pantherclub
Footballguy
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Personal Finance Advice and Education! (4 Viewers)
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Sand
Footballguy
I just checked in with my Moscow office and they said I had zero collusion coverage.
Dentist
***Official FBG Dentist***
whoa whoa whoa.. i'm in the process of building a 1/2 million dollar house, i have a boat that's under 45 years old and both of my cars are under 14 years old!
Gawain
Footballguy
So my wife and I are currently starting to save for a house. Figure we can sock $400 a week away, plus a significant portion of our bonuses. Goal is to put away roughly 60K, which would be 20% on a 300K house in 24 months. I've started to put the cash we're putting aside into T-Bills through Treasury Direct. Figure we can make a whopping 1%, but avoid all risk. Is there a better place to park cash?
Are there any negatives? Will it look odd if we don't have an account that has money in it and just shows cash flowing in and out weekly when we go apply for a mortgage?
Are there any negatives? Will it look odd if we don't have an account that has money in it and just shows cash flowing in and out weekly when we go apply for a mortgage?
PinkydaPimp
Footballguy
Dont iBonds have a much better rate(cant pull them out for 1 year though)? How easy/quick can you get money out of T-Bills? If you are only getting 1% id just toss it in an online bank like Ally. Less money moving around is best when it comes to the mortgage folks.
Gawain
Footballguy
iBonds are 1.96% currently, so that may be the better option for cash we can get in over the next year or so. 3 month interest penalty if less than 5 years old, but should still come out ahead. Thanks for pointing this out.
The churning, or moving around is what I was most concerned about. Would it be better to see an account that had weekly activity, or one that just has 60K come in from the government 4 weeks or so before we're looking to get pre-qualified?
PinkydaPimp
Footballguy
I think it just needs to come into the account as far in advance as possible before getting qualified. I had an account that was for the deposit and just kept depositing in that account every month what the mortgage would be. So there was money going in every month but not a HUGE move that might cause issues. But they likely wont give you problems on that if your credit is solid. But if not then you will want that money in there as early as possible to avoid issues.
CR69
Footballguy
Funds have to be seasoned for two months but if you can source them you're fine. Moving money around makes it tough for the originator and processor to follow and creates a lot more work but it's alright. It'll also be more work for you though because the underwriter will condition you to death to get the paper trail.
-OZ-
Footballguy
Question - if you had the choice of
A. Your primary residence being completely paid off.
B. $300,000 (or whatever the value of your home) more invested in non tax preferred accounts.
Which would you take?
I'm thinking B but want to hear arguments for paying off the home other than risk aversion.
A. Your primary residence being completely paid off.
B. $300,000 (or whatever the value of your home) more invested in non tax preferred accounts.
Which would you take?
I'm thinking B but want to hear arguments for paying off the home other than risk aversion.
From a strictly math standpoint, B will usually win.
However, people get an emotional high knowing they don't have a mortgage (option A).
Really a personal preference and you can't knock someone for either choice.
audiophile
Footballguy
A key factor is the interest rate of your mortgage. I have chosen to not pay off my loan because the rate is only 3.125%. With the tax deductibility, I figure I only need to get > 2% net return in the market and I'll be ahead.
With some quality stocks yielding 4-5%, > 2% net is not difficult.
That said, in the past, with different house/mortgage rate/market conditions, I opted to pay off the mortgage. So as eoMMan said, you can't really knock either choice.
wilked
Footballguy
First, good plan, and nice to see some discipline (most would try and get that house with 5%).
As for parking the cash, just put it in a bank account earning ~1%. Your average balance over those two years will probably be $20K, you are likely talking about increasing your balance by about $200 or so with those financial theatrics being discussed.
Spend less time worrying about where to put the savings and more time on how to increase savings, and you will come out way ahead
-OZ-
Footballguy
Yeah, I'm not knocking either choice. Just trying to decide whether we really want to start adding $500 or more to our mortgage payment. I'm thinking no, wife is more inclined. I'd rather save more between the kids education accounts and other investments. We're maxed on TSP and Roth.
Fwiw our rate is 3.25% on the 30 year.
I'm facilitating Financial Peace University again and this is one of the areas I disagree with Ramsey. I know if I called him on it he's not changing his mind but I want to give the attendees both perspectives.
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In your particular case, why not split the difference - put $250/month towards your mortgage and $250/month across the other savings devices.
Essentially diversify your savings vehicles here by simultaneously reducing debt and increasing savings elsewhere.
RUSF18
Footballguy
Good idea. I'd even go $251/month to the mortgage and $249/month to savings so your wife gets to chalk this one up as a W.
One podcast I listen to suggests putting this "extra" mortgage money aside in a taxed account and call it your payoff off the house fund. Keep piling money into it and then you can make the decision later on if you want to pay off the house or not.
-OZ-
Footballguy
For those interested, https://www.iheart.com/podcast/237-Listen-Money-Matters-27191569/ is worth listening.
kutta
Footballguy
I'm a big advocate of paying off the house. I understand the financial arguments against that, but there is a true peace of mind that comes with having no debt, including no house payment. For a guy like me who was in LOTS of debt most of my life, that peace of mind means more to me than the few extra bucks I might earn in the market.-OZ- said:
-OZ-
Footballguy
Yeah, there's certainly something to be said for that. I'm sort of in the opposite situation. Never been in much debt, just small student loans (wife more than me), cars and home. Currently no debt other than the house and I should have two nice pensions when I'm 60. Secure, but without ever having made more than low 6 figures. So maximizing assets has an appeal.
wilked
Footballguy
GoBirds
Footballguy
KCitons
Footballguy
Couldn't agree more. Having your mortgage paid off allows you to make decisions about other things in life. For us, it made my wife's forced disability retirement easier to accept. And it gave me more leeway when looking for a new job recently. It doesn't have to be strictly about money because the budget is more flexible.
kutta
Footballguy
I was married young and had kids young. Had a wife who liked to shop. I had over $120k of student loan debts. And I didn't make much money until I was in my mid 30's. All that added up to a ton of debt and living paycheck to paycheck, with those not even being enough.
So when I started making real money and had the opportunity to pay off debt and my house, I jumped at it and never looked back.
GoBirds
Footballguy
Congrats on paying all of it off that's great work! We have some real estate investments and carrying significant debt although not over leveraged makes me aim for that day of no debt. That's why was curious, like hearing the success stories.
kutta
Footballguy
It's a great day when it happens. When I was finally debt free, I took my whole family (wife, kids, brothers, sisters, mom, nieces, nephews) out for a super nice dinner. It was a really great night and cost me about $3k. But man, it was a night none of us will ever forget.
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Sand
Footballguy
The siding on your house isn't edible. Neither are the floors. Keeping that wealth liquid reduces risk in case of emergency.
As noted depending on your tax status and your interest rate it's pretty close to even which one grows wealth faster.
KCitons
Footballguy
Bottom line is it won't matter if you can't live within your means. Pay your savings first. With most mortgages being well over a $1000 each month. It would take no time to have a tidy nest egg to draw from in case of emergency. Unfortunately, some see the savings as free money and still live paycheck to paycheck.
The siding on your house isn't edible. Neither are the floors. Keeping that wealth liquid reduces risk in case of emergency.
As noted depending on your tax status and your interest rate it's pretty close to even which one grows wealth faster.
Sand
Footballguy
That's is no doubt the most important part of this is psychological. If you can't trust yourself to hold the cash and not but a new boat, then that's your answer.
sbonomo
Footballguy
kutta
Footballguy
Mastro's steakhouse in Scottsdale. Had about 15 people there. Caviar, seafood towers, steaks, expensive wine and scotch, and butter cake for everyone. Just an all-around wonderful time.
Andrew74
Footballguy
I went through this two years ago when I changed jobs in late summer. HR told me they have no way to know how much I had contributed at my prior firm. It's up to you to keep it under the limit.
-OZ-
Footballguy
but I want a boat! I deserve a boat!
that's not true, but it would require you to tell them. They probably just mean their system isn't equipped to input the amount from previous employment and they're not willing to take the risk of getting it wrong. So it's on you. Which seems reasonable really but there is a way for them to know the amount.
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Andrew74
Footballguy
Yes, that's correct, I could have told them but they didn't care. They wanted no part of it.but I want a boat! I deserve a boat!
that's not true, but it would require you to tell them. They probably just mean their system isn't equipped to input the amount from previous employment and they're not willing to take the risk of getting it wrong. So it's on you. Which seems reasonable really but there is a way for them to know the amount.
audiophile
Footballguy
I was in this same situation a few years. You simply have to inform your new employer what your contributions were at your previous employer. They will then cap it at 18k automatically.
Andrew74
Footballguy
Mine wouldn't for whatever reason. So I guess how this goes is dependent on what the company's HR is willing to do.
Chadstroma
Footballguy
Recently dug more into HSA's and my general advice (always possible for exceptions as there is no one size fits all answer when it comes to finances) now is if you qualify for an HSA then before you max out out your 401k and IRA's is to max out your HSA. For those that are not familiar with them the basics of an HSA is that if you have a high deductible insurance plan it can off set the costs of the deductible. Think of it like an IRA for health costs. Money going in is pre-tax and when you pay for qualifying medical expenses it is tax free. So, if you spend it on medical expenses then you not paying taxes on that money at all. The money is tax sheltered and does carry a penalty (20%) plus taxation if you withdraw it for other purposes. However, at age 65 you are allowed to withdraw it for any reason and only pay the taxes on it. The beautiful thing is that unlike the traditional IRA there is no RMD (Required Minimum Distribution) so it gives you more flexibility in retirement. It ends up being superior to both traditional and ROTH.
So, highlights of why it is a great financial tool:
-No taxes paid if used for healthcare
-Can be withdrawn at regular tax rate for any purpose at 65 years of age
-No RMD
Oh, and there is a once a lifetime transfer allowed from an IRA to a HSA.
So, highlights of why it is a great financial tool:
-No taxes paid if used for healthcare
-Can be withdrawn at regular tax rate for any purpose at 65 years of age
-No RMD
Oh, and there is a once a lifetime transfer allowed from an IRA to a HSA.
Chadstroma
Footballguy
B. And not close to me NOW considering the interest rate environment we are in. At 3.25% 30 year fixed mortgage (what I have about 5 years into it) you would have to screw up your investments pretty darn bad to not get better than the 3.25% and the effective rate is of course lower with the mortgage interest right off.
When interest rates change and go back to more 'normal' levels then the math on that changes and my answer could easily change looking at the specifics.
NutterButter
Footballguy
At first I thought this looked very promising, but then I saw it was limited to the hsa cap for the year which is pretty low to begin with. Not that being able to transfer a few grand and not have to pay taxes on it isn't still nice. I sure wish I had one of these but I don't.
Chemical X
Footballguy
so, when we sold our house in ny and moved to nc my goal to buy for cash, but at the last moment i got cold feet and took a mortgage. i just couldn't stroke a 250k check. decided to stay liquid, which helped when the market crashed in 2008. i just paid off my HELOC this week, which i used to buy my Italy place. opening a bottle of avignonesi 50/50 to celebrate tonite. i am 2 yrs from mortgage payoff, but we have the fortune of putting 39% of our income towards retirement. once that mortgage is gone, debt free and time to sell the house. i will use that money to buy an independent house italy for cash this time. not all, maybe 35-40%.
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Chadstroma
Footballguy
Yea, the big thing on this is qualifying by having a high deductible insurance plan. If you no have then you no get.
Chadstroma
Footballguy
Yes, it is capped at the annual contribution of the year. I am thus not using mine now and will wait for it to grow.
NutterButter
Footballguy
I'm pretty sure we don't but I have another question in case we did. We have a family plan that's from my wife's job. Can I contribute to an hsa that's just in my name or is it in her name since the plan is through her work? Its almost a guarantee that we'll be getting a divorce at some point in the future and I wouldn't want to dump a bunch of money into an hsa that she'd be the beneficiary of.
Chadstroma
Footballguy
HSA is individual like an IRA. It can be used for spouse and dependent healthcare though. You can add an authorized signer to an HSA in most cases but that works like a POA, they are acting on your behalf and becomes void upon your death. You can independently select beneficiaries like in other financial products.
Also, over age 55 you have a $1K catch up contribution over the cap. Though if you are in a family plan and you want your spouse who is over 55 too to put in her $1K, she will need to open up her own HSA to put the $1K in.
NutterButter
Footballguy
Cool. If the contribution limit is 6750 per family, can I dump all of that into my account if my wife wasn't planning on contributing at all in her own account or is an individual still constrained by the individual contribution limit of 3400?
Chadstroma
Footballguy
If she and/or kids are covered under your high deductible plan then yes, the full family contribution. But if your wife was contributing too then you are both still capped at the total of the family contribution.
-OZ-
Footballguy
NutterButter
Footballguy
Yeah, that might happen. Btw, its going up to 18.5 in 2018. 
mquinnjr
Footballguy
Whatever party does this can expect to spend 2 terms out of office. This is akin to killing off the mortgage interest and RE tax deductions. Would not play well.
Sand
Footballguy
So you retire on Jan. 2nd after you grab your year's vacation and do the transfer on that last tax year. Just put it on the list of things to do when you tell your employer to F off.
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