Saturday, July 9, 2016

When Your Money Life Hits a Wipe Out: Lessons Learned - Part 1




May, June and July 2016 have knocked my financial freedom plans right off the board.
  
Avoid my mistakes.
    
I can recover because I have a lot of savings, thanks to my proactive frugal living and personal finance software addiction and decluttering fascination and aggressive downsizing

But my pride and confidence hit the surf and it felt like I slammed into concrete.   Worse, it may have derailed complete financial freedom by a year or more.  And some of it was my fault.   

Surfing toward FREEDOM  

Usually I love the whole inspirational journey of having a juicy, rich, fabulous life, by spending less. Sounds counter intuitive.  But I believe it's true and others have taken the road to prove it.    Ever read about the Tiny House Movement?  

Using less resources means:  

  • Taking up less of my mental bandwidth with stuff to remember, to maintain, to repair, to store, to insure.   
  • Freedom from working 50 hours a week at a job that is completely unfulfilling at best, abusive at worst.  
  • Freedom from the anxiety of whether or not the rent will get paid, or there will be enough to repair/insure the car. 


Which ultimately gives me and all of us the greatest gift of Time.
   
My husband died young, so I am acutely aware of how precious and limited our healthy life can be.  Financial freedom to me = time to be with my friends and family NOW.  Time to achieve a happy and meaningful life NOW. Before it's too late.
   
Sounds great, right? Just takes courage, planning, smarts. And listening to the sages who have gone before. 


Surfing Lessons and the Sages


The first time I retired was about 15 months ago.  

Lo and behold ­­ I wasn’t ready psychologically or emotionally.  Therapy helped. 

As the retirement sages on www.earlyretirement.org said might happen,  I experienced a sudden depression. 

Indeed, much to my surprise, a great deal of my self­perception was tied to my corporate title. It took about a year but I've come out with a much better sense of self. There is hope and I can detail some tools for you in another post in this series.
  
Sound financial planning is not an exact science.  That must be why it requires building in a big margin of error.    

I asked all the wise ones in the money advice forums  "can I please quit this job and retire now?"   But I wasn't liking the answer.   

All the wise  ones kept responding "Just wait!  Yes, you are in a hellish situation.  But can you hold on another year? You need more of a safety cushion.  Nobody gets all the planning and figuring just right.  Give yourself another 5­-10% of a cushion.”    

Boo!  

I hated the idea of holding on another year.  There was $350K in 401Ks plus $65K in cash, two guaranteed pensions starting in two years that would provide $24K per year.  That was before social security.   Monthly spending was down to $3500 (plus or minus 5%).   The corporate situation was brutal. 

I took the leap anyway.    

Looking back?  It was the right thing to do.  I learned a lot and can share it with you in these blog posts. 

But the sages were right too.  I needed a 20% cushion and only had 5% planned.


Killer Wave (Lesson) #1 ­ 401K withdrawals and taxes. 

When I did my first trial run for 30 days into retirement, April 2015, I hadn’t figured out how to withdraw my savings in the most tax efficient way.   401K withdrawals I made for that month almost triggered a big taxable event.   

I also learned that your 401K plan may very well be required to keep 20% of the withdrawal as tax withholding.  No matter what your tax bracket will be that year. 
Check your 401K withdrawal required tax rate. Because of how little I had made in 2015, I figured there was no way I would owe the full 20%, so I hadn't figured that deduction into my cash flow equations.  I needed the cash (I only had a 5% margin of error, remember?  Not 20%.).

So TIAA­Cref help me rescind the withdrawal.  I immediately went back to the drawing board. I had a year of after tax savings, thanks to frugal living habits, so not all was lost.

Killer Wave (Lesson) #2 ­ My rent was cheaper than owning a home, right? It was. Then it wasn't. 


I had downsized and done the Marie Kondo Magic on my stuff down to 600 square feet. 

http://tinyurl.com/jbru7ps
The rent was reasonable, it was a great neighborhood, I could walk to the grocery store and had covered parking. I originally signed a 6 month lease and intended to keep rolling over the 6 months leases figuring a 1­2% bump each lease increase. 

Big joke on me. Rent went up with a 10% penalty for my next "short ­term" renewal, i.e., 6 months. Which had been the original lease term and wasn't considered "short­ term" before. And the 1 year and 2 year renewal rates?  They were still higher than I had ever paid and more than fit into the budget. (WTF?)  


“We changed our policies,” management told me, when I plead my case.  

Someone else clued me in that it was a bait and switch played on most of the tenants.  The demand was high for this area and a one­ bedroom unit.  Management just assumed that people wouldn’t want to move, so they would pay to play. 

Screw them.   (Ah, the financial freedom to Say "Screw Them!")   

So I went back to the drawing board, again, looking for a cheaper housing alternative.  I had savings thanks to my frugal lifestyle, so all was not all was lost.
   
I decided to stop playing the rental shell game and buy a condo in the neighborhood instead.  No more worrying about rent going up.  And mortgages are smart financial vehicles for building wealth right?  They are if you qualify for one...

Killer Wave #3 ­ Getting a mortgage means you gotta' have a job.  


No matter how much cash you have in savings.  It also helps to have a fair and honest appraiser, clean credit record and fair mortgage lender.  (Whoops...) 

It's almost impossible to get a mortgage without employment income.  No matter how much cash you have in the bank.    A mortgage is based on your future W­2 income ability to pay.  

You also can’t get a great mortgage when a hospital has sent you to a collections agency for a $75 bill from ago that you never received, so of course, you never paid.  How can you pay something you didn't even know existed? 

And you only find out about it when the mortgage company mentions it, like "hey, what's this??" 

So... Could I buy a condo outright with cash?  Yes, but with 401K money.   No issue with the credit reporting mistake that the hospital made.    Would it trigger a 45% tax bill to pull out the $100K chunk all at once?  Yes.  Which would drown me financially.
  
Can you get billing mistakes like this reversed from your credit report?  Yes, you can. I had the credit mistake completely removed from my credit report.  (Let me help you do it ­­ I love to kick some bull sh*t creditor ass).  

But it took months and months to complete.  If you plan on buying a home anytime soon, follow that advice about checking your credit scores with all three companies.  If I had done that earlier, I might have had enough time to straighten out the hospital’s mistake before I was stuck in a situation that forced my interest rate up to 4.65% in a 3.35% market.

By the way, a year later?   I still have too many "hard credit pulls" on my credit report to get a perfect score, even though everything else is 100% perfect.  Even though all the pulls are due to mortgage loan requests. Here are the resources I found to help me recover:  
  • My US Congressman's office.
  • My state’s attorney general’s office ­ consumer affairs department.
  • Repeated calls to the hospital's billing department.  

And are there mortgage scams out there in the housing market right now?   Yes Sirree Bob! From mortgage lenders you would think are perfectly legit, like Capitol One 360.  

Ask your title company if they've had any issues with local lenders.  

If I had done that first, I would have heard the horror stories about Capitol One's "centralized" mortgage loan processing "bait and switch." Supposedly it protects local branches from making bad loans.  That's the crap line that they spin. Really, it's corporate america's way to stay arms length distance from a customers they are going to screw over.  

In my personal situation, after a month of working through all the paperwork, approvals, appraisals, etc., Capitol One bank was set to close on the loan on a Monday in August.  

Then I got the email on Friday afternoon, "um, never mind.  No money for you.  We decided that this condo development isn't worth investing in."   

Even though my real estate agent closed on a Capitol One condo refinance in the same development the same day.  I went to the Fair Housing Authority to complain about this one ­­ and claimed sex discrimination. Capitol One had loaned money to a couple, but not to a single woman.   

A local mortgage broker saved me from losing my condo purchase  They found money for me within two weeks.  One of the brokers had worked for Capitol One mortgage division. My mortgage business wasn't the first he had gotten because of his old employer's bad policies.

And then there are the appraisals that are total scams.  

I paid for an appraisal from AmeriSave Mortgage Company and it seems that I got screwed over by them as well.    So many people got screwed on this one that the federal Consumer Financial Protection Bureau stepped in and sued them.  I had no idea.   What a dumb bunny!  The information is all over the internet.  

The CFPR sent me a refund check.  Love them, sending them many kisses, signed up for their email updates!    


So I Cried Uncle.  Got Schooled.  


I went back to work in a minimal stress job and bought a condo.  I also began cultivating a few side clients. No stress,working from home.    

I shored up my resources, learned more about 401K withdrawal strategies and taxes, licked my wounds, and began preparing for a new financial freedom date ­­  January 2017.    

A year or so delayed, but hey, I was getting there.   And then?  

May 2016 happened.

Wednesday, June 22, 2016

What's Enough Money to Be Happy?

Some say that $50,000 per year and a paid up mortgage is the prime point of greatest happiness. Other writers like Wes Moss, host of Money Matters and author of the book "You Can Retire Sooner Than You Think," imply that you need around $65 - $75,000 per year to retire -- which is when you can be happiest.

Most of us seem to believe, at some very deep level, that more money means more happiness. 

But according to the research described by the University of Texas & Indian Business School professor teaching the online Coursera course "A Lifetime of Happiness and Fulfillment," it just ain't so.   

Dr. Raghunathan and his visiting lecturers including such leading thinkers as  Dan Ariely (author of Predictably Irrational), Ed Diener (“Dr. Happiness”), and Mihaly Csikszentmihalyi (author of Flow), money is just a medium that people believe will lead them to happiness.  And our perceptions about that path are often wrong.   

But wait!  That's new age nonsense, I said. 

How happy can you be standing in a food stamp line?  Living in povertyNone of us want that future for ourselves or anyone that we know.  

The good news is that there are many other skills leading to happiness that are proven to bring meaning and fulfillment to your life.     

And you don't have to be a monk  to achieve these states, although it works for them as well.  And in fact, these skills might, paradoxically, make you more successful in the business world.

Finding flow, self-compassion, gratitude, physical exercise -- this is just the short list of what Raj Raghunathan is teaching in the course.  

Even better, you can get to learn about them and practice them for free.   

Favorite Frugal Indulge for this summer?  Coursera Courses!  Usually free, if you don't want or need the certificate.  And totally Juicy.  


Thursday, April 28, 2016

We've Got to Start Talking About Money

The Atlantic Magazine story about the shame and realities embedded in our US middle class money mess rang a lot of bells.  Mine in particular.  I'm sharing as far and wide as possible.  

It was inspired by research that shows almost 50% of Americans wouldn't be able to quickly find $400 in cash to cover an emergency.    

But to me it was more than that -- it was a mesmerizing  peek behind the reality-money-show that is Neal Gabler's life.  He is such a talented writer that he was paid to write a movie script, he's written books, he was paid to critique movies on television, he's a great Dad and husband, has two successful children.    If that's not success, what is?  

His reality-money-show reveals a different backstory, though.  Because he made a series of understandable and common money mistakes that caused a great deal of debt, Gabler suspects he will be working every day of his life, Monday-Sunday, sun up to sun down, until he just can't work anymore.  

Some of the blame for this sad situation falls to our economy and our "head up the butt" (as they say in the south) denial of stagnating wages and other US economic realities.  We are not recognizing, accepting or dealing with the bad news that the middle class is shrinking and the economic cards really are stacked to help those who live off dividends and investments.   Yes, the rich are getting richer.  Yes, our tax code is partly to blame.  Yes, your congressmen and women are not helping you, in most cases.

But some of the blame lies with Gabler's refusal to educate himself about money.  It's not always fun. This blog is designed to help and inspire those who want to get educated and to show them how it can be a blast of achievement, pride and satisfaction.  But it's still tedious at times.   You have to take your "head out of our butt" as they say here and deal with some sobering news about money.  

Good for you for "dealing with it."   By getting a little more frugal in your habits, you are beating a system that is rigged in someone else's favor. By consuming less, you are saving on sales taxes, you are building a safety valve for the inevitable bumps in the money road and you are beating a system that really is rigged against you. 

Unless you think you can lobby Congress, change the tax code and fight Wall Street's sometimes shameful practices of crazy financial product development (i.e., mortgage securities that go bust),  going at least a little more frugal is the best step you can take.     

Of course there will be months when it sucks.  Or when you make mistakes.  I spent an extra $1k on travel and gifts this April.  Two weddings.  Pretty spring days.  There it went.  But I'll be back.  I caught it because I track every penny of spending, a la the advice in  "Your Money or Your Life."     And I follow the geniuses on this free resource, the Early Retirement Forum, among many, many others.  I'm even dragging my book club through a Review of "The 7 Money Mantras" (i.e., if it's on your ass, it's not an asset).  

Good luck to you.  I'll be back next with a juicy, frugal fun blog post.  In the meantime, I'll be clipping a few coupons so that I can enjoy the things I love best -- like going out with my friends.   And maybe I'll set up a GoFundMe account for Neal.  His contribution to our money discussion in America has spurred a conversation that we should been having a long time ago.


Tuesday, December 22, 2015

5 Best Guides to Beginning a Life Free of Financial Worry

It is beginning "the thing" or "the change" that can be the hardest, isn't it?

When I was at my lowest financial point of worry and anxiety, these five books lifted me up and over debt toward a life of fun frugal living and some financial security.  So I'm sharing the wealth.

Amazon has it on sale from time to time
1.  How to Get Out Of Debt, Stay Out Of Debt and Live Prosperously

This was the first book I read that took the shame out of debt and addressed some of the emotional issues.   It inspired me to take a second job as an adjunct professor.  This didn't pay much per hour but the extra $2K in a year helped lift my family out of debt.  I felt like a cork, bobbing above the water and suddenly seeing the shore.  What a relief that was! 



I found a copy of this one for .01 on Amazon!
2.   "The Only Investing Guide You Will Ever Need" 

This was the second financial self-help book I purchased and still have on my bookshelf.  Why?  Because it's so funny, lighthearted and real.  

Tobias is a Harvard graduate who helped me understand that when I avoided buying something, or saved $1.00 on something, I was actually saving $1.50.   A penny saved is a penny and a half earned! And understanding how our taxes affect your personal finance is mission critical. 

If you are being taxed at the 25% marginal tax rate for federal income tax, then add in state income tax, then add in sales tax -- well, you could say that you are being taxed at approximately 50% (for the ease of the example, even though it might be a little high).  

So, as Tobias gives as an example in the book, if you go out to eat on Thursday night and spend $40?  Well, to replace that $40 could mean that you have to earn $50-$60.  

Even though Tobias is a very wealthy guy, he still buys canned tuna "long" (i.e., on sale), and stores the extra cans under his bed.   He goes "short" on tuna when it's very expensive (i.e., he uses up his stores).  


Seriously people, this is how rich people act.  Just be careful you don't overbuy on tuna and never use it.


I Will Teach You To Be Rich
This is about $8 on Amazon
3.  I Will Teach You to Be Rich

So inspirational and easy to read.   

Ramit promised to show me how to make $1K a year in a side gig.  I didn't think I could do it.  But then I did.  And I still make $1k a year doing a side gig.   

I don't know how he does it, just call it "Ramit Magic"



Found this for .01 on Amazon too -- great deal! 
4.  Your Money or Your Life

Ground-breaking,loving and practical approach to understanding how you are trading your "precious" life for that new toaster, or pair of shoes, or kitchen blender, etc., etc.  -- is it really worth it?  Good practical guide to understanding how much your job is really paying you per hour.   

Think you are getting $30 per hour?  Add in all those hours to commute, the wardrobe costs, the unpaid CEU hours, the hours just unwinding from the stress...  hmmm...  maybe it's time to rethink that hourly rate down to about $5!   And the toaster really cost you four hours of your precious life.  Hmmm...

Definitely an eye opener for me and one of the inspirations for Breaking Free From the Corporate Cube.    Inspirational for living well on less.   


Still about $10+ on Amazon
5.  The Millionaire Next Door

Last, but certainly not least, the granddaddy of them all, "The Millionaire Next Door."  Reading about this scene from the book (page 27), with the Decamillionaires (worth $10 million or more) is the best take-away you can have this frugal Christmas.

The professors who wrote the book wanted to study millionaires, so they invited the subjects to a focus group.  Wanting to make the millionaires comfortable, they provided wine and caviar for the group.   Here's what happened next:   When one of the group members (who owned several pieces of downtown New York property) was offered a glass of 1970 Merlot, he said 

"I drink Scotch and two kinds of beer - free and BUDWEISER!"  

It's also where I first heard the phrase, "Big Hat - No Cattle," -- a term the millionaires saved for those who flashed fancy cars and clothes, but had no assets.  

Here are more millionaire tips.

That's my top five that will keep you busy learning through the cold winter nights ahead.  Do you have a favorite I missed?  Share It!


Disclaimer:  If you do decide to click on one of the photos and buy one of the books, I will receive a small commission from Amazon.  It didn't affect my list one whit -- I've had these books on the shelves for years.  And any proceeds will go back to making the blog better!


Monday, December 14, 2015

Deadline 12/14/2015! Special Offer to Get 10% Rewards on Chase Freedom and Amazon Purchases

If you enjoy Chase Freedom credit card rebate points like I do, then be sure that you sign up TODAY for your 10% cash back rewards through 12/31/2015.

The deadline is December 14th for this extra cash back offer.

(And even if you are reading this after December 14th, 2015, use it as a reminder to check your Chase Freedom Cash Back status.
There are plenty of juicy deals for the basic 5% to take advantage of before the end of the year.)   

Monday, December 7, 2015

Why Your Monthly Budget is a Dangerous Myth

 

Caution:  Your Monthly Budget is Only About 66% of the Story 

I have a budget built after years of study – and it’s about $3K per month in expenses.  At least that was the target amount that would allow me to claim financial independence from the MegaCorp life while still living well on less.  
It even included money for several “sinking funds” of savings for the nasty surprises that will happen eventually, but of course -  just not this month.   For example, I will need a new car someday, just not this month.  I will need new glasses that cost about $500, just not this month.     The appliances will someday go ka-put, just not this month.   Hmm…. 
But as smug as I’ve been about building a great budget including savings accounts for the “just not this month” expenses – the last few months of backing away from MegaCorp life have given me the time to examine what’s really happening in my financial life.
Basically, I’ve been fooling myself by woefully under funding those accounts.    What I’ve realized is that at least one of these “just not this month” expenses  seems to happen every month!

For example, during 2015 the “Not This Month” expenses included...

Sunday, July 26, 2015

Jet.com Reviews

Have you used  Jet.com yet?  If so, what did you buy?  How was the process?  Our readers are loving the service so far.   

Amazon's newest rival certainly took off this week.   And according to Forbes Magazine's Pricing Comparison Research, their claims to have lower prices than Amazon or Wal-Mart are holding up. 

In a price comparison of 16,000 items, they were overall 9% lower than Amazon and the best deal by far for pet supplies (12% under).    (See how our reader Linda benefited from this below).