What's the Deal with Your Mortgage? 5.875%!

The Old Homestead

Warm Cancun greetings to all!  Over the last few months I have received comments and questions regarding my ridiculously high 5.875% mortgage rate.  Currently, I owe $59,568 on the mortgage; I also owe around $21,500 on our HELOC (home equity line of credit).  Many people recommended that I refinance the balance to a lower rate; others suggested that I pay off the mortgage by making additional payments to the principal.  These are great suggestions, but I have my own plan to slay the beast.  Here is a brief look at my financial ball and chain in financial calculator format:

• PV = $59,568 (originally borrowed $125,000 on $157,000 home)
• I = 5.875%
• PMT = $811 (including additional principal payment)
• N = 7.5 years / 90 months (originally a 30 year loan) 
• FV = $0 (that's the goal of every homeowner, right?)

Refinancing

I have looked into refinancing my mortgage, but I have not been impressed with the options.  Sure, I could get a lower rate, BUT I do not want to pay points and closing costs.  At this point I simply don't want to pay anymore fees to the banks; I'm tired of paying these guys.  Moreover, I do not want to extend the term of the loan.  Presently, I am on pace to pay off the mortgage in about 7.5 years, so the last thing I want to do is "upgrade" to a 10- or 15-year mortgage.  Refinancing looks like a classic "heads-you-lose-tails-I-win" scenario to me.    

I have also looked at refinancing our mortgage and HELOC balances together.  Last fall Alliant Credit Union had an enticing offer to consolidate both loans into at 10-year loan at 3.375% for only $300 in fees.  The idea of paying off both loans in 10 years or less appealed to me, so I applied for the loan.  Fortunately, I failed to get my tax return information back to them in time to qualify for the rate.  I say fortunately because I believe I can do better by not locking myself into 10 years of payments.  

The Big Plan: 

What's my devious and clever plan?  Actually, it's incredibly boring and pedestrian.  First, I plan on making additional mortgage payments to get my mortgage balance down to $45,000.  Once I get my mortgage down to $45,000, I can then use my USAA HELOC to pay off the rest of my mortgage.  Paying off the mortgage would eliminate a monthly payment of $811, but it would also swell my HELOC balance to its maximum credit limit.  In that event, I would pay a rate of 2.89% on my HELOC balance...roughly $110 a month.  In other words, my monthly payment obligation would be only $110, not the $811 I'm currently paying.  

Over time I would drive down my HELOC balance with my other sources of income.  For example, every January my wife and I deposit our IRA and 457 distributions into the HELOC  and then slowly withdraw them as needed.  We could also deposit rent payments into the HELOC if we decided to rent our home again.  I feel confident that we could have our HELOC under control within 2 to 3 years.

What If...      

1. your low 2.89% HELOC rate suddenly rises?  In that case, I would go to USAA's website and lock in a fixed rate on the balance (or part of the balance).  Even if my HELOC rate doubled, I would still be paying less than my current 5.875% mortgage rate.  (2.89% * 2 = 5.78%)
2. you can't hit your $45,000 mortgage balance goal in time?  In that case, I might have to postpone this magnificent plan a year or two.  At my current payment schedule, my mortgage balance should hit $45,000 around January of 2016.  However, if I just couldn't help myself, I guess I could use a 0% credit card to drive down the balance.  Obviously, I'd be playing with fire, but I'm certain I could pay off $5,000 to $7,000 over the course of 18 months.  I get such credit card offers (0% for 18 months!) in the mail every month, so maybe I'll use their money to help me.  Of course, this would be an impulsive last resort, and I wouldn't recommend it to most people.  Credit cards coupled with humans usually lead to disaster. 

When will this financial coupe take place?  It depends on my extra principal payments and HELOC interest rates, but I would love to pull this off in January of 2015 or 2016.  Of course, a lot can change between now and then, but I'll be ready if a good situation presents itself.

What do you think about using a HELOC to pay off a mortgage?  How about my incredibly awesome idea of using a credit card to pay off a mortgage?       

Our Family Adventure in Cancun, Mexico

Mexico or Bust!

Greetings from Cancun, Mexico to all my loyal Millionaire Educator readers (Mom and Honest Abe)!  Two weeks ago I bought one-way airline tickets from AirTran for the Atlanta to Cancun flight.  Two days later my wife, son and I landed in Cancun and began our family adventure.   We decided to come to Mexico for two main reasons.  First, my wife and I both agreed that an extended family adventure would benefit all of us.  We could all work on our Spanish, see lots of interesting sites, hit the beaches, and escape the suddenly cold Georgia winter.  Second, we also wanted to see what it would be like to live in Cancun as a local, not a tourist.    

Let's face it, most U.S. news pertaining to Mexico is very negative.  Friends and relatives advised us not to go, and my wife and I had our own reservations.  We agreed that if we didn't like it, we would return home after two weeks.  So far, we have really enjoyed our trip, and we plan on staying for two full months.
  

Arrival

The flight from Atlanta to Cancun went smoothly and only took two and half hours.  The flight was especially exciting for my son because it was his first flight AND his birthday.  It was a day to remember for him.  It was also a big day for me because it was my first flight in 13 years!

Birthday Flying!

Once on the ground in Cancun, we proceeded through immigration and customs without any problems.  The immigration officer was a gregarious guy, so Sr. Hablar-sin-fin here struck up a conversation with him.  I mentioned to him that we spent our honeymoon in Cancun 17 years ago.  He told me that I would by shocked by how much the city had grown.  He issued us tourist visas for 180 days and wished us well on our adventure.  All in all, it was the most pleasant immigration experience I ever had.

Once outside of customs, we exchanged a few dollars (at a terrible exchange rate) and proceeded to the ADO bus counter where we bought three tickets to downtown Cancun for 93 pesos ($7 U.S.).  Outside the airport, we immediately felt the 80 degree warmth of the tropics...it was awesome.  Of course, we also had to fight off numerous taxi drivers offering their services as we made our way to the bus stop.        

After a 20 minute bus ride, we found ourselves in downtown Cancun during Friday rush hour.  I did not have a hotel reservation, but I knew there was a hotel near the bus station that would fit our needs.  Unfortunately, I couldn't find it and took my wife and son on a goose chase that ended up in McDonald's.  I figured I could at least get my bearings using their WiFi.  After a few minutes, my son said he was hungry, so we celebrated his birthday with a Cajita Feliz, Happy Meal.  (So much for cultural immersion!)  

Cajita Feliz:  It Don't Get No Better!

Lodging
After our birthday meal at McDonald's, we found a taxi driver who took us to our hotel for 30 pesos.  We checked into the Hotel Kin Mayab where we paid 600 pesos ($45 U.S.) for a room with two beds.  My wife and I immediately realized that prices had gone up considerably since our last trip 17 years ago.  

Enjoying the Pool

The following morning we moved over to a suite at a hostel for 680 pesos.  The room was better, had a nice pool, and included breakfast.  We stayed at the hostel for two nights, so the first three nights in Cancun our lodging cost us about $150 U.S.  The costs of hotel rooms is much higher than I anticipated, so we began exploring other options and found a studio apartment in downtown Cancun.

Nuestro Apartamento

Our studio apartment cost us $511 U.S. for one month...not exactly  cheap, but much better than hotel rates.  The apartment is nice; it includes WiFi, a coffee maker, mini fridge, microwave oven, and access to a shared kitchen.  However, the room is a little small for the three of us.  A couple or single individual would love this set-up.

  

Our Home for the Next Month

The Beaches

One of benefits of an extended stay in Cancun is that you can explore its many beautiful beaches.  Since we are not staying in the hotel zone, we have to ride the bus to the beaches.  It costs us 57 pesos ($4.40 U.S.) to get to and from the beach; the bus fare is 9.5 pesos per person.  So far, we have been to three different beaches:  Playa Tortuga, Playa Forun, and Playa Delfines.    Playa Tortugas has shallow, calm water with no waves or undertow.  It's a nice relaxing family beach.

Having Fun at Playa Tortuga

Playa Forun (aka, Playa Chac Mool) is more of a party place for foreign tourists.  Like all the beaches here, it is gorgeous due its combination of white sand and clear blue water...you have to see it to believe it.  

Fun at Playa Forun

Thus far, our favorite beach has been Playa Delfines.  It's more of a local beach towards the south of the Hotel Zone.  It has nice facilities:  palapas (gratis!), showers, and a nice changing / bathroom.  If you ever make it to Cancun, you'll have to check out Playa Delfines...highly recommended! 

Playa Delfines Day Trip

If you have any questions about Cancun, please email me.  Due to the incredible amount of fun we're having here, it might take me a while to get back to you, but I'll do my best to answer any questions.  I'd love to write more, but today we're off to Playa Delfines!

We're Done with Credit Card Debt

Credit Card Debt...Be Gone!

This post will be brief...I just wanted to share some good news.  This week we paid off the last $500 balance on our Visa credit card.  We had carried a balance on a number of 0% rollover cards since 2009.  At its peak, the balance was $10,000.  By rolling our credit card debt to 0% rollover cards, we were able to avoid most credit card expenses:  interest and late payment fees.  Every month we automatically sent in payments using our bank's Bill Pay service.  However, owing anything to a credit card company is NOT good; thinking and worrying about credit card debt definitely affects your psyche.

In the future, we plan on using our credit cards sparingly.  That shouldn't be so hard since we make most of our purchases these days with our debit cards.  We prefer debit cards because they seem to moderate our spending and encourage us to be thrifty.  (Watching our checking account balance steadily diminish over the course of the month seems to keep our spending and consumption in check.  On a debit card you can't spend what you don't have!)

If you don't have any credit card debt, congrats and good for you.  If possible, avoid credit card debt at all costs; it's usually a first step towards debt slavery.  If you are dealing with credit card debt, good luck paying them off and reclaiming your financial freedom.    

      

2013 Accomplishments and 2014 Goals

Happy New Year to all; may 2014 be your year!  Okay, it’s time to see how we did with our 2013 goals.  Let me start by saying my wife and I only worked five months each this year, so we came up short on most of our financial goals.  Nonetheless, 2013 was still a great year for us.

Savings Goals
Our 2013 savings goal was to save $102,050 in our various retirement and education accounts:  IRA, 403b, 457, HSA, Coverdell ESA, and 529 plans.  Unfortunately, we did not hit our goal; we actually came up $23,328 short!  However, we still managed to save $78,722 in our five months of work.
Result:  We missed our goal, but we're not ready to call saving over $78,000 a failure.      

2013 Savings Results
Accounts	Self	Wife	Total
457	$15,512	$17,500	$33,012
403b	$11,200	$13,460	$24,660
IRAs	$6,500	$5,500	$12,000
Health Savings	$6,450		$6,450
Total Retirement  and Health Savings			$76,122
Educational Savings	Son	Others	Total
Coverdell ESA	$2,000	$0	$2,000
529 Plan	$300	$300	$600
Total Educational Savings			$2,600
Grand Total			$78,722

Spending Goals
Our 2013 spending goal was to live on $51,750. Right off the bat, I got this goal wrong by miscalculating how much we could earn and still remain in the 10% federal income tax bracket.  In 2013 we took $58,375 of income from our 72t IRAs and 457 accounts, so we overshot our goal of $51,750 by $6,625. 
Result:  We missed our goal and paid more federal income tax than planned.  Oh well!     

2013 Spending Results
Spending Goal	$51,750
Spending Result	$58,375
Amount Over	$6,625
Federal Income Tax Due: ($7,850 * 10% = $785) + (10,075 * 15% = $1,512)	$2,297
Effective Federal  Income Tax Rate: ($2,297 / $58,375)	3.9%

Debt Goals
Our debt goals for 2013 were very ambitious.  By working only five months last year, we came up way short on this goal. Currently, our total debt (mortgage, HELOC, and credit cards) is $107,351.  As this amount goes down to ZERO over the next few years, our net worth should increase.
Result:  A swing and a miss, but that's what happens when you stop working.

2013 Debt Results
Debt Goal	$92,728
Debt Result	$107,351
Amount Off	$14,623

Health, Professional, and Personal Goals
Here's a recap of how I did with my various 2013 goals.

1. Overall, I am happy with my health.  My weight is still at 245 in spite of the fact that I haven't run in 3.5 months.  I still adhere to my No-Low-Slow Carb diet, and it has changed my life for the better.  My minimalist exercise routine became so minimal that I stopped it all together.  That was a bad idea because exercise almost always improves my mental outlook.  In 2014, I plan on re-committing to my minimalist workout routine.  I also plan on running more regularly; I never feel bad after a run.  
2. I got almost nothing done on my professional goals for 2013.  I added no new teaching certifications, did not finish my books, and my web sites are still disasters.  This area is my biggest disappointment.
3. In the area of my personal goals, I did a little better.  Initially, I had hoped to use Memrise to build on my Chinese, French and German language skills.  Sometime around March I began using Duolingo instead.  I am currently at level 12 in Spanish, level 8 in Portuguese, level 7 in German, level 2 in Italian, and level 1 in French.  My Chinese fell to the wayside.  I only completed one FEMA independent study course, and I did not take the CLEP Humanities test as planned.  

2014 Goals
I'm going to keep it simple; here is what I hope to do in 2014:

• Savings:  We plan on saving 100% of our wages when and if we take jobs in 2014.  All wages will be diverted into IRA, 457, 403b, HSA, Coverdell ESA, and 529 accounts.  We also plan on starting a taxable investment account this year.    
• Spending:  This year we plan to live on $51,775.  That amount is the total of our 72t IRAs and the balance of two 457 accounts.  At the this level of income, we should pay $1,239 in federal income taxes for an effective federal income tax rate of 2.4% ($1,239 / $51,775).     
• Debt:  At a minimum, this is the year we finally slay our remaining credit card debt.  We're also considering selling our house and downsizing to a retirement home in Florida.   
• Health:  I plan on continuing my No-Low-Slow Carb diet plan and restarting my minimalist exercise and running program.  This should be an easy goal to achieve.  
• Professional:  I'm not going to make any bold claims this year.  Last year I wrote 16 blog posts; this year I plan to write at least 17.  I also want to get at least 100,000 pageviews of this blog in 2014.
• Personal:  I plan on sticking with my Duolingo language study; I should hit level 12 in both Portuguese and German.  Any improvement in French and Italian will be a bonus.  I also plan on taking the CLEP Humanities test because I will need the college credit to keep my teaching certificates updated.  Time permitting, I would also like to earn 12 hours of  FEMA Independent Study credit.  

With those goals in mind, I plan on lacing up my steel-toed boots and squarely kicking 2014 in the derriere!  

10 Happy Years with a Couple of Old Nags

Swayback #1

December 26th, 2013 marked the 10-year anniversary of a very special relationship.  The old girl in question has been so good to me and my family.  She's reliable, hard-working, and still a little pretty in spite of her advanced age.  Sure, she often has a "rode-hard-and-put-up-wet" look to her, but I don't mind.  Even though at times she feels unsteady and rickety, she still delivers one heck of a ride.  While I don't really "love" this aging wench, she does have a special place in my heart.

Yeah, my 2002 Mitsubishi Galant has been very good to me!  Ten years ago we paid $10,500 for this "sweet" ride.  Since then, I have replaced the tires thrice, the timing belt twice, and the air condition once.  (I might have changed the tires four times, but I wanted to use the word "thrice.")  When I bought her, she had 46,000 miles on her; today she has over 257,000 miles!  Here she is:          

The Chick Magnet

Earlier this year her wheel covers fell off, and she looked especially bad.  So, I forked over $20 for some smoking hot wheel covers, and she instantly looked 300 pounds lighter and 10 years younger.    

My Girl All Gussied Up

A few months after we bought the Mitsubishi, we bought a used 1998 Volvo S70 for $7,000.  We've used the Volvo as our secondary vehicle, so we've only put about 35,000 miles on it over the ten years.  The good news:  we haven't had to buy a car since May of 2004!  Sure, we have spent money on gas, oil changes and basic maintenance, but we haven't spent a dime on car payments.  (Actually, I have never had a car payment while my wife had one over 20 years ago.)    

Swayback #2

Without a doubt, these two reliable cars, sans car payments, have helped us to maximize our savings and build our net worth.  While these two girls have served us well, we know that eventually we'll have to put them out to pasture.  Until that time comes, we plan on saddling them up and ride'm hard till that can't go no more...giddy up girls!    

Net Worth for December of 2013

Here is our net worth for December of 2013:  

December of 2013
ASSETS	$915,431	LIABILITIES	$104,553
Checking	$430	Morgage @ 5.875%	$60,599
Savings	$1	HELOC @ 2.89%	$42,589
Stocks	$147	Credit Cards @ 0%	$1,365
72T IRAs	$567,454
Traditional IRAs	$32,092
Roth IRAs	$15,795
457 Accounts	$102,582
HSA	$4,100
ESA-529-UTMA	$33,725
Home	$156,605
Cars	$2,500	NET WORTH	$810,878

Thoughts and Comments on Our Net Worth

1. At this point of the year, my financial goal is to simply get to January of 2014 without a financial misstep.  
2. As of the today (12/12/2013) our net worth is down about $2,000.  
3. I'm still looking forward to paying off the credit cards in January...oh yeah!  Credit card is up a little because I used it to pay for an international job fair and a few purchases.  
4. The HELOC will be used to pay for next months mortgage and utilities payments.
5. Depending on whether or not we take jobs, we could crack the million dollar net worth mark next year.  It's just a matter of time...

How I Escaped My 403(b) by Quitting My Job

Welcome to any new readers visiting this site after my recent post at 403bwise.com.  Thanks again to Dan Otter for letting me share our 403(b) story with his readers.  In case you missed it, here is the link to the article.

Net Worth for November 2013

Here is our net worth for November of 2013:  

November of  2013
ASSETS	$915,643	LIABILITIES	$103,329
Checking	$2,487	Morgage @ 5.875%	$61,119
Savings	$1	HELOC @ 2.89%	$41,183
Stocks	$139	Credit Cards @ 0%	$1,027
72T IRAs	$567,073
Traditional IRAs	$32,052
Roth IRAs	$15,757
457 Accounts	$102,425
HSA @ Alliant CU	$4,098
ESA-GA 529-UTMA	$33,614
Home	$154,997
Cars	$3,000	NET WORTH	$812,314

Thoughts and Comments on Our Net Worth

1. The rising market is helping our bottom line...for now.  
2. I'm really looking forward to paying off that credit card debt!  I'm done with credit cards; they're dangerous.
3. I have got to get that mortgage balanced refinanced.  My current rate of 5.875% is just too high.  I feel like I'm leaving money on the table by not taking care of this. 
4. The HELOC will increase as I borrow from it to finance the rest of 2013.  As soon as we receive our IRA distributions in January, we will park the money in the HELOC and reduce that balance.  
5. We took our last 457 distribution for the year; it was a $5,000 withdrawal.  
6. In January I will adjust the value of our cars; they're probably worth less than $3,000.
7. Overall, our net worth increased a little over $12,000 since October.  Thank you Mr. Market.

Jekyll Island Camping Trip

Coming to a Tent Near You

In mid-October we attended our niece's wedding in Tifton, Georgia.  We all enjoyed ourselves at the wedding, and since we're not working these days, we decided to spend a few days catching up with friends and relatives.  My wife and I really enjoyed the fact that we didn't have to hurry home to plan for a busy school week.  Instead, we were able to have some fun on our own schedule.  To build on that fun we decided to go for a camping trip to Jekyll Island, Georgia.  Not working* sure has its advantages!  

Our Home for 4 Days

Now, I won't lie...I don't know much about camping, so I wasn't sure how the trip would go.  My wife has more camping experience than me, so I followed her lead as we set up camp.  All in all, there was nothing to it:  the tent went up in five minutes and the chairs were unfolded in five seconds.  We then graced our tent's entrance with a car floor mat and boom...home sweet home!  

All throughout the night we heard raccoons rummaging outside our tent as they looked for food.  The weather was perfect for sleeping,  and we were so tired that we slept soundly.  Of course, we were a little sore the next day...camping is not for pampered sissies!  

Nephews and Son Enjoying the Sand, Sun and Surf

One of the benefits of camping on Jekyll Island is that it is also a beach trip.  Jekyll has beautiful beaches that are a little different from the more popular Florida beaches to its south.  Jekyll Island has a rustic feel and fewer tourist attractions.  October is a perfect time of the year for a Jekyll beach trip.  On day three of our trip, a few relatives from Tifton came over for a beach weekend with us.  We had two great days together on the beach.    

Thoughts and Observations on the Trip 

1. Camping in low season was awesome!  When we arrived on a Tuesday afternoon, we had the entire tent section of the campsite to ourselves.  By Friday, there were about five tents, but it was still peaceful and relaxing.  
2. Raccoons are really cute until they get too close.  Then, they suddenly look like overgrown rodents with better manual dexterity.
3. In mid-October there are still plenty of mosquitoes on Jekyll Island; bring your bug spray!   
4. On our next time, I'll have to do a better job with the food.  Chow time consisted of cheese, cold cuts, hard-boiled eggs, nuts, olives and dark chocolate.  Actually, it was pretty good...especially with the box wine we brought.  The problem was that we did not cook at all on this trip.  
5. There are not many grocery or restaurant options on the island, and the ones on the island are on the pricey side.  I advise that you stock up on food and supplies in Brunswick before you come on the island.  
6. There is a $6 toll to get on Jekyll Island, and annual passes cost $40.  Keep your toll stub because it is valid for reentry until midnight of the following day.
7. I highly recommend the Jekyll Island campground.  It was $24 a night for our tent.  If you pay for six nights the seventh night is free, so you could have a relaxing week at the beach for $144.  Not bad!    

* = "financial independence," "selfish employment", "early retirement," "quasi-retirement," "semi-retirement," or what ever else you prefer to call it.

Net Worth for October 2013

Those of you who receive my Twitter or Facebook updates have already seen some of my "Net Worth Alerts!"  Unfortunately, I was using NetworthIQ to track my net worth.  I say "unfortunately" because it appears that the site has been left for dead.  While I liked the layout of the site and found it very easy to use, it simply has been less than optimal for the last few years.  From here on out, I plan on using my own format to relay any future net worth updates.    

What is net worth?  

Net worth is a simple way of tracking your wealth.  It is a number derived from a very simple equation:  ASSETS - LIABILITIES = NET WORTH

• Assets are all of the things you own that fall to your side of the net worth ledger.  For example, real estate, vehicles, bank accounts, stocks, bonds, mutual funds, and retirement accounts all grow your bottom line.   
• Liabilities are all of the things that you owe money on.  For example, credit cards, credit lines, mortgages, and car loans all subtract from your bottom line.

Here is our net worth for October of 2013:  

Net Worth for October of 2013
ASSETS	$905,090	LIABILITIES	$105,112
Checking	$442	Morgage @ 5.875%	$61,619
Savings	$1	HELOC @ 2.89%	$39,653
Stocks	$131	Credit Cards @ 0%	$3,840
72T IRAs	$556,955
Traditional IRAs	$31,820
Roth IRAs	$15,360
457 Accounts	$107,233
HSA @ Alliant CU	$4,045
ESA-GA529-UTMA	$32,631
Home	$153,472
Cars	$3,000	NET WORTH	$799,978

Thoughts and Comments on Our Net Worth

1. I'm a fraud because I'm still about $200,000 short of the million dollar mark.  There's no Millionaire Educator to be found at this site yet.  
2. Actually, I'm an even bigger fraud since this these numbers are household totals, not my totals.  Without my wife, I'd be a half millionaire...at best.
3. All that said, I'm satisfied with the progress we've made since our carefree graduate school days.  In spite of the poor planning and terrible financial decision making of our youth, we have been able to build a decent financial foundation.
4. I realize that technically my son's accounts belong to him, but as long as he's in our household, I'm counting his assets towards our net worth.  We funded them, so I'm counting them!
5. I also realize that our assets in retirement accounts have limited liquidity since accessing them would trigger early withdrawal penalties and tax obligations.  Nonetheless, we count these assets in full towards our bottom line.  We have no plans to drain our retirement accounts without considering the tax and penalty implications.    
6. Wow, we're currently low on cash, but don't fear.  We are expecting to get our tax refunds this month, and we still have access to our HELOC account to fund any cash shortfall.  In November, we also plan on taking one last 457 distribution for 2013.
7. Our net worth doesn't reflect our Georgia TRS pensions that we will receive when we turn 60.  My benefit will be at least $21,000 a year while my wife's will be at least $13,000 a year.      

I hope you found this net worth post helpful; I plan on doing one net worth update a month.  If you're not tracking your net worth, you should consider doing so.  It 's a great way to keep you eye on the financial ball.