Tom Hagen
Footballguy
You also can’t use the same qualified education expenses to exclude bond interest that you used to claim a tuition credit or exclude income on a 529 distribution.
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Personal Finance Advice and Education! (3 Viewers)
- Thread starter No. 16
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Gawain
Footballguy
Back to the mortgage discussion, I am (attempting) to pay off early. There are a few reasons:
1) There's no guarantee that the extra money that I'm putting on the mortgage would be saved. 401K and Roth IRA are (almost) fully funded. The cash going to the mortgage is more than the couple % I'll fall short. That would just give me money in a brokerage which has had an annoying habit of getting spent on whatever "emergency" crops up.
2) Eldest is 5 and there are two more right behind her. I want to be in a position where I can either cash flow as much of college as possible or have the ability to force household income down under an income cap if financial aid continues to go the family income route. To do that, eliminating debts is priority.
3) Either through laziness or stupidity, still at a 3.875 rate. However, only have 160K left so refinancing has looked like a bit of a wash once the costs are included.
4) With a paid off house, if I keel over the wife (probably) can get by on Social Security and what's been saved and can continue to stay at home with the kids.
1) There's no guarantee that the extra money that I'm putting on the mortgage would be saved. 401K and Roth IRA are (almost) fully funded. The cash going to the mortgage is more than the couple % I'll fall short. That would just give me money in a brokerage which has had an annoying habit of getting spent on whatever "emergency" crops up.
2) Eldest is 5 and there are two more right behind her. I want to be in a position where I can either cash flow as much of college as possible or have the ability to force household income down under an income cap if financial aid continues to go the family income route. To do that, eliminating debts is priority.
3) Either through laziness or stupidity, still at a 3.875 rate. However, only have 160K left so refinancing has looked like a bit of a wash once the costs are included.
4) With a paid off house, if I keel over the wife (probably) can get by on Social Security and what's been saved and can continue to stay at home with the kids.
Juxtatarot
Footballguy
Runkle
Footballguy
Yes, and if you buy now in late October, you get credited for having held since 10/1. For both calculating interest, and, when the "12 months" are up that you're required to hold the bond before cashing out (with a penalty). If you buy on October Twenty-something (it takes a bit to process and 10/30 and 10/31 are weekends) of 2021, you can cash them out as soon as 10/1/2023... 11 months and a couple of days... with full credit for 10/2021 as a month of interest gained.
Charlie Harper
Footballguy
What would you guys with school age families say you spend monthly outside of mortgage and bills? So basically transportation, food (groceries+eating out), activities, entertainment, education. Planning to start a family soon and the wife is itching to move. After saving for maxing our retirement accounts, our mortgage + bills right now account for about 1/3rd of our take home. So we're used to a good amount of disposable income.
The new home budget + bills would be about 1/2 of take home. We live in the Bay Area, CA. We have parents nearby so we don't have to worry about babysitting and plan to move to a school district with good public schools. I think we could do it. Many families do it with less. We would definitely have to curb spending a bit, but I'm still just worried I'm not factoring in something.
The new home budget + bills would be about 1/2 of take home. We live in the Bay Area, CA. We have parents nearby so we don't have to worry about babysitting and plan to move to a school district with good public schools. I think we could do it. Many families do it with less. We would definitely have to curb spending a bit, but I'm still just worried I'm not factoring in something.
3 - Not sure what rates you are looking at but I could see a 2.5-2.75% 15 or 20 year being about no cost. I’d look more than your local bank as I’m sure you could shave off 1% and not pay much of anything and save a bunch. Yes, you can lay down too, but why not pay less interest while paying it down and saving a nice chunk of change.
I’m not normally in favor of paying down the mortgage but after the market’s run up the past decade or so, I wouldn’t say it’s a bad idea. People who paid down their mortgage a decade ago missed out on a a chance to pay their mortgage with part of the stock market’s returns and still have the entire principal they paid down plus a nice return. Huge financial impact. I don’t see the next decade as the same returns. There will be some good stocks still but not so sure on easy index money.
I switched to a 15 year to basically pay down early with the rate decrease and the fewer payments. I have not sunk any extra money in there as I’m also paying for college for another 7 years.
You don’t want to know. It was tough for about 12-13 years as a single income although buying our first house a few years before #1 of 3 was a great choice as we build a nice amount of equity for our current house. All the equity we have now will basically be the down payment on retirement house which I anticipate being a bit more expensive due to location.
We moved to an area with great public schools which absolutely saves a ton and has the benefit of being an area where people want to buy a home as well. My only worry now is that houses have run up like crazy. Good for current house but tough if looking for first house or have to buy something a lot more expensive.
Kids aren’t cheap. They are great but if you have good day care substitutes (my wife stayed home), that will really help. Once they all are in school, if you can work from home it’s much easier and they get to be a bit more self-sufficient. Sports and everything else gets expensive. I have 3 boys so if we go out to eat, pickup food or even eat in something like a steak, it’s expensive. Much cheaper with baby food, etc. College ain’t cheap either. Wouldn’t change it but so lucky my wife found a great job after she started working again as it got us back into gear for retirement. It’s fun but damn it isn’t cheap and it’s non-stop!
Sand
Footballguy
~6k, not including charity expense. That includes insurance and upkeep on 4 cars (ugh) and subsidizing the rent of the college kid.
Charlie Harper
Footballguy
Sand
Footballguy
Runkle
Footballguy
With the recent talk of I-Bonds and inflation, and, all of us "seeing" inflation in our daily lives due to supply chain issues... why hasn't the federal prime interest rate moved? Do we think they do believe it's simply "transitory", and that eventually as things get back on track, the supply-influence on inflation will ease and the inflation we're seeing will stop? Or are they missing something and inflation will continue even after supply chain issues resolve? Or are they artificially keeping the prime rate low to support the economy? Thoughts?
Personally, I feel even if it's transitory, it'll be hard for prices to go down in the future. Instead I think they'll remain elevated, even if artificially, until the real prices "catch up". That is... if today a widget should cost $3 but due to inflationary issues it's priced at $5, once those issues are resolved, it'll continue to be $5. Even if widget prices normally rise a dollar a year, next year it'll stay $5 instead of $4, in the third year it'll be the true $5, and in the fourth year it'll start rising normally again to $6. There might be a middle period where everything costs more than it should until the underlying true cost catches up to the artificial one.
Personally, I feel even if it's transitory, it'll be hard for prices to go down in the future. Instead I think they'll remain elevated, even if artificially, until the real prices "catch up". That is... if today a widget should cost $3 but due to inflationary issues it's priced at $5, once those issues are resolved, it'll continue to be $5. Even if widget prices normally rise a dollar a year, next year it'll stay $5 instead of $4, in the third year it'll be the true $5, and in the fourth year it'll start rising normally again to $6. There might be a middle period where everything costs more than it should until the underlying true cost catches up to the artificial one.
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Desert_Power
Footballguy
Yeah, we are planning on having my wife stay home after I finish up the paternity leave I'm allowed. Assuming everything goes well with the birth next February it just doesn't make to me to pay these child care costs I see quoted locally. I'd prefer to quit too, but probably a couple more years are needed without more drastically cutting expenses. We can always go back to work at a lesser salary later on once he is further along in school like you said. Health care over the next ~30 years is really the big item we have to solve for.
Judge Smails
Footballguy
Not cheap. I’m in a great spot now but it’s daunting to think of. 3 orthodontists to cover. 3 first cars paid for. 3 college tuitions. 2nd wedding on Saturday. 1 more to go. Seeded first grandkids 529. It’s a lot. Worth it. But a lot.
So glad to have boys. Done after college, lord willing. When my FSA refills in January, braces are 3 for 3 paid and done. College is getting close to 1 of 3. Hoping for in state on the last two.
Does babysitting include daycare, assuming you both work? If not, that might run you $2k+ per month per kid depending on where you are at.
Orange&Blue
Footballguy
Net worth finally broke 1m... finally.
Random
Footballguy
All good points. We only paid ours off a two(?) years ago, however, saying it'd be better to do it today is just hindsight. I had the same feeling 2 years ago. Markets up, RE up, play it safe and payoff the mortgage. I'm sure its irrelevant, but we'd been in the house 15 years and I just didn't want a mortgage anymore. The remaining balance just wasn't very material (we had refied a few times and may have had 5 or so years left).
Congrats to those who let it all ride. You certainly killed it.
Ignoratio Elenchi
Footballguy
jm192
Footballguy
Got our 1st 10,000 in IBonds. Luckily I was able to register on the website and not have to send in the papers.
Going to try to register my wife tonight to get 10,000 more.
We've been sitting on 20K to invest. I was going to just get more stocks. But once I saw the rate for the next 6 months, couldn't pass this up.
Edit was able to get her account also set up without a hitch. For as much as people complain about treasury direct, it's not THAT bad.
Going to try to register my wife tonight to get 10,000 more.
We've been sitting on 20K to invest. I was going to just get more stocks. But once I saw the rate for the next 6 months, couldn't pass this up.
Edit was able to get her account also set up without a hitch. For as much as people complain about treasury direct, it's not THAT bad.
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gianmarco
Footballguy
Yeah, the site is not great, but it's not that bad.
We were able to do $10,000 x 3 (mine, my wife, and our trust). Nice option for a little more diversity with a good rate and timing works out.
Thanks to you guys in this thread for making me aware of it and answering questions. ( @Juxtatarot)
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Juxtatarot
Footballguy
I’ve been pimping I Bonds as an emergency fund/cash vehicle for about 10 years so it’s particularly cool for me to see it pay off so well now. (Despite the fact that inflation is intrinsically not cool.)
SFBayDuck
Footballguy
Yup, that's correct. So I'm keeping some cash for now in the savings account, but as that year hits I'll be able to keep less cash on hand and let these things keep that money ahead/even with inflation.
Juxtatarot
Footballguy
Orange&Blue
Footballguy
Put $5k in I-bonds for all three kids. Wanted something different than 529s for next year and decided to go ahead now instead of 2022 contributions. My tax advisor may shoot me.
MarshallPlan
Footballguy
Talk me out of paying off last 17k of my wife's student loans. We have been saving each month that we haven't had to pay it. Have 5k just sitting in savings ready to pay and have another 15k of savings that's liquid. Her rates are around 5.5%. I just hate having to pay them monthly and want to get rid of them.
gianmarco
Footballguy
jm192
Footballguy
jm192
Footballguy
It seems too good to be true haha.
I've been a big advocate of emergency fund needs to be in a money market account or high yield savings account. I want the money today or tomorrow if I need it.
But...if my Emergency fund is 20,000--once that 20,000 crosses over the 1 year threshold--it makes too much sense. The website says the money will be in your checking account within 2-3 business days. I think we can pretty much always wait 2-3 days.
All of sudden, you're earning interest guaranteed to keep up with inflation--rather than your purchase power dying down to inflation. You can invest the 20,000 you were keeping in the bank and put it to work rather than getting 0.1% in your local bank.
Sure, you may forfeit 3 months of interest. But you may also not. And that's completely negated by the money you were able to invest rather than sitting it in your checking.
We just bought 20,000$ worth--once it hits a year--that'll be our emergency fund.
Runkle
Footballguy
Random
Footballguy
Desert_Power
Footballguy
wilked
Footballguy
Judge Smails
Footballguy
I'll have to read through this ibonds stuff and talk to my financial advisor. I'm looking at cash as a buffer if I want to retire early. Have a few hundred K in Ally now. But way more than is needed in any emergency fund. Sounds like I should start shifting as much as I can into i bonds, correct? I'm going to have more cash that can be used for more aggressive investment opps.
Desert_Power
Footballguy
I've really liked ChooseFI but cannot get into the Stacking Benjamin's. Too much going on and a lot of jokes I don't care about. Stay Wealthy is good but very short. Will try out Retirement Answer Man next.
-OZ-
Footballguy
I’ve added talking real money, which is solid but repetitive. Risk parity radio is good but some don’t like the repeat sound clips.
The one that’s made me think the most lately is radical personal finance.
-OZ-
Footballguy
We’re planning on doing $20k every year in I bonds for the next decade. Retire, and that $200k in bonds will serve as a nice cushion in case the market falls. No other bonds right now.
-OZ-
Footballguy
-OZ-
Footballguy
Sold our land finally. Cash wired in today.
$10k will go to I bonds. $10k will stay in savings to get us $15k which will keep in place as a floor. We’ll max 4x coverdell. Just trying to decide whether to invest the rest immediately into my M1 pie or wait. Another option would be to buy I bonds for all the kids. Wife still wants a highlander but I think I’d rather take a loan on that.
$10k will go to I bonds. $10k will stay in savings to get us $15k which will keep in place as a floor. We’ll max 4x coverdell. Just trying to decide whether to invest the rest immediately into my M1 pie or wait. Another option would be to buy I bonds for all the kids. Wife still wants a highlander but I think I’d rather take a loan on that.
Gawain
Footballguy
I have 8.8k hanging around and the only thing giving me pause is the possibility of Biden wiping 10k at some point as a sop to progressives. I don’t think it’s a 50/50 proposition, but I do think it’s more than a 10% likelihood. Thats enough for me to pay the minimum and eat the 6% I payMarshallPlan said:
jm192
Footballguy
The farther that passed from inauguration, the less likely it feels. It only seems popular with progressives.
6% guaranteed return is sick. I’d finish it off asap and call it a win.
Runkle
Footballguy
-OZ-
Footballguy
I’m no professional gambler but a $528 bet each year for a 15x payoff with 10% odds seems reasonable. Presuming Gawain invests the money he would have used to pay off the loan, this seems a very reasonable move.
Sand
Footballguy
Maybe it's just me, but loan forgiveness has just fallen off the map. 10% is maybe a bit generous.
Maelstrom
Footballguy
Long time reader, first time seeking help (at least in this thread) - there is looking more and more likely that my wife may eventually need some sort of long term care or have significant medical expenses. We're in our 40s right now and have good insurance right now (my work) and she's eligible for Medicare now due to kidney disease progression (also has diabetes). I'm not sure where to start, but I want to try to figure out how to potentially protect our assets now in case of LTC or significant medical expenses in the future. Not sure if she can even get LTC insurance (probably just have to call around for that and see but guessing it'd be a lot more $$ than normal for our age given her health issues). Anything else I should be looking at?
Assets mainly include emergency savings and retirement accounts - his and her IRAs & Roth IRAs (latter is relatively small still) plus 401K. And the house, which should be paid off in < 15 years at this point (intentional decision to work on paying it off despite the low interest rate).
Assets mainly include emergency savings and retirement accounts - his and her IRAs & Roth IRAs (latter is relatively small still) plus 401K. And the house, which should be paid off in < 15 years at this point (intentional decision to work on paying it off despite the low interest rate).
