Friday, May 5, 2017

Big Hairy Audacious Goal (BHAG)

I’ve actually written down a new goal that I’ve thought about for a while, and finally decided to tackle.  The only thing we still owe is our mortgage, which is now at below half of our home value.  While that’s great news, we are ready to attack the BHAG.  It seems overwhelming, and we “could” sell our investments, pay taxes (of course) on the gains, and pay off the mortgage today.  That would create less risk in our lives, but I don’t feel that’s the best way for us to do it.

It’s important to prioritize financial decisions.  Start investing early, with the goal of investing 15% of your income.  Somewhere along the way, we bought a home.  The payments should be less than 25% of your take home pay.   California has it a bit tougher, and we Californians have been known to stretch our payment to 1/3 of our take home pay, but that’s riskier to keep up with the bills and investments.  Once you start making more income, keep up with the 15% retirement investment, and start adding extra funds to pay down the mortgage principal. 

With the proposed tax reform, mortgage interest is not going to be as attractive as a write-off, since the standard deduction will most likely be the best bet for most Americans.  Interest rates are likely to go up this year, so refinancing will not be as appealing, either. 

If we add $700 a month to our payment, we could have the house paid off in seven years.  That would save us thousands of dollars.  My plan is to take any extra income and any savings earned to pay towards the principal.  So far in May, I’ve already saved $143 by catching a medical billing error on my co-payment, negotiating with my Internet Service Provider to not charge us equipment rental, and coupons I used.  It’s early in the month, and now that I’ve written down the goal, my actions will bring in more results.

Is anyone brave enough to make the same challenge?  What ways do you think you can engage to bring in more funds to pay down the principal?  How would it feel to not have a house payment anymore?  

Tuesday, March 7, 2017

Family Members and Money

 Why is it that we seem to be making some good choices and getting ahead financially, when along comes a family setback, and we’re reeling right along with them.  Are you the one who graduated from college and is doing better than the others, so you are the caretaker?  Are you the oldest child who takes responsibility for the others?  Did you fill your grandmother’s footsteps as rescue worker?

Let’s talk about boundaries.  Let’s outline some things that, regardless of your relationship and ability to pay, you should NEVER do.
  • ·         NEVER co-sign on a car loan or other purchase
  • ·         NEVER rent a home or rental property to a family member without a written and signed rental agreement
  • ·         NEVER add other people to your wireless phone plan

So many times, we have a noble intent to help our sister, and they take that inch and a mile more.  If they can’t buy groceries for their young children, don’t give them grocery money.  Buy them food and bring it to their home.  If they can’t pay the electric bill, call 211 to find community resources that can help.  You may have offered money in the past, so build up your resolve to help them with information and moral support instead of money.  Teach them how to fish.  If they don’t want anything except money, let them find it elsewhere.

Santa Cruz, CA 1920's  My dad is the little guy standing up

I know this is easier said than done, but making them dependent on you does no one any favors.   They’ll never grow strong when there’s always someone to fix their problems.  I know this sounds harsh, and it may be something that a family has never seen before.  Maybe they won’t talk to you; that shows that all they really want is the money, so let them be mad for now.  Think how much more independent people would be if they learned by “tough love” instead of constant coddling.

If it’s your parents, it’s even tougher.  You probably acquired a lot of their struggles when growing up, and may have learned to treat your money differently.  Share with them some of your scuffles, and encourage them to try incremental changes that may make a big difference.

If your family relationships cause issues for yourself or your marriage, read the book “Boundaries” by Dr. Henry Cloud for some insight into understanding and addressing the concerns.  Seek advice from someone to help with your resolve to not give in.  Ask others for help to stick with your determination to not hurt yourself financially to dig someone out again.  

Thursday, January 26, 2017

What Have You Been Missing?

Am I paranoid, or are they really trying to overcharge me?  In the past six months, we changed our ISP, entertainment, and phone service, saving us $150 each month.  I have had to call five months in a row because my bill was wrong – sometimes up to $200 in errors. 

I shopped our insurance rates, and it’s reassuring that we already have a company with the best rates and reliable service. Our homeowners’ insurance company had the wrong start date on the policy, and we were able to get it corrected and have two additional months of coverage.

We reduced one bill that provided redundant services and will save $240 a year, and I did find an error on our medical insurance bill dating back to August, and we are getting a refund for $200. 

All this is from reading the monthly statements for our bank, credit cards, cell phone carrier, and reviewing the insurance bills at renewal time.  Except for the phone service and insurance, I accomplished most of these savings in January.  Is there anything you have been missing on your statements?  How would you know?

I’ll admit that reading statements and bills is not very entertaining.  I’d rather be perusing travel brochures and planning our next escape.  That is my motivation for being vigilant about our money – I want to travel and experience new adventures as often as possible.  Our next trip keeps me inspired to save now and enjoy soon enough.

I’ve talked about this before, First Step to Control – Review Your Bills.  You don’t have to look at every detail on your 401K account, but make sure that your contributions are showing up right, and that the money is being invested the way you had it planned.  At least once a year, have a face to face appointment with your financial advisor to ensure your investments are doing what you need them to do.  Your goals may have changed, and you want to ensure your securities are still the best choice for you.

Starting today, read all the statements that you receive in the mail or e-mail for the next thirty days.  See what you observe about the bills, note any follow-up needed. Make the calls to get things fixed.  You are more in control of your finances than you were a month ago.  Feels good, doesn’t it?  Now, you can browse the internet for your next adventure.