Archive for the ‘Personal Finance’ Category

Attempting to Save on Home Annoyances

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The following is from my husband, Len Stemberger.  Yes, that is a miracle.  He has only guest posted for my main site, budgetinginthefunstuff.com, once.  In 5 years…

Like most new things, building a new home is a bit of an adventure, and once it is finally done, you enter into a honeymoon period. The house is wonderful; everything is as you always dreamed it would be; and the smallest details amaze you.

Losing the Shine

But, also like most things, this euphoric feeling wanes. The smallest details begin to annoy you, and you realize that your dream idea may not work so well in practice.

For me, this moment occurred rather quickly. And, to be honest, it wasn’t the house’s fault, and it wasn’t the fault of the builder – or at least not the people who actually built the house.

The problem: our dish washer.

Really, I blame my mother-in-law. See, in our last house, my mother-in-law bought us all of our kitchen appliances – refrigerator, microwave, oven/stove, dish washer, washing machine, and dryer. They weren’t fancy – just simple, efficient, and very effective. I loved that dish washer. Not at the time mind you – I didn’t realize how good I had it.

Crappy Dishwasher

It wasn’t until we really got everything moved in and settled in our new home, that we began using the dish washer on a regular basis. The problems emerged.

Our new dish washer is worse in every way compared to our old one. It holds fewer dishes. It does a worse job cleaning (even with pre-rinsing which we never had to do with our old one). It does a lot worse drying – you need a towel to dry the dishes that came out of the washer (and that’s with the fancy heated dry option on).

Now, there is nothing left to do but either live with it or replace it. So every Sunday, when the paper arrives, I flip straight to the Sears ad just waiting for the day that the deal is too good to pass up. I also keep an eye on the Sears section of Groupon Coupons so I can combine a great deal with a discount too!

One day it will arrive, and the scourge of the dreaded dish washer shall be removed from our lives. But, until then, I suppose there are always paper plates when I just can’t bring myself to drying dishes by hand…

What about your home annoys you? Is there something about a previous home that you really miss?

Lesson Learned

Money Tree

The following is a staff writer post from MikeS.  He is a married father of 2.  So, with the cat, he ranks number 5 in the house.  He loves numbers and helping people. Please leave any questions or comments below for either Mike or Crystal.

You would think that I would have learned this lesson over the years: Always do your homework. Maybe I was just lazy, but my mistake probably will end up costing myself a few hundred dollars.  The good news is that I am going to save myself thousands.

The Refinance

A couple of months ago I thought maybe it would make sense to refinance my current mortgage to eliminate the mortgage insurance I was paying.  When I bought my home a few years ago, I did not have the 20% necessary for a down payment.  As a result, I had to pay mortgage insurance.  It was a little over $300 a month.  That’s simply money down the drain.

A friend of mine just bought a house, so she recommended the bank that she had used. I contacted them to determine what options I had for refinancing.  The bank could do a refinance with a primary mortgage and a home equity loan.  The primary would be 30-year fixed at 4%, with the home equity line a variable rate, currently 5%.  The total cost of the loan, compared to my current mortgage was basically a wash.

The biggest upside was that this would eliminate the mortgage insurance.  It would also save me some money on a monthly basis, roughly a $100.  The biggest downside is the variable rate, as I believe interest rates are going up sometime in the future.  If and when interest rates rise, so would may payment.  I was willing to make this trade off, as I am locked into the mortgage insurance for another 7 years.  Since the deal sounded pretty good I started the process of refinancing.  What I should have done, was to investigate other lenders to see if I could get a better deal.  I sent the money in for the house appraisal to begin the process.

The Issue

The appraisal came in slightly lower than I expected, but still high enough to go through with the refinancing. One of the things that changed was that I would have some additional closing costs that would be rolled into the loan.  As all the paperwork was being worked on, I noticed that rates on the bank’s website had come down.  Since the rate lock agreement I had signed was only a couple of weeks away from expiring, I inquired what would happen if the lock rate expired before I closed on the mortgage.  Turns out, if rates went down, I would not get the benefit of the lower rates.  While I understood this, I was not exactly happy about it either.  This was the trigger for me to do the homework I should have done all along.  So, I contacted a few other lenders to see what other deals were out there.

Our Decision

After discussing my situation with other lenders, I found a better deal for my mortgage. The new deal was all one mortgage.  My high credit score qualified me for the lender to pay the mortgage insurance.  When I did the math, I will save about $15,000 over the total cost of the loan.  Even though this loan had a slightly higher interest rate, 1/8 of a percent (4.125% overall), it had lower closing costs.  The first refinancing option also had the home equity portion as well at a higher rate.

The end result is that I will probably lose the money that I paid for the first home appraisal. Had I done my homework initially, I would have found the lowest cost option to start.  I guess, since I went with the best option in the end, there is only a little bit of financial pain.  I will remember that pain then next time I have to make a financial decision.

Plugging a Hole

Money Tree

The following is a staff writer post from MikeS.  He is a married father of 2.  So, with the cat, he ranks number 5 in the house.  He loves numbers and helping people. Please leave any questions or comments below for either Mike or Crystal.

I was bad. I spent more money than I should have spent.  The good news is that the over spend came from my allowance, so the damage was minimal.  Still, I was in danger of not having the savings that I wanted by year-end.  I planned on having $600 set aside by the end of the year for the surprise trip for my wife in a few years.  Poor impulse control led me to spend too much money.

The Spend

The biggest expenses I had were a couple casino trips that I had not anticipated. I have not really been to the casino much in the last few years, so I had not set aside money for gambling purposes.  I ended up going with my good friend a couple of times.  I went mainly because he was having heart surgery.  He and I went once before the surgery and then again a couple of months after his surgery.  We both had a great time.  I think it also helped my friend after the surgery as he couldn’t drive, so it got him out of the house.  So, in that respect, the money was well spent.  However, my luck was nonexistent at the casino and I lost everything that I took.  What this meant for my finances is that I would be falling about $150 short of my year-end goal to save $600 for the trip for my wife.

Extra Income

Since my allowance is fixed I was initially just going to accept the $150 shortfall and make up the difference next year. I was not exactly excited about the idea, but felt it was probably inevitable.  I then began seeing a bank advertise a bonus for opening up a checking account with them.  The bonus was $100.  It probably took a few weeks of seeing the ads before I started considering opening the account.

I finally investigated the conditions necessary for the bonus.  I would need to have at least $250 direct deposited into the account over a 60 period and keep the account open for 90 days.  The account’s only requirement to avoid any monthly fees is that I have to have at least one direct deposit into it every month.  This seemed like an easy $100 to make.  I can easily adjust my paycheck direct deposits with a few simple mouse clicks.  So, now all I have to do is wait for the bonus and then transfer all of the money back to my savings account.  The remaining shortfall was made up via another checking account bonus.  This one was even easier.

Since I have a Discover credit card, they were offering a $50 bonus to also open up a checking account.  There were no restrictions or conditions necessary to receive the $50, just open up a checking account.  That felt like a no-brainer to me.  So, with a little paperwork, I was able to pick up an extra $150 and plug my deficit for the year.

Morality

It took some time to think about opening the accounts. I wondered whether it was ‘right’ to open the accounts.  I had no intention of keeping the accounts, just of getting the bonus.  The more I thought about it, the better I felt about it.  I reasoned that I was following the conditions without bending rules or doing anything dishonest.  There was nothing illegal about opening the accounts just for the bonus and then closing them shortly thereafter.  By abiding by the conditions the banks set forth for the deal, there was nothing wrong with opening the accounts.

Future Budget

Since it looks like I’ll probably be headed to the casino more frequently (more than zero times), I should plan for it. I don’t want to be in this position at the end of next year.  Have you taken advantage of any bank incentives to your advantage recently?

Middle Class

Money Tree

The following is a staff writer post from MikeS.  He is a married father of 2.  So, with the cat, he ranks number 5 in the house.  He loves numbers and helping people. Please leave any questions or comments below for either Mike or Crystal.

When it comes to financial articles, I usually fall for click-bait. Such was the case when I came across this article a while back.  The article discusses seven things that the middle class can no longer afford.  I consider myself middle class.  I am probably upper-middle class with and annual income around $100K.  So, naturally I was curious about the things I was supposedly unable to afford.

Vacations

This first item listed is vacations. This is not something that I have given up.  Granted I don’t take an expensive vacation every year, but my wife and I still get away for a few days.  I am saving for two big vacations.  One is a family vacation to Disney World.  I am expecting the cost to be about $10,000.  The trip is planned for roughly 3 years from now.  I have been saving for it for the last couple years and should easily have the money when we need it.  The second vacation is the second honeymoon I am going to surprise my wife with.  That trip is going to cost in the neighborhood of $6,000.  That trip is also budgeted and won’t be an issue financially.  I think for middle class earners, a little planning can keep vacations easily accessible.

New Vehicles

I think the issue with cars, is that people buy too much car, much like they buy too much house. They then compound the problem by not driving the car for a long time.  My wife and I have two cars, one is 3-years old and the other is 13-years old.  Neither one of the cars is top of the line nor have all of the features you could buy.  By being sensible about what we buy and only buying what we need, we can still afford to buy a new car.

To Pay off Debt

Do I have debt? Yes, a car loan and a mortgage.  I could pay the car loan off, but with an interest rate less than 2%, it is not my priority.  I do not have any credit card debt, nor do we have student loans anymore.  We paid all of that off within the last few years.  Sure, we could have used that money for other things, but paying off those debts was a higher priority.  I think that’s the issue most people have, prioritizing where they want their money to go.

Emergency Savings

My emergency savings aren’t quite where I want them to be yet. I have about $15,000 dedicated for emergency savings and another $10,000 that I could use if it was a true emergency.  Establishing the emergency fund was one of my top priorities when I was digging out of my hole.  When life’s unexpected expenses would pop up, it would put me back in the hole.  The cushion allows me to absorb life’s expenses without having to go into debt.

Retirement Savings

This one is simply people not prioritizing the future. I currently set aside 7% of my gross pay and my company contributes another 8%.  When people say they can’t afford to set aside any money, they are simply not prioritizing their retirement savings.  Instead, they are going out to eat, buying a new TV, or buying the latest iPhone.  Sure, all of those things are nice, but not having to work the rest of your life is nicer in my opinion.

Medical and Dental Care

The article listed these two separately, but they are essentially the same to me. I’ve experienced both this year, first with my root canal and then with surgery for my little guy.  I was able to handle the expense for both because of my HSA.  I had been saving the money throughout the year in the HSA and used it when the expenses came up.  Once again by planning ahead, I was able to handle the expenses when the unexpected happened.

Plan Ahead

In my opinion, the middle class can afford all of these things with a little planning. Since their income is limited, the middle class just needs to prioritize where their money goes.  They may not be able to take a vacation every year or a buy a new car every 3 years, but it doesn’t mean they can’t have them at all.  By setting a little bit of money aside each paycheck, all of this is possible.

Light, Energy, Action: How Blinds Can Save You Money

Chairs

To some of us, blinds are just something that makes our windows look a little prettier. For the rest of us, they can be a real money-saver that proves to be one of the shrewdest investments for your home you can make.

Ever since the first set of blinds was invented (and unfortunately, we don’t have any concrete historical stats in front of us), they have been boosting energy efficiency. The fact that they are just able to block some sunlight, made them a firm winner and meant that our homes were either to intercept more sunlight, or retain their heat.

That’s now just the tip of the iceberg. Catching onto the fact that we’re now all obsessed with energy efficiency and ways to save money, blinds manufacturers have taken their initial creations several steps further. Some serious technology has been invested into some blind types – and this means that the potential to save more money has gone through the roof.

Let’s look at what the situation used to be like with blinds. Whether it was Roman, Venetian or vertical blinds – they could all serve the purpose of cutting our bills in some way or another.

Chairs

Now, their “big brothers” have taken things a step further. To combat chilling temperatures, and ultimately soaring heating costs, we’ve been presented with blinds that have been specifically designed to combat temperature control. Insulated shades are the product in question and some of the stories that have been released about these types of blinds are bordering on the ridiculous. For example, one household reported seeing a “puff of condensation” when they opened their blinds in the morning – as the difference between the general room temperature and that on the window-side of the blinds was so different. In other words, the savings can be huge.

As the title of our post suggested, there’s also a big point on light with modern-day blinds. While you could have experienced some thermal benefits with something like a blackout blind several years ago, it came at the cost of a room in complete darkness. Solar shades have stepped in to save the day in this regard and if you do reside in a hot climate, you can block out the sun’s heat but keep the natural light. It means that you save on both energy costs, and lighting costs – so the savings can again border on the ridiculous.

The list really could go on. For those looking to make a heftier investment, motorized blinds aren’t just for show either. They can be programmed to function only in the peak hours of the day, from a weather perspective anyway, so it can be possible to allow optimum amounts of sunlight in at various timeframes.

What has become clear is that this is an industry where any investment you make will now pay for itself several times over. The energy efficiency benefits of blinds shouldn’t be underestimated and in an age where our bills are soaring, this shouldn’t be taken for granted. After all, our windows are the biggest source of air leaks which in other terms means, they’re also our biggest source of money leaks!

Capital Allocation

Money Tree

The following is a staff writer post from MikeS.  He is a married father of 2.  So, with the cat, he ranks number 5 in the house.  He loves numbers and helping people. Please leave any questions or comments below for either Mike or Crystal.

I feel like I am entering a new phase financially.  I am looking at aspects of my financial life that I had not contemplated previously.  I have to say that I like it.  As I have stated recently, I am feeling more secure financially than I have ever felt.  What this has meant is that I am beginning to think more in terms of where to save my money and less about can I save money.  Now that the cushion is sufficient, I want my money working as hard for me, as I worked for it.

The Current

The cushion, as I like to call it, is divided between two accounts, my Vanguard brokerage account and my Capital One 360 savings account.  The savings account is where all of our savings go and I use a spreadsheet to keep track of the various things for which we allocate money.  For example, we set aside money for property taxes, gifts, car repairs, and the emergency fund.  The Vanguard account is strictly emergency savings.  

I started the two account approach about 3 years ago as a way to make it harder for me to access the money.  When I first started trying to save for the rainy days, I found it too easy to dip into the savings account.  The lack of discipline is what got us into trouble in the first place.  So, the brokerage was my way of making it harder to access the money.  Instead of simply transferring the money from savings into the checking account, I would first have to sell some securities, wait for the trade to settle, and then transfer the money to the checking account. 

Since the process would take more than a week, it gave me enough time to really think if the transfer was necessary.  I have only tapped the Vanguard once since I opened it, when we bought our house 3 years ago.  In the Vanguard account, we have about $5,600 and in the emergency category in Capital One, there is about $8,200. 

I know what you are thinking, that’s not a big enough reserve. 

I agree.  My goal is to have about $30,000 dedicated to emergency savings.  While I do not have that amount in the emergency bucket, I have other buckets that I could access in the event of an emergency.  For example, I have mentioned that we are saving for a Disney vacation in about 4 years.  Right now, there is about $5,000 in that category.  If I lost my job tomorrow, that $5,000 would become available to use.  So, without going into all the other buckets, there is probably another $13,500 available.

My Plan

I feel like I would like to have the cash portion of the emergency fund at $10,000.  So, I will add some portion of my bonus every year to it until it is at that level.  I figure it should only take a couple of years to get there.  Then I would like to have the Vanguard account make up the rest.  I plan on contributing to it on a regular basis and maybe even more so in the future.  I am sending $75 a month to the account now or $900 a year. 

At a minimum I would like that number to be $1,000 a year.  Depending on what, if any, salary increase I receive next year, it could happen then.  From then on, I would likely throw a little bit of the bonus at it every year as well, just to get to the finish line as quickly as possible.  My strategy is a result of the interest rate I am currently earning.  At 0.75%, any interest I earn is an after-thought.  As I said, I want my money to work as hard as I do.  I have the money invested in 4 different Vanguard ETFs to balance my portfolio.  The hope is never to need this money and maybe I can even use it in retirement.  I’m just glad that after digging out of the hole, I get to admire the grass.

Throwing Away Money

The following is a staff writer post from MikeS.  He is a married father of 2.  So, with the cat, he ranks number 5 in the house.  He loves numbers and helping people. Please leave any questions or comments below for either Mike or Crystal.

I came across an article recently in the Wall Street Journal.  It was written as a tongue-in-cheek way on how to throw away a fortune.  It is written to show you how you might be spending or throwing away money by accident.  The author listed seven ways to throw your fortune away.  I was curious as to how many of these I was guilty of in the past, and whether I was actually still doing any of them today.

Delay Saving

Yes, I was guilty of this in the past.  It was one on the reasons I was in a financial hole to begin with.  My retirement savings did not begin in earnest until late 2007, when I was 32.  Now, I contribute 7% to my 401k, with my employer kicking in an additional 8%.  This year, I also began fully funding an HSA.  These steps, along with additional savings and paying down debts has allowed my net worth to go from negative to over $120,000 in about 7 years.

Shun Retirement Accounts

I can’t say I was guilty of this in the past or the present.  In the past, there virtually was no savings, so there wasn’t anything to put in a tax-advantaged account.  Today, I fully take advantage of the retirement accounts that I can.  With my 401k, 1% of my contribution goes into the Roth 401k option that is available to me.  Since I don’t know what taxes will look like in the future, it is my way of diversifying my tax position.

Forfeit the Employer Match

Yup, I was guilty again on this in the past.  It wasn’t so much that I didn’t get the match; it was that I didn’t leave the money in the account.  I pulled all of it out at one point in time and paid the tax penalty for doing it.  It was the right move at the time, but by doing so, I did forfeit the match that I had earned.  Today, I make sure I get every dollar for which I am entitled.

Buy Active Mutual Funds

I was guilty of this in probably a couple of ways.  The first being my 401k when I first opened it up years ago.  I was not as diligent as I am today at making sure my expenses are at a minimum.  I had probably picked whatever fund looked like it had a great return, with little thought to expenses or asset allocation.  Today, my 401k funds are all index funds with low expense ratios.  I have come to believe that market returns are good enough for me and that I don’t have to strive to try and beat the market.  I was also guilty of this in another way, trading costs.  When I first began investing outside of my 401k, I was guilty of paying trading fees.  Not knowing any better, I was paying for every trade I did and thus cutting the amount I had available to invest.  Since then, I have been investing with Vanguard for free.  The fund fees are miniscule since I invest in index ETF’s.  Thus, more of my money goes towards investing and growing my net worth.

Carry a Credit-Card Balance

Again, I was guilty of this in the past.  This was the hole that I was in.  I probably had $30K on credit cards at one point.  I tried to minimize as much as I could any interest I had to pay, but I still paid.  Today, I don’t carry a balance.  I still use credit cards, but they are always paid in full when due.  I haven’t carried a balance for at least 3 or 4 years, I’ve lost track of exactly when they were paid off.

Get a New Car Every 3 Years

This one I can claim not-guilty.  I haven’t bought cars that often, mainly because I knew I could not afford that large a purchase.  My current car has about 157,000 miles on it and I hope to get another 30,000 miles out of it.  I haven’t decided yet whether I will go brand new or slightly used when I buy the next one.  I’m still on the fence on that one.  I have typically gone the brand new route in the past, but my views on things have evolved over time.  I’m not sure that’s exactly where I want to be spending my money.

Remodel Your Home

I am definitely not guilty on this one.  I have never done anything to a home simply for the resale value.  When I first bought a condo years ago, I had new floors installed, but that was because I didn’t like the old floors.  I kept in mind what would appeal to buyers in general with my choices, but it was not done simply for the resale value.  In my current house, any remodel that is done will be done because that’s the change that I want.  I plan on being in the house for 30 years; I am not concerned about the resale value just yet.

Progress Made

It’s good to see that I am not guilty of these practices anymore.  I’d like to think I have learned quite a lot about how to manage my finances over the last 10 years.  I am always on the lookout for new things to help me or new ways to save money.  How about you, how many things were you guilty of?

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