollar Tree had 3 for a $1. Naturally, I tried there first, but our local dollar tree doesn’t carry button cell batteries. I did find a set of two at Wally World for $4, a price that beat Walgreen’s 1 for $5.

With the replacement battery procured, I had to figure out how to open the fob. There was a very small indentation at the 5 o’clock position that a flat head screwdriver could fit into.

With the fob opened up, it was a simple matter to replace the old battery and close up the fob again.

Prices for new fobs for our car range from $12 (Amazon) all the way to $100 (stealership).

Individual Retirement Account

November 5, 2015 by Andrew Leave a Comment

Today I opened my first IRA. It took about 15 minutes on Vanguard’s website. If you haven’t started saving for retirement then an IRA is a great place to start (a company matched 401k is even better).

Traditional vs ROTH

One of the first questions you will encounter when opening an IRA is whether you want to open a Traditional or a ROTH account.

An IRA comes in two flavors, just like 401ks. You can open up a traditional IRA, a ROTH IRA, or both. The difference between the two is where the money comes from. In traditional IRAs, the kind I just opened with Vanguard, investment money comes from pre-tax dollars. So if I make a $1 profit from my business, that entire $1 can be invested immediately. With a ROTH IRA, if I make a $1 profit, I pay tax on that profit and what is left over (¢85 to ¢92) gets invested. Of course the flip side to this is that when it comes time for me to withdraw the invested money, I pay taxes on gains for a traditional whereas I would pay no taxes on a ROTH.

In short, pick a Traditional IRA or 401k if you expect to be in a lower tax bracket when you retire than you are when you are working (most everyone fits into this boat).

IRA vs 401k

If you have access to an employer sponsored 401k plan, it would probably be best to max that out ($18000/year) before opening up an IRA. Most employers contribute some amount of money to your 401k as long as you do as well. In essence, you get free money from your company.

IRAs are available to everyone that works and have an income. They are also really easy to set up and give you total control over the fund choices. However, the contribution limits are lower, only $5500 per year.

Why Not Both?

If your employer offers a 401k plan, or you are self employed and take the initiative to create your own, then you can contribute to both a 401k and an IRA. The advantage of ‘maxing’ out both accounts is that it shields up to $18000 (401k) + $5500 (IRA) = $23500 from taxes. Add a spouse doing the same thing and suddenly your taxable household income drops by a whopping $47,000. Wowza, that’s about seven thousand dollars of taxes saved!

What Fund To Invest In?

Call me lazy, but I am a big fan of Vanguard’s Target Date Retirement funds. These all in one index funds include equities and bonds in a slowly changing ratio to make the portfolio less volatile as you reach your target retirement date. The one I am using, VFFVX (2055 target date) has a modest expense ratio of 0.18%. I could do a bit better than that by manually managing my own three fund portfolio, but the difference that the lower expense ratio makes in extending working years can be measured in weeks.

Leave a question in the comments if you’d like to learn more about retirement savings.

Financial Goals Update – Fall 2015

September 25, 2015 by Andrew Leave a Comment

Happy Autumn! We have closed our windows and have started to bundle up at night as the temperatures drop into the 40s and 50s.

We are also making progress on our financial goals.

Mortgage

Our mortgage is 88.1% paid off, up from 61.9% in April. There have been many sacrifices along the way to make that progress but we’d do it again in a heartbeat. At our current pace we should own our home free and clear by the end of the year (well before our 30s). The standard critic’s response to our situation would be that we had rich parents who paid off the house for us. The thought is that there is no way that a couple could live below their means and aggressively save money instead of spending it.

One of the nice things about keeping detailed financial records is that I can go back and look at the numbers and say that 8% of the house was procured using inheritance/gift money. The other 92% was earned and saved by our own sweat and determination. Of that 8%, 0% was explicitly earmarked for house payments, meaning that when we received a lump of money we CHOSE to invest it into our house instead of spending it freely.

Retirement

Our retirement accounts haven’t changed much in value over the last 6 months thanks to a market correction in late August. Our equity heavy portfolio is more volatile than a bond portfolio, but we are not worried about the anemic pace this year. The market value of the portfolio has remained steady solely because we keep pumping money into retirement accounts each paycheck. The important metric is the number of shares owned and that has been growing steadily over the past half year.

Just yesterday, Caterpillar announced that they would be reducing their employee count by 10,000. A couple of months ago, another major employer in our area, Mitsubishi Motors North America, closed a factory with 1200 workers. My heart goes out to these families. For many, I suspect these layoffs will have devastating effects on their lives. The pink slips being handed out are not because they are bad at their jobs, they are the result of global economics, something that the affected worker has no control over. What we do have control over is how we manage and save the money that we have right now.