The Balanced Spreadsheet-Financial News, Budget Advice, Debt help, Financial Tips, and other advice

November 30, 2009

FICO reveals how certain financial events affect your score

Filed under: News Review, Personal Finance, Uncategorized — Tags: , , , , — thebalancedspreadsheet @ 6:09 pm

After years of mystery surrounding how certain financial events affect your credit score, FICO is revealing how some mistakes change your score according to an article by Jeremy M Simon of  The article titled “FICO reveals how commons credit mistakes affect score” is an interesting read.  I am not a huge fan of the FICO and do not believe it is the end all and be all in determining your credit worthiness but I do feel it is important to pay your bills all the time and have clean credit.

It is interesting to see how the different financial events lower your scored.  Obviously Bankruptcy and Foreclosures are an atomic bomb to your score.  But it is also interesting to see how debt Settlement lowers your score.  It is actually pretty close to a foreclosure in terms of lowering your score.  It will be interesting to see what happens in a few years when all the people who are short selling their homes recover enough to buy another house.  Will they take longer to qualify again for a mortgage or will the banks have easier standards considering this will affect many applicants?


November 25, 2009

The Ohio Marriage Penalty

Filed under: Excel fun, Personal Finance, Real Example, Simulation, Uncategorized — Tags: , , , , — thebalancedspreadsheet @ 11:50 am

With 2009 quickly coming to a close, it is that special time of the year again. No, not Thanksgiving. No, not “Black Friday”, but time for year end tax planning! I know tax planning is not the most exciting thing in the world but I do feel it is important to keep an eye on it to make sure you are legally minimizing your tax bill as I have written before on how much you really pay in taxes.

Since I got married in May I was going ahead and running the numbers for Ohio’s income tax to see what the tax difference is between married filing separately and married filling jointly. I knew that there would be some difference, but I was a little surprised to find out that it will cost us about $460 more to file married instead of separately!

As you can see from the chart here, Ohio’s state income table is the same under any circumstance unlike the federal incomes rates which changes depending on whether you are single, married filing separately, married filing jointly, or head of household. For example that means if you are married filing jointly and you both make $40,000 Spouse #1 pays the same tax as if they were single. However, spouse #2’s $40,000 would get taxed at 4.109% instead of starting at .587% and moving up in $5,000 increment until the final $20,000 gets taxed at 3.521%. Ohio does get a 5% tax credit for filing jointly but does not come close to covering the gap.

Now we could file separately and avoid the marriage penalty. However in Ohio you have to file whatever you file on your federal income taxes and filing separately would make us ineligible to fund ROTH IRA’s for 2009 and the tax free growth of ROTH IRA’s is more valuable then the $460 long term. IT is disappointing though to pay more tax simply because you committed the “sin” of marriage. J

Overall the $460 is not going to change our life either way, but perhaps this why Ohio’s growth rate is among one of the lowest in the nation.

November 20, 2009

November 17, 2009

The Stock Market Rebound of 2009

Filed under: Excel fun, Personal Finance, Real Example, Uncategorized — Tags: , , , , — thebalancedspreadsheet @ 8:16 pm

Have any of you been keeping your eye on the stock market recently?  If you are like most people, you stopped keeping track during the last half of 2008 and the first few months of 2009 when everyday on the news they talked on and on about dwindling retirement accounts and how people were withdrawing their money in droves.  Or maybe you stopped looking when you opened up your year end 2008 statement and noticed your 401(K) looked more like a 201(K).  But in case you have not noticed the markets have rebounded some, but the question is how much?  After doing a little research I found out the bottom of the market “appears” to have occurred on March 9th of this year.  I put together a table showing how much the market has recovered since then:

How come the news has not had a lead story covering the over 50% increase in the markets since March 9th?  Granted these gains are after hitting rock bottom lows not seen for over seven years, but what if you had panicked on March 9th and sold all of your stocks and mutual funds?  You would have missed out an over 60% return in your 401(K) and IRAs, while your safe money market account would have gotten < 1%.  In fact I was quite surprised to find that my two 401(K)’s have gotten a 79.5% and 65.3% return since March 9th!

Now I do realize that overall the market is still down about 25% since its peak on Oct 9th, 2007 and that your equities are still down around 20-30% since the start of the recession.  With that being said you sometimes just need to ignore the drama that comes from the news or from Washington and realize that it is not all bad and the recovery is starting.  Just remember that you do not get hurt on a roller coaster if you do not jump off when it is crashing, or when it is rising.  You just have to enjoy the entire ride and know that you will ok in the end.  🙂

November 13, 2009

Benefit Enrollment

Filed under: Real Example, Simulation, Uncategorized — Tags: , , , , — thebalancedspreadsheet @ 1:59 pm

My 2010 health benefits enrollment period for my employer ends today at midnight.  It always brings some interesting conversations at work as co-workers are scrambling to figure out if their plans changed in either coverage or in price, and how theses changes affect them.  Thankfully, the only change to our benefits was a help to us as our high deductible on our Health Savings Account (HSA) plan dropped from $5,000 to $3,000!  That was pretty cool to find out that the maximum out of pocket expense we would be responsible for reduced by $2,000.  I personally love the HSA, and am planning a review of it soon.  We dropped our dental coverage down to cover just basic checkups as we do not plan of having any major dental work this year.

As always it is a good idea to check to see how your plans compared to any new ones your employer might add this year.  You might have had the same plan for years, but your current health might dictate a change in coverage.  It is also good to keep on ways to lower the cost of your premiums or get better coverage for the same amount.

November 12, 2009

Book Review: “Thou Shall Prosper” by Rabbi Daniel Lapin

Filed under: Book Review — Tags: , , , , , — thebalancedspreadsheet @ 12:43 pm

Thou Shall Prosper

I have not found the time to do a book review in a while, even though I have been reading some good financial books recently.   In fact, I was surprised to find out that I have not done a book review since my review of “The Millionaire Next Door” back in June.  But after finishing “Thou Shall Prosper” by Rabbi Daniel Lapin I knew it was time to do another book review.

Rabbi Lapin’s book is insight from an Orthodox Rabbi on the Jewish ways of creating wealth.  It is not a book on Judaism, but more on principles that allow one to create wealth. Rabbi Lapin divides the book into his 10 principles or Commandments on wealth:

The First Commandment-Believe in the Dignity and Morality of Business

The Second Commandment-Extend the Network of your Connectedness to Many People

The Third Commandment-Get to Know Yourself

The Fourth Commandment-Do Not Pursue Perfection

The Fifth Commandment-Lead Consistently and Constantly

The Sixth Commandment-Constantly Change the Changeable, While Steadfastly Clinging to the Unchangeable

The Seventh Commandment-Learn to Foretell the Future

The Eight Commandment-Know your Money

The Ninth Commandment-Act Rich: Give Away 10 Percent of Your After-Tax Income

The Tenth Commandment-Never Retire

While all 10 chapters have great insight, three stuck out to me.

The First Commandment-Believe in the Dignity and Morality of Business

Making money is much harder to do if, deep down, you suspect it to be a morally reprehensible activity.

With all the discussion over the latest Wall Street bailouts and discussion over executive bonuses, it can be easy sometimes to think that all business is full of greedy, immoral people.    Where as that is the farthest thing from the truth.  Business in itself is good; it is the exchanging of goods and services to people who desire it.  Business is where wealth is created.  True, there have been businesses that have mistreated the customer all in the name of profit, but that makes them bad, not all business.  It was refreshing to hear that point of view.

The Ninth Commandment-Act Rich: Give Away 10 Percent of Your After-Tax Income

Through the mystical alchemy of money, giving charity jump-starts wealth creation

One of our financial goals is to become big givers.  Rabbi Lapin points out a big myth that people have about giving.  When you are giving, you are hurting yourself financially when instead you are really opening yourself up to receiving more because giving focuses you outside yourself.  It is better to give then to receive.  We try to think of giving as something rational, but it is something totally irrational that does something inside of you that can not be explained mathematically or on a spreadsheet, as much as I might try. J But the giving of your time and money opens up so many doors to be able to create more wealth.

The Tenth Commandment-Never Retire

Integrate your vocation and your identity by thinking of life as a journey rather than a destination

Rabbi Lapin discusses the concept of never retiring in the final chapter.  Rabbi Lapin reminds us the retirement is a 20th century concept and that the Hebrew language does not even have a word for.  He is not saying to work at a job you hate for 60 years until you die.  Rather he says that we are stimulated by work and that we need to stop believing the lie that we have nothing to offer when we get older, but instead realize that when we get older we have vast amounts of wisdom and experience to share with others and use in the workplace.

Rabbi Lapin does a good job of using real life examples when illustrating his points and ties all 10 of his commandments together.  Again, this book does have religious references but does not hit you over the head with it.  I feel like this book can be read by someone of any religion.  Overall this book is on my must read personal finance book list.  I learned a great deal from reading it.

November 11, 2009

The Importance of an Emergency Fund

Filed under: Personal Finance, Real Example, Simulation — Tags: , , , — thebalancedspreadsheet @ 10:50 am

When getting financial advice from financial planners, either on TV, through books, or, most highly recommend keeping an emergency fund handy.  The last few weeks have really enforced why we do have an emergency fund in place.  First, my wife got into an accident driving to work on a wet morning a few weeks ago.  Thankfully she was all right but the car was not as it needed a new back bumper and had to be taken to the body shop for a few weeks.  Next, last Wednesday when my wife and I were getting ready to leave our house when we discovered that our electric garage door would not open at all!  After getting a repair man to come out and fix it that night, it was discovered that we had a broken spring in our garage.

All in all, after paying for our deductible, new tires, a rental car for my wife while her car was in the shop (which the insurance picked up about 80% of), and the garage door repair man we were out roughly $875.  Thankfully with the emergency fund, these situations were not true financial emergencies, rather just financial inconveniences. 

All this has made me think of how essential the emergency fund really is in one’s financial plan. Unexpected expenses occur all the time, you just do not know when and importantly how much.  It will be very difficult to plan and budget correctly without an emergency fund because you will constantly be putting out fires that arise, whether it is job loss, car problems, leaking roofs, broken heater system, etc.  Having the emergency fund in place will give you peace of mind as well as the ability to financially bounce back quickly if something major occurs.  Unfortunately it does take times like we have had the last few weeks to realize why you do have the emergency fund.

November 9, 2009

What do when you car is Under Water

When people decide they are ready to get out of debt, one of the first things they try to get rid of is their nice car with the big stinking payment of $300+ a month.  However, when they get ready to sell the car they realize that they owe more on the car then what they can sell it for.  This is commonly known as “being underwater”.  Some just assume then that they are just stuck with the car until they can pay it off but that is not true as there are some options one can take to get rid of the car loan.  Below are the steps to be taken to get out from a car loan that is underwater.

  1. Determine what the car is really worth-Sites such as Edmunds and Kelley Blue Book are two good sites to get this information.  Enter your cars information such as make, model, year, and mileage and get a value.  Use the private sale price instead of the dealer price.  The dealer price is what a dealer is willing to give you which is at wholesale, while private sale is the retail price and will be higher then what a dealer can give you. 
  2. Determine how much you are underwater-After determining your cars value, find the loan balance from your latest statement and subtract the cars value.  That is how much you will need to borrow to cover the difference.
  3. Line up a loan for the difference from a credit union or local bank-This is the most difficult part of the ordeal and you will need to make sure this part is taken care of before you put the car up for sale.  Getting a loan through the dealer that you bought the car is next to impossible so your best chance is at a credit union or local bank.  If you have your car loan through a credit union or local bank already then they are probably be your best bet to get an unsecured loan because basically they already have one if the car is underwater.  You might have to go to everyone in town until you find one willing to loan you the difference.  The interest rate will undoubtedly be higher but you will have a loan at a fraction of what you would have owed.  If no credit unions or banks will loan you the money, you can always try and put the deficit on a credit card, although that is as a last resort.
  4. Sell the car-After lining up the loan you are now ready to sell.  When you find a buy you will give the buyer the keys and a bill of sale.  You will then take the money from the sale along with the loan money and send them to the finance company.  You will then receive the title in about a week and you will then send it to the buyer.
  5. Pay off the loan as quickly as possible!-The sooner the better obviously.  You will be more motivated then ever now since you will be paying for something you do not even own anymore!

Real example-So using some numbers let us assume you have $20,000 car loan and after doing some research you find out you can sell the car for $16,000.  You go to your bank where you have your financing and receive an unsecured loan for $4,000.  After selling the car for $16,000, you send in $20,000 ($16,000 from the sale and the $4,000 you borrowed) to pay off the car.  A week later you get the title in the mail and go ahead and give it to the buyer.  All you have left then is a $4,000 loan that will be paid off very soon and will give you the cash flow you need to create wealth. 

Hopefully you will never be in this position, but however if you do find yourself under water on your car, just realize that you can get out with a little patience and persistence.

November 2, 2009

October ’09 Net Worth Update (+4.66%)

Filed under: Excel fun, Net Worth, Personal Finance, Uncategorized — Tags: , , — thebalancedspreadsheet @ 12:39 pm

October was another good month net worth month, although not quite as good as September, but still good overall.  We finally got caught up on our ROTH IRA contributions for the year.

Net worth Oct '09

Net Worth Oct '09

Cash-The huge increase this month was due to the sale of some company stock in the Employee stock purchase program (ESPP).  That contributed approx $5,400 in increases.  That was offset by our catch up funding to our ROTH IRA.  We contributed about $1,400 between my wife and me, so now most of our balance less our $10,000 emergency fund is for our vacation/car fund.

Employee Stock Purchase Program-As previously noted, our ESPP account was depleted to buy stock on September 30th.  That stock was sold on October 9th and put into our cash reserves.  The October amount equals one month’s pay that will be used to buy stock at the end of the fourth quarter.

House-A few condos have sold for more then the $95,000 that is on the balance sheet.  I think we have might have hit the bottom of the real estate market.  With that being said I am still leaving the condo valued at $95,000 for now.  I would rather be conservative then jumping the gun.

Retirement-Unfortunately all of the gain is 401(K) and IRA contributions.  The stock market has stayed flat for the most part this month.  Still overall our investments are up around or over 30% since the beginning of the year.

Pension-Back to the normal contribution.  This amount will increase ever so slightly in November and December due to hitting the next income level threshold.

Mortgage-Another triple mortgage payment reduces the principal by ~$1,750!  I have discussed our decision to pay down the mortgage pretty as quick as we can before. It is really cool to see the principle reduced by big chunks every month.  At our current rate, we will pay the mortgage off on July, 2013.  I have decided against refinancing for now due to the breakeven point being 24 months.

You can see past net worth updates at the net worth history page.

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