HisHersMoney

This weekend I was flipping through an old Money Magazine from November of 2007. We usually use the library for books and reading material, to include magazines. Typically you can get recent copies as soon as they become a month old but occasionally I will pick up some older ones as well. The content really doesn’t become outdated to the point of uselessness.

This one particular article was about the number of jumbo mortgages in default, specifically a 65% increase in the number of prime jumbo mortgages in default between June 2006 and June 2007. I can only believe that the trend has continued right into 2008. We live in the Washington DC area so in order to buy a house we would fall into the jumbo mortgage category since a typical 3 bedroom house is priced in excess of $600k.

We currently rent and live in a brand new, very nice apartment building that we are perfectly satisfied with. I don’t expect us to be calling up a real estate agent any time soon in this area. But, yesterday we were taking a little drive to go see the new Extreme Makeover, Home Edition house that they are building this week in MD. We drove down a long, windy road through what turned out to be a very high end, beautiful area.

The houses on both sides of the street were HUGE, not just big, but HUGE! I’m talking jaw dropping, have to look kind of houses. We thoroughly enjoyed the drive and getting a chance to see these homes. What surprised me was the number of For Sale signs out in front of these places. So, I decided to do a little online research into what these homes actually cost and how many were on the market.

I plugged in a started search criteria of greater than $1 million and the results I got back exceeded the max allowable number of 250 so I bumped it up to greater than $2 million and was able to it down to about 200 results. I was in shock that one little town could have that many homes in that price range on the market. This really was a small area that wasn’t too densely populated as each home sat on a significant lot.

In general, about $3 to $5 million got you seven bedrooms, seven bathrooms and if you went up to the $8 million dollar range you got around ten bedrooms. Yes, they were beautiful homes, but everyone would agree that this is a bit excessive! I have to believe that people got themselves into mortgages that they just couldn’t handle and in this case multiple mortgages.

If you can’t afford a traditional mortgage on a piece of property than you really can’t afford it in my opinion, clear and simple.

Yesterday I covered the first three ways in the “Six Simple Ways to Retire Rich”. Thanks to automatic 401(k) plans and one-stop investing options, saving for retirement is a cinch. Editor’s note: This article is adapted from Kiplinger’s Retirement Planning 2008 guide.

I promised to cover the last three ways today so here they are!

Simple Way #4 Consider a Roth

I mentioned this quickly in the last Simple way but they give it an entire section in this article. While your 401k gives you your tax benefits up front, the Roth IRA gives you your tax benefits on the other end at withdrawal side. The new Roth 401k also offers tax-free income at retirement. The Roth IRA has contribution limits of $5000 in 2008 and does have some income limitations so a little additional research is warranted but whomever you set your account up with should be able to help you determine your eligibility and limits.

I personally max mine out each year in twelve handy little payments. Most plans will allow you to make monthly contributions directly taken out of your checking account or whatever account is most convenient for you. Again, the younger you are when you start funding this type of account the more you will benefit from the advantage of time.

Simple Way #5 Don’t Cash Out

I personally was kind of shocked by this one. Not shocked by the advice but shocked by the related statistic that they mention that nearly have of all workers cash out their 401ks when the leave their job rather then rolling it over or even just maintaining it there. If you cash the account out you get hit with both taxes and penalties and forget the whole advantage of time, you just started that clock all over!

I have rolled a 401k or two (or even more) in my time. I can’t tell you how easy they make it for you to do it. I have to believe that it actually requires more work to cash it out these days that is does to roll it over. I recently heard a commercial on the radio about a guy who rolled his old 401k over in the same about of time that his friend ate a sandwich at lunch, it really is that easy.

One benefit that I enjoy as a result of rolling all of my 401ks over into one account is that the value of that account is obviously greater that the individual accounts were so I now qualify for a higher level of service from the company who holds my money. Some of the perks are free checks, a special phone service number, fee waived accounts, etc.

Simple Way #6 Sell Company Stock

Many people have a portion of their 401k tied up in their company’s stock. While it’s great to be confited and supportive of your company, it’s not always a great strategy to put all or even half of your eggs in one basket. After the whole Enron scandal and the Pension Protection Act of 2006, employers must now allow workers to cash out their company stock within three years to diversify their 401(k) investments, and many employers now allow their employees to transfer out at any time.

It’s always best to diversify your holdings. This also something you need to look at if you have your savings and investments spread among numerous accounts. If you choose not to roll your old 401ks into one account make sure you look at the overall balance of your accounts as a whole not individually. If you do have a personal advisor than they can do this for you, if not, make sure you bring up any additional investments you have when speaking to the folks at the individual companies.

As always, I’m not a financial advisor, just an ordinary person trying to make the right choices, just like you so please do seek professional advice. I hope my comments and observations help you know what the right questions to ask are and help you make the right choices for your particular situation.

So as you may have read previously in this space, Hers and I will be heading to Jamaica in less than two weeks for a much-needed vacation. Neither of us has been there before and we are very much looking forward to. In order to be able to relax more we decided to go the all-inclusive route and will be staying at Sandals.

The price is most definitely not cheap. However, if we do it right and do not go adding on extras once we are there then I think it is reasonable. We get 3 meals a day and all drinks included while at the resort. Our plan is to mostly just relax on the beach or by the pool for the majority of our time there. This is not one of those vacations where we have a strict schedule of things to see. We just want to sit and enjoy each others’ company.

Now about those extras. Sandals offers everything from guided island tours, horseback riding, dinner ON the beach, and in-room massages. These are all great and obviously we would love to do them all. However, that is where most people make the mistake. They think “We’re on vacation, we should enjoy ourselves and do whatever we want!” The problem is that usually this is where they will pull out the plastic to pay for it as these were unplanned expenses on the trip. If you have things that you absolutely MUST do while on vacation make sure to budget for those expenses so that the month after you get back there is not a huge charge on your credit card that you can’t remember what it was for.

Once we return from our trip I’ll share with everybody how well we were able to limit our expenses.

Today while surfing around the internet I came across an article called Six Simple Ways to Retire Rich.

Since everyone wants: One: To Retire Rich and two: For it to be Simple, I figured it was worth a read. While a few of the “Simple Ways” were no brainers to me I was surprised by a few of the statistics that they quote that show that obviously they aren’t to everyone. I will discuss the first three “Simple Ways” today and the last three tomorrow.

Simple Way #1: Don’t Opt Out

With this they are referring to how many companies these days are automatically enrolling employees in the 401k or retirement savings programs when they are hired in and in order to not participate you have to actually opt out.

I think this is a great idea, especially for young people who are just entering the workplace and may not really understand how the 401k works yet. The article says that 85% of adults surveyed started saving earlier as a result. This is great because as everyone knows the biggest ally that you can have when it comes to retirement savings is time.

Simple Way #2: Get Help from the Pros

Most retirement savings plans have some sort of target- date retirement fund which claims to have the appropriate mix / balance of funds in it for the timeframe you want to retire and usually if you don’t choose other wise your plan may automatically enroll you in this fund. While that may not be a horrible choice for you, it may not be the best either.

I do have a personal financial consultant and for me it has been working out pretty well and I’m happy. That doesn’t mean you need to run out and hire one yourself. If you have a 401k a good resource is to talk to someone at the company that administers it. My company recently changed plan administrators and the representatives came by and spoke to people one on one and they are available by telephone as well at no additional charge. I know a number of people in my office who have taken advantage of this free professional help.

Simple Way #3 Check Your Progress

Keep an eye one the big picture, including your insurance options, retirement savings, emergency savings, etc. It’s easy to get bogged down just looking at the percentage that you are putting into your 401k but don’t’ forget about making sure you have the correct amount of life insurance in place and make sure you have kept the beneficiary up to date as well. You don’t want your ex to be still on there from like ten years ago and your kids to get nothing! Another insurance need to consider is your long and short term disability coverage whether it’s through your employer or a private policy it’s definitely something to consider.

Another investment to consider in the mix is your Roth IRA if you are eligible to contribute and of course don’t forget your emergency savings account. It is probably worthwhile to sit down with a professional to get some solid recommendations to make sure you are covered.

I am so excited about our upcoming vacation to Jamaica! Neither of us has been before so it will be a new experience for both of us. Originally the vacation was planned as our honeymoon but due to actual wedding date changes which seem to be never ending right now we are taking the trip as a pre-wedding-moon.

We are staying at one of the Sandals resorts which are all inclusive which really helps with the budgeting aspect of the trip. There are a couple extra activities which we are considering doing which we realize are extra that we need to identify, budget and pay for and since the trip is in just a couple of weeks I guess we ought to get on that soon .

We have been on a couple of vacations in the year and a half we’ve been together. We went to Dallas for an extended weekend, Florida to visit / meet the family over Thanksgiving after we got engaged and a couple more local trips that we drove to.

This is a very much needed vacation for both of us as work has been an absolute bear for me requiring extended work hours and various stresses at HIS’s job as well. We’ll try to post a couple pictures when we get back mid-July.

Well, I will start by apologizing for our lack of posts for the past week. It’s not that we were extra-ordinarily busy or anything, we just got busy with other “stuff”. If you remember in an earlier post we discontinued our gym membership since HIS can use the gym at work for free, I now walk to work (2 miles a day round trip) and we both can use the small gym in our apartment building for free.

Well, I have had absolutely no motivation recently to work out at all. I have only walked to work a few times a week due to some extremely hot weather and rain. So, in order to fight the battle of the bulge and get ready for our upcoming week long trip to Jamaica (YAY!) I have decided to look for a group activity that I can participate in to get some exercise.

I’m leaning towards a group activity so it will help keep my attention as well as the opportunity to meet some new people. In the past I have tried a soccer league which got a thumbs down due to the timing of the practices and games which were just too late at night. I’m totally not interested in softball no matter how many people ask me to play. I used to row crew in college and I think it will be my next sport to try. I’m hoping it’s like riding a bicycle and comes back to me easily.

Living in the Washington DC area we have access to a number of rowing clubs at a variety of costs, some of which I think are more than reasonable. I’ll write more after I give one or two of them a try.

So in our lovely new apartment I finally have a room to myself to call an office. It’s actually our second bedroom which is quite spacious. We also have an office area which is a smaller alcove which HIS uses an office. I decided I would like a tv for my office space in hopes that I would spend a bit more time getting stuff done in there if I had a tv.

Now, there’s many options available to me to procure said tv. I could go to the mega mart and by a shiny new flat panel tv which would cost a fortune but that’s really not in my budget nor is there really any reason to go that route. We do have a nice new flat panel tv in our living room and that’s really all if not more than we need.

So I went onto craigslist today and simply searched for a tv for sale. Let me tell you, there were a ton of them! With everyone getting their new mega mart slat panels it seems there are a ton of those old fashioned tube tvs out there for just pennies on the dollar. I got a 27″ name brand tv with a dvd player, a stand and all the necessary cords for $75. I am more than pleased. The guy even carried it from his apartment to the elevator and then out to the car for us. This tv will more than fill my need and I paid about 10% of the cost of a new one.

I really do like craigslist and have gotten a number of things off of it. Most notably my KitchenAid stand mixer which was always a dream of mine. I was so happy the day it became a reality for me especially since I got it for only $100. I have also sold a couple tickets on there that we were unable to use as well as a spare dining table and chairs. I also got my wedding dress on craigslist for only $260! Brand new, never worn and it fit nearly perfect requiring only $75 in alterations (I found the women who did my alterations on craigslist as well). We also have gotten a bike rack for the car and sold a nearly new cell phone.

No matter what I am looking for I always turn to craigslist first! If you can find what you want it’s almost always worth it.

So, in recent posts I have eluded to the fact that we just moved into a new apartment. Our lease was up on our old apartment and it just really didn’t seem to have enough redeeming qualities to keep us there, let alone the fact that they wanted to jack our rent up. We were paying $1875 a month and they wanted to raise it up to around $2300. Add to that the monthly fees of $100 for utilities, $175 for parking two vehicles, $70 for storage and $35 for the pet fee.

Now the only thing this place had going for it was location. Yes, I know how the saying goes: location, location, location but that only carries so far. It was right on the metro route and had a number of places you could walk to to get either a bite to eat, a few drinks or do any retail or grocery shopping. Sounds great right. it was but we realized we just didn’t use a lot of those things. Yes, we would walk over and have a couple of drinks now and then but other than that we usually drove elsewhere to retail places that had lower prices.

So, off we went in search of a new residence. We looked at a number of places including a number of places which would have even lowered our monthly rent bill but none of them were really jumping out and saying “come live in me” to us. Then we decided to go look at a brand new tower that just went up. Originally the building was supposed to be condos but when the market fell they decided to make it apartments but prices were way out of our league. Luckily the market continued to decline causing them to have to lower their prices.

So, here we are. Our new rent is $2300/month with a pet fee of $50 and parking of $75 and then an electric bill of whatever the electric companies charges us that month. Our rent will be higher but our new apartment is about 300 sq. ft bigger and about a billion times nicer so for now we are willing to pony up the additional cash.

As, I previously posted, now I can walk to work so we have tossed around the idea of going down to one car between the two of us but for right now we are going to settle in and think about that later. I have to believe my chi is worth something!

Our cell phone bill is out of control!

There I said it. With four lines currently on our plan, one of which is a blackberry and another an iPhone I’m sure you can understand how it can quickly sky rocket. Our plan currently has 1400 anytime minutes (we are on At&T/Cingular) which after reviewing the last six months worth of bills we never go over let alone even get close to. If we switch to the next lowest plan which has 700 minutes we will save $20/month. I have been hesitant to change our minutes for many months because of the drastic difference in number of minutes. I’m sure the companies do this on purpose.

We used to get a nice corporate discount on our monthly bill but once we added the iPhone we had to forfeit any and all corporate discounts unfortunately . But, His really likes his iPhone and doesn’t seem to want to give it up. I have a blackberry which I absolutely adore so between the text messaging and the blackberry plan it adds a fair amount to the bill as well.

Well as of last Friday I no longer commute to work via car. Previously I have about a 15 minute commute to my office where my employer paid my $60/month parking fee. It really didn’t eat up THAT much gas but still resulting in a $75/month petrol bill. With the recent increase in gas prices I will be glad to leave the car at home.

As I have eluded to in previous postings, we recently moved to a new apartment. I wish I could say that the new apartment will be saving us money on rent and utilities but in reality it won’t. We didn’t make the move based on financial considerations but really just on general sanity (more on that later). Luckily the new place is exactly one mile from my office so as long as it’s not pouring down rain or over 100 degrees there’s really no reason for me not to walk.

I turned my parking garage opener in to my boss in exchange for a nice new shiny Smarttrip card. For those of you not in the Washington DC area, Smarttrip cards are like a little credit card which has preloaded funds on it to ride the public transportation. My company gives their emplyees two options for transportation, paid parking or paid public transportation. Even though I will be walking I took the public transportation option since I do ride it occasionally and I might as well ride free.

So Friday was my first day walking, it was an absolutely beautiful day weather wise and the walk was quite enjoyable. I recently had loaded my iPod with the audio version of Steven Covey’s 7 Habits book (from the local library) so I have plenty of listening material since it’s something like 14 discs long!

I even decided to cancel my local gym membership wince I will now be enjoying two miles of walking a day which has got to beat 2 hours of aerobics a week at something like $65/month. This brings my savings to about $115/month as I will still need to put some gas in my car for some errands and such.

Before you go thinking of where I could put those $115/month I will tell you where it’s going – a housekeeper. I am done spending my evenings and weekends trying to keep up with the cleaning. I would gladly walk to work in trade for house cleaning!