PAYING OFF MY HOME ONE MONTH AT A TIME (post #5)

It’s time again….here is the amortization chart.  It’s getting rough with Christmas on the way. Yes, you need to set aside money for Christmas.  No big spending. Do you even remember what you bought your brother or sister last year? How about the year before?  My family has a “Secret Santa” Christmas, so that helps tremendously. Although I want to splurge on my granddaughters.

So I made 3 extra principal payments for the month of September which totaled a little more than $600.   Not as much as I wanted but the BF and I budgeted for a short vacation to the Sequoia’s this month. We paid cash for the short vacation.  The trees are beautiful and I had never been there, even though I was born and raised in Southern California. I highly recommend going to see the magnificent beauty of the trees and the caves.


This 2nd chart is my way of showing me how many $1000 dollars I have paid off and how many I have left.

Let me know how you’re paying your mortgage off early.

Here’s to reading on!!!

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STRESS/RETIREMENT

Retirement…ahhhh…sounds like such a nice word, until you don’t know where your money is at.

The stress of having an account that someone else has control over is overwhelming sometimes.

I am finding this out from my BF (boyfriend).  He is a very responsible, accountable, old fashioned man (not old in years, he is only 54).  He happens to be a responsible person who worked for the same company (company changed hands 3 times) for the last 31 years and lived below his means.

The company is now on the verge of filing bankruptcy, which is why he unexpectedly retired early, otherwise there would be a good chance of him losing more than half of his pension.  And after 31 years of hard manual labor, he wasn’t about to let his pension slip through his hands.

When a company files bankruptcy and their employees have pension plans, there is usually a guarantee provided by the government called a guarantee pension.  PBGC is a federal agency created by the Employee Retirement Income Security Act of 1974 (ERISA) to protect pension benefits in private-sector defined benefit plans – the kind that typically pay a set monthly amount at retirement.  You are not guaranteed your whole pension, in some cases you are only entitled to about ⅓ of your original payout.  

One day while I was at work he texted me…”I pulled the trigger, I gave my two week notice and retired”.  He wasn’t ready for it, I wasn’t ready for it. But I was extremely happy for him. He had been dealing with incompetent managers (people who had degrees but never once worked in the field, couldn’t read a road map to get them out of a ceral box, and just thought “they knew better” than someone who had a degree but also had 31 years experience out in the field but didn’t want to be in management).

But then came the fear.  The fear of “what happens next?”  “How do I get my money”, “How do I invest my money”?  He only had two weeks to roll over his pension and his 401k.  For someone who has been debt-free for the last 10 years, I couldn’t understand how he didn’t know what to do with his money.  I have been following Dave Ramsey, Mr. Money Mustache, The Money Wizard, Root of Good, etc for the last couple of years, and I know exactly what I would have done if it was my money.  But it’s not my money and I am trying to understand how hard this is for him. Any advice I give him may be wrong and I wouldn’t know who to advise him to go see.

The problem with retiring early (prior to 59 ½) is that in order to take money from any retirement accounts without penalty you have to do a 72T withdrawal.  This is just the IRS way of distributing your retirement plan with equal periodic payments without charging a penalty. But, and here’s the big but….you have to know how to withdrawal from a 72T.

Unfortunately or fortunately, the BF decided to use a finance person who is also helping fellow employees with their respective retirements, but how much does anyone know about this person?  BF is now having trouble seeing his money on the financial website. The brokerage firm is now using a new company. All of this stress is unbelievable. I suggest that if you’re not going to manage your own money, do yourself a favor and learn as much about finances as you can and if you still don’t want to manage your own money, search out someone who you’ve done your homework on and interview them…interview several of them and then pick the one that suits you, understands you, and has your best interest in mind.

I have read Simple Path to Wealth by J.L. Collins and Quit Like a Millionaire by Bryce Leung and Kristy Shen.  Both are great books but I still can’t tell the BF to “just put your money here, or there”. What happens if he loses it, I would feel that I was responsible.

So please, if you are anywhere near retirement know exactly what you are going to do with your money.  Have the foresight to look ahead and plan.  

I suggest getting a Personal Capital Account as does every other FIRE person (financial independence retire early) to keep track of budgeting, investments and bank accounts and also go with the Big 3 at Vanguard:

VTSAX

VTIAX

VBTLX

If you like, comment below on your views for retirement.

Here’s to reading on!

PAYING OFF MY HOME ONE MONTH AT A TIME (post #4)

Well here I am again…trying to keep my promise by updating the paying off of my mortgage post by posting every 2 weeks.  

For this post I am showing you the month of August.  

I was only able to pay $1183.11 towards the principal this month.  I was saving cash for an upcoming vacation.

As you can see the balance is coming down at a good pace and it is now only a 27 year mortgage.  I have paid off 3 years of a 30 year mortgage in 5 months!

Dave Ramsey would say to get a 15 year mortgage, but I think I am doing pretty well paying it down myself.  I just have to remain focused and intentional (as Chris Hogan would say – finance guy, not football player).

As the months continue to fall to the wayside, it is getting harder to pay more of them.  As I look through my amortization table I realize it will take me longer to pay off each year as the principal amount gets larger.  I am not sure I will be able to continue to post every 2 weeks. Since I get paid every 2 weeks, I try to squeeze as much out of my bi-weekly budget as I can to put towards the principal.  It may boil down to just posting updates once per month. But I encourage you to follow me for updates and to keep you encouraged to pay off your debts and your mortgage.

Here’s to reading on!

PAYING OFF DEBTS

On your way to being a senior citizen, it is very important that you become debt free prior to retiring.  Your life will be so much more enjoyable without having the stress and worry about paying credit cards and car payments.

I first started off reading the blogs by Mary Hunt.  Mary Hunt is an author of “Cheapskate Monthly”, a subscription newsletter.  As much as I tried her techniques to become debt free, an “emergency” would always came up and I could never get to the point to save $10,000 as an emergency fund.

Step in the boyfriend (BF)….the BF in his wisdom, has been debt free, including his mortgage, since the age of 45.  It was always his goal and he obtained it by being frugal, eating at home, taking his lunch to work, etc. He is not so frugal that he hasn’t lived.  He owns 4 cars…yes I know that’s more than any one person needs. But one of the cars belongs to his daughter. The other 3 all have a purpose (in his mind).  The ‘84 jeep – a “classic”…the F250 – “to pull the Seadoo”…the 2014 Jeep Wrangler – “cause I like it”. Hey he has the money and has been frugal, who am I to tell him he’s crazy? Anyway, whenever we would talk about finances he would tell me about some guy named Dave Ramsey who believes in being debt free, including your house and “living below your means”.  I would talk back and say “no thank you I’m doing it “MY” way. But as the months and then the years would go by, “MY” way wasn’t working.

One day, driving down the freeway to go more than 45 minutes away to a mall to buy some bras from Victoria Secret (best fitting, best quality for the money bras), I decided to listen to a Dave Ramsey podcast on my radio.  

STOP THE CAR!!!  I couldn’t believe my ears.  Here was a married couple 15 years younger than me, making half of what I make combined (that’s awful) and they were doing their “debt-free scream”.  What the heck is a “debt-free scream”? It’s what you do when you have no more debt. Zero. Nada. Zip. This couple had paid off over $80,000 in something like 4 years.  I thought to myself. “This is crazy. No one can make $42,000 per year and pay off $80,000 in 4 years, NO WAY”. Well, one after another, I heard all these people for over an hour coming on the radio screaming they were debt free.  Some even had their houses paid off, some just their student loans and credit cards.

I turned the car around, went home, (no I didn’t buy any bras that day) and listened for the next 4 hours of what Dave Ramsey calls his “baby steps” and people screaming about being debt free. 

Dave Ramsey’s Baby Steps:

  1. Save $1000 for emergency fund.
  2. Pay off all non-mortgage debts using the debt snowball:
  • List your debts from smallest to largest, regardless of interest rate.
  • Make minimum payments on all your debts except the smallest.
  • Pay as much as possible on your smallest debt.
  • Repeat until each debt is paid in full. 

      3.  Three to 6 months expenses in savings.

     4.  Invest 15% of household income in retirement funds.

     5.  Fund college for kids

     6.  Pay off your home early

     7.  Build Wealth

I wanted that.  I wanted my furniture payments gone. I wanted my student loans gone.  And most importantly, I wanted my mortgage gone. I didn’t want to be 78 yrs old when my house was finally paid off.  I didn’t want any payments of any kind after I was going to retire. I knew that night what I was going to do, what I HAD to do, and how long it was going to take me to get there.  

I took all the money I was saving, the way Mary Hunt had suggested, and used it to pay off all of my furniture and credit card payments that night.  I cut up my credit cards that night. I paid extra toward my student loans that night. I was on fire. I was going to start living below my means as much as I could.  My problem was that I had a huge house with a big yard and a big pool and a bigger electric bill because of the big pool! I needed to get rid of the house. But there was a problem.  I was 53 at the time and I knew about 2 little propositions in California called Proposition 60 and Proposition 90. Those 2 propositions help senior citizens (55 yrs or older) keep their property taxes at decent rates when downsizing.  So I had 2 years to pay off the rest of my student loans, then hope the housing market would go up (more) and sell the big house and buy something smaller that would fit me better.

sorry for the terrible pic, have to learn how to edit photos

Each square = $1000. I started on 2/4/17. As you see I owed and paid off $43,000.00 in a year and a half. It was actually more, I didn’t do this chart for the furniture ($2200 and misc credit cards approx $1000).

Present time: I am now 55 yrs old.  I sold my big house and bought a smaller house in a 55+ Active Community. I have paid off all of my debt, except for my mortgage.  My mortgage should be paid off in 3 years. I will be 58 at that time. I have added a new goal for myself. Besides being debt free including my mortgage, I want to be able to retire at 60, which now leads me to reading the blogs of Financial Samurai, Mr. Money Mustache and the rest of the FIRE group (FIRE = financial independence retire early).  Why don’t you come join me!

Here’s to reading on!

PAYING OFF MY HOME ONE MONTH AT A TIME (post #3)

I know, I know….I was supposed to have this 3rd post out a couple of weeks ago but…..it’s very hard when your BF is already retired and wants to spend your days off with you. I’ll take all of the time with him I can get!!!

So here we go:

How does that look?  I look at this everyday on my refrigerator.

The month of July seemed to be a bit tough for me to put extra principal towards the mortgage, I think because I had taken some time off from work.  I only paid off 7 months worth of principal at $1344.41. I would like to work extra hours, but being summer and having a pool, a gym, a golf cart (for cocktail cruising at night!) it’s very difficult to be focused.  Can’t wait for fall to get me intentional on working extra hours.

I have this other chart that I keep on the fridge also:

I love visual aids/charts that help give me a purpose to keep pushing on.

This chart is helping me to see how many $1000 dollars that I need to pay in order to be mortgage free.  It’s 14 squares across and 10 squares down which = $140,000.00 which is what my mortgage was after buying the house and putting down $130,000.00

If you have any opinions let me know.  Also tell me what YOU do to keep on track with either the Dave Ramsey Baby Steps, or your journey to paying off your debt.

As always, 

Here’s to reading on!

HOW TO GET SPENDING UNDER CONTROL #1

BY USING DAVE RAMSEY’S ALLOCATED SPENDING PLAN 

Dave Ramsey has a free app called “EveryDollar” that you can put on your phone and your computer.  It is a budgeting app that helps you tell your money where to go, instead of keeping track of where your money went.  What’s the difference? In my opinion it puts you more in control of what you’re doing with your money. This app is very easy to use.  

The problem I had with this app is that I get paid every two weeks and I would split my paycheck up by only putting half of my monthly mortgage payment to my mortgage checking account every payday.  For example let’s say I got paid $2000 on the 9th, then I would take $650 of that and hold it for the next months mortgage. When I got paid $2000 again on the 23rd, I would take another $650 and put it with the first $650 and make the house payment.  It was just easier for me to take half of the mortgage payment from each paycheck, so my accounts are a little complicated for the average person. Every so often I would get paid 3 times per month, and when that would happen I would continue with how I was paying the mortgage and I would just be a month ahead on the mortgage payment.

Alas,  I found what worked best for me was the Dave Ramsey Allocated Spending Plan:

Dave Ramsey’s Allocated Spending Plan

It’s pretty easy to use. It’s actually 4 pages long (yes, there are lots of categories to choose from). Just put your net income in the “pay period income” column, then place the amount of money you will be spending for each separate category and deduct it from the previous remaining balance column.

I have been using this for the last 2 and a half years.  It’s what works for me at this time. Try it. It also is simple to use.  If you need any instructions for it, just comment below or you can look it up on daveramsey.com or look it up on YouTube.

I love the allocated spending plan.  It makes me more conscious of where my money needs to go.  I can also plan vacations, buy big purchases, etc. ahead of time by utilizing this form.  I know exactly where my money needs to go and how much will be left over to fund my retirement.

But now that I am on Dave Ramsey’s Baby Step 6 (paying off mortgage early) I may try to use the EveryDollar app again.  What do you think?

Here’s to reading on!

PAYING OFF MY HOME ONE MONTH AT A TIME (post #2)

How do you pay off your home early?  By being focused and on fire. The following shows how I am using my amortization schedule to keep track of how much I currently owe on my house.  I will show you every two weeks how my progress is going (growing?).

2 weeks ago I showed you how I was paying off my home early using the amortization schedule from my lender.  Here is the 2nd post showing how much has been paid off.  

As you can see, the monthly interest portion decreases as the monthly principal amount increases.  This will make it a little rougher each time I make an extra payment. As much as I want the house paid off, I need to concentrate, be disciplined, and most of all be FOCUSED.

For the month of May through June, I only made 2 extra payments,  which the total amount of the extra payments were $2030.33, but it paid off an ENTIRE YEAR of house payments! So by the 7th of June I had already taken my 30 year loan down to 28 years.  

At this point I owe $135,669.76.  I wonder if Dave Ramsey would be proud of me?

Here’s to reading on!

PAYING OFF MY HOME ONE MONTH AT A TIME (post #1)

How do you pay off your home early?  By being focused and on fire. The following shows how I am using my amortization schedule to keep track of how much I currently owe on my house.  I will show you every two weeks how my progress is going (growing?).

I bought my current home in March 2019, so the first house payment was actually due on April 1, 2019.

So I made the first payment on 04/01/19.  My total house payment with taxes and insurance is $1117.00.

Amortization Schedule

You can see how the principal portion goes up as the interest portion goes down with each monthly payment.  But if you want to keep track of early payoff, just pay the next month’s principal payment. You can see that on 4/5/2019 I made an extra principal only payment of $346.38 (May’s payment of $172.84 and June’s payment of $173.54). Make sure when you make an extra principal payment you specify “principal only” to the loan holder.

You can see that in one month I actually paid off a whole year on my 30 year mortgage loan.

I know Dave Ramsey says to get a 15 year fixed mortgage, but I am focused and dedicated and would rather have the lower monthly payment from a 30 yr mortgage than the higher monthly payment at a 15 yr mortgage.  If you don’t think you can be focused and dedicated as I am, then please go for a 15 yr mortgage.

And yes, at the time of releasing this blog, mortgage interest rates have declined, but I figure if I pay the house off in 3 years, I don’t know if it would be worth it to refinance.  Let me know what you think.

Here’s to reading on!

WHY YOU CAN AFFORD TO RETIRE IN CALIFORNIA

Do you ever wonder why seniors in California leave the state when they retire?  There are a couple of reasons, but one is because they think they can’t afford the housing.  But do some research and you will find that just not may be the case.

Enter California’s Prop 60 and Prop 90.  These are propositions that let you take your base tax value from your current home, sell the home, then transfer your base tax to your new residence.  Yes, there are some catches but first, let’s learn about the wonderful Proposition 13 that we have here in California.

Proposition 13

Proposition 13, adopted by California voters in 1978, mandates a property tax rate of one percent, requires that properties be assessed at market value at the time of sale, and allows assessments to rise by no more than 2 percent per year until the next sale.

In English = This means if you buy a house in California for $200,000 the property tax for the year is $2000…of course you have some other small taxes from individual counties, for instance my property taxes are approximately 1.43% per year.

What this equates to is that you can keep a house for ever and the property tax will only rise by no more than 2 percent per year, and that’s only if the County Tax assessor decides to assess your house (they don’t always perform assessments every year).  Sorry to everyone who lives in New Jersey and Texas.

So Prop 13 has been saving us since 1978, but what happens when you become a senior, the nest is empty and you & grandpa want to downsize from your 2500 sq ft  2 story home??? This is where Prop 60 and Prop 90 come in handy. 

The reason for these propositions was because the housing market was drying up, young new wanna be home owners couldn’t afford the new house prices and the seniors had most of the larger homes, which most of the space was going to waste.  So, in steps Prop 60 and Prop 90 which states:

Proposition 60 allows for the transfers of a base year value within the same county (intracounty).

In English = The property taxes on your current home will transfer over to your new home.

Proposition 90 allows for the transfers of a base year value from one county to another county in California (intercounty) if the county has authorized such a transfer by an ordinance.

IN English = You can sell your home from one county and take the taxes from that property and buy a house in a different county and still use the same low taxes.

The Catch:

The catch is you have to be at least 55 years old when you sell your current home and the new home needs to be of equal or lesser value of the home you are selling and they both need to be in the counties that participate in Prop 60/90.

Example:

I just sold the house I lived in for the last 6 years.  I bought it for $168,000 (it was a HUD home) and my property taxes were 1.43% which = $2402 per year.  I sold it for $340,000 one month after I turned 55.

I then bought a smaller house for $270,000, which if I wouldn’t have used Prop 60, my property taxes would be $3861 per year.  But since I found the Prop 60 information I am allowed to take my base value tax from the bigger, more expensive house ($2402) to my new house, saving me approx $1400 per year in property taxes.

Recap and other Catches:

Must be 55 yrs old or older when you sell your home.

New house must be of equal or lesser value of the house you are selling.

There are only 10 counties (as of November 2018) that you can use these propositions:

Alameda

Los Angeles

Orange

Riverside

San Bernardino

San Diego

San Mateo

Santa Clara

Tuolumne

Ventura

Please check your local County Assessor’s Office for any updates and/or changes.

The California State Board of Equalization has all the information you need.  Just type in Prop 60 or Propositions 60/90 in Google to get the information.

Here’s to reading on!