Sunday, April 29, 2012

Can a $250,000 house lose $100,000 in value in just five years?

We choose not to have money set aside in escrow when we pay our mortgage, so it's now time to make a semi-annual payment towards our property taxes. I am responsible and I just know to set $200 a month to cover this expense. But here is my concern: This morning I was writing the check and looking at the paperwork they sent us and I found out some potential bad news. The market value they are going to use for our 2013 taxes is $39,900 less than the market value they are using for the 2012 taxes. Are they expecting our house value to drop by nearly $40,000 in the next year? Or are they a little behind? They say our market value of our house for the 2012 taxes is $207,100 and the market value for the 2013 taxes will be $167,200. Right now zillow is saying our house is about $175,000. I don't know who to believe. I hope they are saying our house is already at $167,200 today and the taxes will reflect that next year and not that they think the house is actually worth $207,100 today and will still lose $40,000 in value in the months to come. So if our market value on our property taxes for 2012 is about $32,000 higher than Zillow is today or about 15%, will our Zillow value be 15% of next year's market value of 167,200? If that's the case, our house will only by worth $142,120 on Zillow by 2013. That thought just sickens me. That would mean our house will have lost about $100,000 in value in 5 years. I really hope our property taxes are just behind the times and we have already bottomed out!

If there is any good news, maybe our taxes will be less next year? The market value for 2013 is about 80% of the 2012 value, so let's hope the taxes will drop by that much! We pay about $192 a month right now, and 80% of that would be $153.60, so that would save us $38.40 a month. I'm not really counting it though because the market value from 2011 to 2010 decreased by $3,400 (which is about 2%) but our taxes actually increased by $84 a year.

Wednesday, April 25, 2012

Will my boss give me a raise?

This Friday will mark eight weeks since I originally asked my boss for a raise and I still have not heard if I am going to get it.  The boss did mention to me on Monday that he is still waiting to hear back from someone else. But I'm really starting to lose hope.  My co-worker had encouraged me to just go ask for a raise because she made it sound so easy.  I thought I'd know by the time I left his office the day I asked.  Then I figured I'd know no later than a week later, now almost two months have gone by and I still have not got an answer. So I'll let you know if anything ever happens there. I think after I take my vacation next month it might be time to look for a new job!

My husband's cost of living raise starts this month, so at least we will be getting a little more income.  Unfortunately my husband's personal trainer will be increasing from the already too expensive $100 per month to $132 a month.  I really, really, really wish I could convince him to stop going because it is not helping him at all and it's just a waste of money. 

I now have $8,000 saved up for the upstairs windows.  I don't know when we are going to get them replaced.  My husband isn't as enamored with windows now that we got the downstairs ones done.  So the $8,000 might be used towards a replacement vehicle. I read on J.D. Roth's website "Get Rich Slowly" that he is not saving for any goal in particular.  I kind of feel that way, but I still have so many things to save for, I'm just not sure which one we will need first.  Because they are all big ticket items, I have to start saving months or even years in advance. Even if you look at the chart I posted a couple months ago, it says I saved for flooring for the bathroom, yard work, my sister's wedding, a front door and a vacation - none of which has happened yet (although the vacation is coming soon!).  Other than the sister's wedding and the vacation (which for the most part is now pre-paid), I don't have each of those in a separate savings account.  So the $8,000 could go towards some of those items as well. Anything smaller than $500 can probably be cash flowed as long as the other spending that month is not out of control.  So I think I'll just concentrate on the bigger items. The main ones are:
  • Upstairs windows
  • Replace vehicle #1
  • Replace vehicle #2
  • Fund Roth IRA
  • Trip to Japan
  • Replace siding on the house

None of these need to be done this year (except maybe 2012's IRA contribution), but I would like to see them all done within the next 3 years. We are probably looking at a total cost of about $65,000 to $75,000 accomplish just those six things on the list.  Maybe I should just make a big fat goal of raising $75,000 and then go on a shopping spree and take care of all six at once!

Tuesday, April 17, 2012

How big of a nest egg do we need? Taking another look at retirement...

Saving for retirement is so frustrating. I hate having so many unknowns. There are way too many unanswered questions.

Will Social Security be around?
If Social Security is around, how much can we expect?
What will the value of the dollar be when we retire?
What will the rate of return be on our investments?
Will we live "too long" and outlast our money?
Will my husband still get a pension and how much will it be?
Are we saving enough?
What will the tax rates be when we retire?
Should we take the tax savings now or later?

It's so frustrating and it is very tempting to ignore saving for retirement. I had been kind of ignoring it ever since I fully funded my IRA last year. I feel like there are so many things I need to save for now in the short term, I just don't want to put so much money away that I can't touch for another 30 to 35 years. Who knows if I'll even be alive by then. I see so many people in the obituary section of the newspaper who die in their 50's and 60's and you got to wonder how much they put away towards their retirement and now they never get to use it. In order to save for a future they were not even around for they might have sacrificed going out to dinner with friends, seeing their favorite rock band in concert, a vacation or getting the car they really wanted. It's kind of sad to think of people dying with all this money saved because they sacrificed some enjoyment in their lives to put money in their retirement accounts.

How long we'll live is just one of the biggest unanswered questions. It's tough to just plug your info into a calculator online such as the one from Kiplinger to see if you're on track to make it in retirement when changing just one variable slightly can significantly affect the results.

One big variable in question is the rumor that social security will not be around for people our age. People that are currently retired can get by on a lot less of their own money because it is being supplemented by Social Security. I've seen articles saying it won't be around in 30 years, or it'll be only 77% of what it is today.

Another issue is my husband says he gets a pension, but I have never seen any paperwork on this. I asked him once and I think he said it was $30,000 a year. I'm not sure if that is today's dollars or future dollars. And that brings me to another question - how bad will inflation be? Will it be like the 1970's or will in be a steady increase of about 3% a year?

So I plugged in some numbers into the calculator and did a few different scenarios.

  • 80% of gross income of $97,000
  • Years until retirement: 30
  • Monthly SS $1,908 and $1,001 (today's dollars) (I used this calculator to get these numbers)
  • Monthly pension $2,500 (not sure if this is today's dollars or not)
  • Current retirement accounts: Husband: $69,013 Me: $28,899
  • Assume 6% return
  • Assume stay in same house, but mortgage paid off
  • Live 30 years past retirement
  • Investments have 35% stock at retirement


Scenario 1:
(Best case scenario)
Annual Retirement Income In Future Dollars: $188,568.00
Annual Social Security and Pension Benefits: $133,426.00
Nest-Egg Goal: $1,588,090.00
Projected Future Value of Current Savings: $562,015.00
How Much You Should Be Saving Each Month: $739.00

Scenario 2:
Same inputs but 77% SS
Annual Retirement Income In Future Dollars: $188,568.00
Annual Social Security and Pension Benefits: $113,889.00
Nest-Egg Goal: $2,150,755.00
Projected Future Value of Current Savings: $562,015.00
How Much You Should Be Saving Each Month: $1,144.00

Scenario 3:
Same inputs but no pension 
Annual Retirement Income In Future Dollars: $188,568.00
Annual Social Security and Pension Benefits: $84,826.00
Nest-Egg Goal: $2,987,770.00
Projected Future Value of Current Savings: $562,015.00
How Much You Should Be Saving Each Month: $1,747.00

Scenario 4:
Same inputs but no SS
Annual Retirement Income In Future Dollars: $188,568.00
Annual Social Security and Pension Benefits: $48,600.00
Nest-Egg Goal: $4,031,078.00
Projected Future Value of Current Savings: $562,015.00
How Much You Should Be Saving Each Month: $2,498.00

Scenario 5:
Same inputs, no SS or Pension (worst case scenario)
Annual Retirement Income In Future Dollars: $188,568.00
Annual Social Security and Pension Benefits: $0.00
Nest-Egg Goal: $5,430,758.00
Projected Future Value of Current Savings: $562,015.00
How Much You Should Be Saving Each Month: $3,505.00

So, the best case scenario says we need to be saving $739 a month.

Here is what we are doing currently:
Husband's 401k contribution: $350 (6% of $70,000 year salary)
Company match: $175
My Roth IRA contribution: $200
Total: $725

So we are very close to being on track for the best case scenario. Some of the money will be taxed when it is withdrawn, but my Roth IRA money won't be. So that is yet another question. Do we need to save $739 before or after taxes?

Ideally I'd love to get back to saving $5,000 a year in the IRA. If I spread it evenly throughout they year it would be about $416 a month, so that would mean between the two of us we'd invest a total of $941 a month.  If scenario 1 is what ends up happening, then we're good.  But if Social Security drops to even 77% we are not saving enough even if I increase my savings by $216 a month.  I don't know about you, but $216 a month is a fairly significant amount of money.  And if the worst case scenario happens, we might as well just give up now and plan on working until we drop dead. So this is very frustrating because I'm trying to make a good decision, but I don't feel like I have enough info.  If I do increase our retirement investments, it'll take some sacrifice now and I don't even know if I'll ever need that money later.

So right now the results are inconclusive.  I think I will try to invest $5,000 in the Roth IRA each year, but I'll probably wait until later this year in fund the majority of it (and just keep it at $200 a month right now) so I can have some more cash reserves first. It just hurts because that $5,000 (after taxes) every year could allow us to go on a pretty sweet vacation every year!

Thursday, April 12, 2012

Net worth update - April 2012

It's time for my quarterly check in on my net worth. Here are the numbers:

Approximate value of our house: $175,700* (up $100)
Roth IRA: $23,997 (up $1,887)
Simple IRA: $5,332 (up $832)
Savings (including emergency fund): $14,729 (up $1,918)
Total assets: $219,758 (up $4,737)

Mortgage: $182,310 (down $763)

Total net worth: $37,448
Difference since last quarter: $5,500

For the first time in a while our house value hasn't dropped like a rock and negatively affected our net worth. It even went up slightly! It was nice to see an increase in our net worth of $5,500 in 3 months! My IRA's are doing well and increasing in value and I only added $200 since my last net worth update. Maybe this is a sign of good things to come:)

Currently, my main wealth goal is still to build up cash. I was a little disappointed to see the cash savings not go up that much, but I also have to remember we bought windows for the basement which were about $4,000 and we also had some expensive car repairs too.

I'm still not really sure what our next big purchase will be, but I know it's coming. I'm guessing it'll be a new vehicle, if not windows for the upstairs. So of course when the time comes to make the big purchase it will make it appear our net worth is less. I don't like to include non-monetary assets other than the house in these reports. I'm still debating whether to remove the house, but if I did it would show a negative net worth due to the mortgage.

Sunday, April 1, 2012

Extra Cash Challenge - March Results

I'm still waiting to hear whether or not I'm getting a raise. The boss at least told me it is still pending. Of course these higher-up's are not in a big hurry or anything. It's now almost a month since I originally asked, so hopefully I'll hear something soon.

I actually had an opportunity to work a few Saturdays this month, so it was nice to make about $300 extra this month. Too bad we recently had a $900 repair on our truck and a $400 repair on our car this month. In this case we would have been better off having 2 car payments on new vehicles that don't have issues. Hopefully we are done with repairs for a while!

Anyway, I thought I'd post my results for the extra money challenge. I did a lot better this month. Too bad it wasn't enough to pay for the repairs on the cars, but every little bit helps. I'm posting this a little early before some of these numbers become "official" (they usually go down slightly), but it should be close.

(Very) part time job: $7.44
Advertising for my blogs: $162.00
Amazon affiliate: $18.62

Total made for March: $188.06
Last month: $81.43
Difference from last month: $106.63

So I more than doubled my earnings since last month! Hopefully this will continue to improve every month! I have one blog in particular that usually makes about 95% of the income. However, this month my second most popular blog made $42.61 - or about 26% of the advertising earnings! That blog was also the source of pretty much all the Amazon earnings too. I was very happy to see that. However, there was a TV special about the topic of that blog that aired last month so that caused people to search for the topic and find my blog. I believe the special is now done airing, so my numbers might fall back to where they used to be.