Monthly Archives: January 2008

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Smurf Village AssociationLast night, my wife and I attended our first Village Association meeting.

What the hell is that? Well, think, town hall meeting, but a lot less formal.

We live in a section of town that was once its own entity, but has since been absorbed into the neighboring city. The Village Association is its attempt to distinguish itself from the greater community and I’m all for it.

The meetings apparently occur once each month and are hosted by the “ceremonial” mayor of our town. Nice enough guy, I guess (he made a point to shake our hands on the way in and the way out), but he rubs me the wrong way for some reason — he plays the part of an arrogant New Yorker — which is really out of place here.

Anyhow, besides one other couple, that was apparently new to the club as well, it looked more like a senior citizen’s meeting than anything else. I briefly got the feeling that some in the room were happy to see some young faces in the crowd.

The topics covered were interesting, if you live in this small section of town, and the meeting moved along at a pretty decent clip.

We even got pieces of cake! Really, it was like going to a grandparent’s birthday party at the nursing home or something. But who doesn’t like cake?

What struck me was how some of the older people think. One of the more heated discussions was regarding the costs of re-renovating a recently completed park project — and the line was quickly drawn. It was obviously young vs. old.

The debate focused on the engraved bricks you often see in municipal areas these days. You know, you pay $80 to the town and they engrave your name on a brick that will be used in the construction of a new municipal building.

Last year, the Village Association “built” a park that included this kind of brick in a mosaic fashion around a clock tower, with some benches and that sort of thing. Very “Back to the Future”… Okay, not really, but that would be cool…

For the younger set, it was about saving money. For the older set, it was about bringing in more money.

You see, the younger group (by younger, I mean under 50) was opposed to the idea of tearing up the completed park to install more “engraved” bricks. The project is done, the mosaic looks great, the surface is flat, the moss growing between the bricks is uniform. You know, it looks like a job well done. Let’s leave it at that.

The older group seems only interested in selling more bricks. Tear the damn think apart, one brick at a time, as more people request to have a brick engraved.

What they couldn’t seem to get a handle on is that it’s not worth the costs involved. One sold brick doesn’t cover the costs involved to install a new one. All they saw were dollar signs (completely ignoring the costs that would come later).

To me, the whole debate went the opposite way I thought it would have. I wouldn’t have thought the younger set would have been the group that was interested in turning away cash upfront in the name of pinching pennies in the grand scheme. It was the older set that seemed, well, greedy… without even considering the ramifications.

I guess it’s a good sign that the younger folks are more cautious when it comes to finances, but the “topic” will be up for discussion again next month… and I’m pretty sure it will be another 20 years before I join the majority…

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The VaultIn another month or so, if all goes as planned, I’ll be out of credit card debt 100% for the first time in over a decade.

The deepest I found myself was $29k in November of 2006.

At the time, I was carrying around $l7k in credit card debt (down from $26k two years earlier) and I had just taken out a $12k loan from Bank of America (that turned out to be a credit card too) to have the roof of my house done.

Coming that close to $30k scared the crap out of me. I had worked so hard to get it down to $17k… only to be deeper than I’d ever been after one signature. That’s when I got serious about dropping the debt fast.

I started transferring balances — seriously this time — to take advantage of lower teaser rates and stopped using all but one of the cards. It wasn’t until November of 2007 that I started a snowball plan.

This time my plan worked. I don’t know how we paid off so much. I don’t where the money came from. I mean, I keep track of every penny using MS Money, but the thought of paying over $20k and receiving nothing in return is hard to fathom.

You just don’t have $20k of “extra” money, you just don’t.

But somehow, we came up with it, and sent it all to the fine folks at MasterCard and Visa.

Right now, this morning, my credit card balance stands at $5226.53. At my current pace, that number will be zero at the end of February. Maybe the first week of March… Depends on what we do with our tax refund.

I know I still have the outstanding car loan. I hate it when people call something “good debt”. My car loan is at a 5.35% interest rate. I’m around 5 months ahead on it and the payments are within reason. Basically, it’s a tolerable monthly bill or, ahem, “good debt”.

That said, I’ll likely go another 3-4 months like I have been and wipe that debt out too.

Then what?

In anticipation of this looming achievement, I’ve already increased my 401k contributions to get the maximum employer match, I’ve accelerated my mortgage payments, which I know some people don’t think is a good idea, but it’s mainly to eliminate the (overpriced) PMI I’m paying each month, and I’ve already got a plan in the back of my head to start putting more in savings.

So with all of that already on the go, when I get out of debt and if (a big IF) all of that proposed “extra” money materializes, over the next few years I want to:

  • Quit my extra job. (oops, jumped the gun on that one!)
  • Start a family.
  • Take a real vacation.
  • Have the entire first floor of my house remodeled. We’re talking the works. New floors, walls, ceilings, electrical work, plumbing…
  • Buy an all new living room set with a sectional couch so we can both sleep comfortably when football is on.
  • Have some trees removed and then have other areas landscaped professionally.
  • Tear down and build a new garage.

Best of all, I want to be able to pay for all of these things without carrying a balance. It just *might* be possible.

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Housing Slump HeadlineIt’s been a bit of a reality check for me adding my house to the assets calculation for my net worth updates.

For the longest time, I was thinking, “What housing slump?”, but now I see it first hand. Already this month, I’ve seen the value of my home drop 5-figures. Ouch.

It’s tough to get inspired when you see your assets dropping $12k in the span of a month through no action of your own. In fact, it kinda sucks.

It’s also a bit of an eye opener to see that my net worth is mostly dependent on the markets and not what I do with my paycheck. I guess I always knew that (based on my 401k fluctuations), but never really visualized it like I am now — probably because my home value is over 3 times as high as my 401k balance.

The good news is that that works on both sides — when the markets are up and housing prices are on the rise, I’ll see my net worth rising at the same rate it’s falling now. When those days return, well, wow, that will be *very* fulfilling.

For now though, I’m keeping my spirits up by concentrating on something I do have full control over — the liabilities.

So far this month, I’ve already knocked off another $1100 from my non-mortgage debt. And with 2 paychecks remaining this month, that news can only get better.

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Joint Account?Recently my wife has been expressing interest in paying some of the bills.

But I’m reluctant to change my ways as I’ve been paying all of the bills from my checking account, while keeping detailed track of everything, for over a decade now.

It’s not so much that it’s a habit, it’s just that I’ve grown accustomed to the consistency of the numbers.

If a bill slips by, or arrives late, I’m going to notice. It throws things off.

I hate it when a second mortgage bill clears before my checking account statement comes. Makes it look like I spent too much one month, and not enough the next, you know what I mean?

While we’ve been married for over a year now, and together for nearly 6 years, we each have our own separate checking accounts.

The benefit, from my perspective, is that we both have our own money to do with as we please — within reason. Without this set-up, there’s no way my wife would have been able to surprise me with a Wii this past Christmas.

The downside is that, I’m sure, with our combined incomes, we could really speed up our current savings rates.

But for now, I’m content with continuing on as we have been!

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    Papa Smurf?Last night while watching, um, American Gladiators on NBC, I saw a promo for a fluff-piece on the Today show about a blue man that would have aired this morning.

    I’m at work when the Today show is on, but I looked the story up and it stems from a December 19th story out of Oregon:

    It’s not makeup or paint that makes Paul Karason’s skin a bluish color.

    The 57-year-old started making the transition from fair skin and freckles to what he looks like today 14 years ago.

    “The change was so gradual that I didn’t perceive it and for people around me, likewise,” Karason said. “It was just so gradual that no one really noticed. It wasn’t until a friend that I hadn’t seen in several months came by my parents’ place to see me and he asked me ‘what did you do?'”

    What Karason did was use a substance called colloidal silver, which is made by extracting silver from metal. It goes into water with an electrical current and then you drink it. Colloidal silver is billed as something that will cure just about everything that ails you and Karason swears by it.

    Karason does not believe drinking the potion is what caused his discoloration. He believes it happened because he rubbed it on his face to treat a skin problem. A medical condition called Argyria has been linked to such discoloration since the days when silver solutions were used as antibiotics.

    Whatever the cause, Karason said it is not easy living life as a blue man.

    Interesting stuff. I’d actually heard of this condition before, but this is the first time I’ve seen it. Makes you wonder if he grew the beard to look like Papa Smurf?

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    Countrywide Home LoansMy biggest bill each month, like a lot of people, is my mortgage bill.

    What’s funny to me, and probably me only, is that, of all of my bills, it goes back in the smallest envelope.

    Biggest bill in the smallest envelope. Those who hold their mortgage with CountryWide know what I’m talking about.

    Think they do that on purpose?

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    Grow!  Grow Money Tree!Okay, now what?

    Totally a fictitious question — I haven’t hit the contribution limits and don’t really expect to in 2008, but over the last few weeks, while crunching numbers to maximize my 401k contributions, my eyes were opened to the yearly limits placed on this type of retirement account.

    Around ten years ago when Roth IRAs made their big splash, I had a co-worker who ranted and raved mindlessly over how great they were. I was already contributing to my 401k pretty heavily and sending an additional $150/month towards a mutual fund I randomly selected from Fidelity so I just gave it a quick looksie to see what all the fuss was about.

    The $2000/year limit (at the time) turned me off. Maybe it’s just me, but that’s NOTHING!? Saving an additional $166/month just wasn’t worth the hassle of opening another account with another institution and keeping track of it — remember, you couldn’t do everything online back then.

    Fast forward 10 years and the IRA contribution limit for 2008 is $5000. That’s a little better, but for the past few years, unfortunately (or fortunately, depending on how you look at it) we’ve been up against the income limit for contributing to one anyway, so it hasn’t been much more than an afterthought, but am I missing something?

    I’m certainly not an expert on the subject, but five grand per year just doesn’t seem like very much, even with the tax advantages — which when we’re talking about such a small amount can’t be that much of an advantage.

    So, back to a retirement account that I actually do have… The contribution limit on a 401k for 2008 is $15500 and as far as I can tell, that doesn’t the including employer match so if you work for a really great company, you could in theory sock away $31k per year. Now we’re talking…

    But for most folks, a high enough salary and a 100% match to sock away that kind of money just isn’t in the cards.

    I was unaware of the $15.5k limit until recently, and unfortunately my salary isn’t high enough to get me there, but it did get me thinking…

    In theory, a typical Joe with the ability to hit the contribution limit across the board could save a maximum of $25,500 in 2008. (Broken down to $15,500 for a 401k, $5000 for a traditional IRA, and $5000 for a Roth IRA).

    I’ve never come near that number in the past, but I have been averaging $2215/month in payments to credit card companies alone over the past three years. The credit card balances will be eliminated sometime this year, and once that happens, in theory, I could be saving $2215/month instead. That works out to $26584 per year.

    So, what do people making 6 figures, say $250k per year, do?

    They’d hit the 401k contribution limit by contributing just over 5% of their paycheck — not very much. They also make too much to contribute to a Roth IRA (which as I mentioned earlier would be a waste of time as it would only amount to a negligible 2% of their income anyway), so where do they save for retirement?

    Now that I’m maxing out my 401k to get the maximum match (though still short of the contribution limit), and I’m nearing the finish line when it comes to debt repayment (which will give me a lot more money to save), where should my expected $26584 each year go?

    I want to emulate the people who earn incomes that make 401k’s look like my meager ING account…

    Mutual funds are my best guess…

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    Pay Day!Being a Thursday and all, today was the first paycheck of the year.

    And, as hoped and expected, my tax filing status moves last week increased my take home amount even when I also increased my 401k contributions at the same time.

    No raise, but more money in my pocket and more money towards retirement…

    Net pay increase worked out to $88.53 every two weeks. Not bad.

    My 401k contributions jump up $153.29 every two weeks. Again, can’t complain.

    It’s a great start for 2008 — though it is unfortunate that this paycheck already has the mortgage written all over it…

    Can You Dig It?

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