The Math Is the Easy Part

Achieving financial independence is hard in spite of the math being surprisingly easy.

Here’s the math: 

Mr. Money Mustache tells the shockingly simple math behind early retirement much better than I can.

Save 5% of your take home pay and you’ll need to work 66 years; save 20% and you’ll need to work 37 years; save 50% and you’ll need to work 17 years; save 70% and you’ll need to work 8.5 years.  Yep just 8.5 years.

This is a bit simplistic–but close.

I have my retirement mapped out in mind numbing detail.  And you should too.

But for the smarty pants readers of this blog, it’s not too hard, right?

But here’s what’s hard:  Continue reading “The Math Is the Easy Part”

How to Hack Your Mortgage

Yep, if you have a mortgage, you should hack it.

Pick a hack, any hack.  In fact, pick a couple.  Each of them allow you to pay off your mortgage sooner and can save you a ton of money in interest.

First, let’s talk about how mortgages work.  When you get a mortgage, your monthly payment includes both interest and principal.  The principal reduces the amount you owe, the interest pays your lender for letting you use their money.

The best rate I can find today (on bankrate.com) is 3.75% for a 30 year fixed mortgage.  For a $250,000 mortgage, the monthly payment is $1,158.  $781 of that first payment goes to pay the interest.

$250,000 x 3.75% / 12 months = $781 all to interest
The remaining $377 goes to reducing the amount you owe-the principal
For your second payment, a little less ($1.18) goes to interest and a little more goes to principal

Over the 30 year term of the mortgage, you’ll pay almost $417,000 in payments and $167,000 of that is interest.  Yep, even at today’s historically low interest rates, that’s a ton of money going to interest.  So it definitely pays to hack your mortgage.

Hack #1 – round up.  Round up that 30 year loan payment of $1,158 to a payment of $1,200 and save almost $12,000 in interest and shorten a 30 year loan by about 2 years.  Just $42 a month can do what???!!!  Round up to $1,250 and save another $13,000 in interest and shorten your loan another 2 years. Continue reading “How to Hack Your Mortgage”

You Got a FAT Raise, Now What?

So you got a promotion and a FAT raise, now what?

First of all, congratulations!  You must be kicking butt at this work thing and you should feel really good about your accomplishment.

So celebrate a little.

But don’t buy anything you’ll still be paying for after this amazing feeling wanes.

And it will wane quicker than you think.  Our emotions revert to our baseline quickly–both after good events and bad.

Celebrate with people who love to celebrate YOU.  Have a special meal, spend a bit extra on your drink of choice, maybe go away for the weekend.  Make it special.

But don’t go crazy.  Because your real test after a promotion, isn’t whether you can succeed in your new role–obviously you can.  Your real test is how much of that FAT raise you can use to create the future you want for yourself.

So once you wipe that smile off your face?  What do you do? Continue reading “You Got a FAT Raise, Now What?”

My Lovely, Inefficient Life

I read a lot of my fellow bloggers stuff.  Some, I read because I love how they write (frugalwoods), some, I read because I love how they think (OurNextLife),  some I read because they are irreverent (BitchesGetRitches), and some, because they have such great hacks.

Many of the hacks are to help people save time.  Because these bloggers have to fit a lot into each day.  They often have full time + jobs and families and successful, money making, blogs.  I run a money losing blog and it still takes a lot of time.  I can’t even imagine how much time is devoted to a money making blog–oh the pinterest pins, the facebook groups, the tweeting that is necessary . . . it’s so daunting, I haven’t even attempted it.

And, I have to admit, when I read about hacks to save time, I kind of giggle inside.  I’m still celebrating that I don’t need to be so damn efficient.

I’ve created a life for myself that has a ton of inefficiency built into it . . . because I can. Continue reading “My Lovely, Inefficient Life”

The High Cost of Marriage

Please don’t think I’m questioning my relationship or my life partner.  Mr. Ms. Liz is truly my best friend; he makes me a better person.  There’s no one I’d rather have along side me in this adventure of life.  We’ve created a life, together, I could not have created without him by my side.

But that doesn’t mean I won’t examine what marriage has cost us . . . financially speaking.

First, some history.  I was married at 24–crazy and amazing that I found the person who would make me happy over these last 28 years at such a tender age.

When I married, I changed my name.  Mr. thought it was unnecessary to do so but I wanted to be MARRIED and changing my name made me feel MARRIED.

In fact, Mr. wasn’t all fired up to be married, he was perfectly happy to cohabitate.  Smart guy.  But, I wanted to be MARRIED and he wanted me to be happy so we were married.   And we’ve been quite happy.

My frequent readers know we keep our money completely separate.  I never thought we needed to combine finances in order to feel MARRIED.

For the first 25 years of marriage, we split our house related bills based on our incomes.  When Mr. made twice what I did, he paid 2/3 and I paid 1/3 toward these bills.  As my income grew, I paid more.  This allowed us to live at a blended lifestyle rather than at the lower earner’s (mine) lifestyle.  Over the last few years, we have split our house related bills based upon our relative net worth.  Again, he pays more than I do because his net worth is higher.  This has always worked well for us.  We’ve always split groceries and other joint purchases evenly.

Because we keep our money separate, I’ve always split our income tax bill based on what we would have paid if we were single.

You see, the U.S. tax code is set up for a family where there is a high wage earner and a low or no wage earner.  The tax code penalizes families where both partners have similar or high earnings.  This additional tax cost is referred to as the “marriage penalty”.

The penalty exists because the upper earnings limits for the married filing joint tax tables are not two times the limits in the single tax tables.

Then, at higher income levels, an alternate minimum tax kicks in which makes the marriage penalty even worse.  Oh and Obamacare added some pesky charges when your income is quite high and we hit that.

And because I am a strange money nerd who looks at this stuff, I can tell you how much marriage penalty we’ve paid over the last 22 years.

In the highest year, our marriage penalty was over $7,100.  Yep, $590 a month not for a car payment or a fancy trip but for the privilege of being married. Continue reading “The High Cost of Marriage”