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

April 30, 2010

PMI Removal

Filed under: Personal Finance, Real Example, Uncategorized — Tags: , , — thebalancedspreadsheet @ 4:10 pm

After significantly paying down our mortgage balance and monitoring recent condo sales in our area, my wife and I finally decide to try to get rid of our Private Mortgage Insurance or PMI. PMI is simply is insurance paid by the borrower that protects the lender from potential loss in case of foreclosure.

Currently PMI is costing us $58.26 a month. To remove PMI you must have a Loan to Value (LTV) ration of 80% which means you must owe less than 80% then what the home is currently valued. Our LTV is currently 65.29% after our April payment; however the value of the house is significantly less than the $118,500 we bought it for in 2006. Our current loan balance is $77,365 so we need an appraisal of $96,700 to be at 80%. It is going to be really close; the good thing is that the appraisal is good for 90 days so we would have a few more months to pay it down if we are short.

The Appraisal costs $150 but it is worth it as we can knock off $58.26 on our mortgage payment each month and apply that to the principal owed. In addition it would be nice to get a good estimate on how much our house is really worth instead of estimating each month. My goal is to have PMI eliminated starting with June’s payment. Hopefully it will all work out.

April 27, 2010

Financial issues facing Generation Yers

Filed under: Goals, News Review, Personal Finance — Tags: , , , — thebalancedspreadsheet @ 7:05 pm

While in Tennessee last week I came across a good front page article in USA Today titled “Generation Y’s Steep financial hurdles: Huge Debt, no savings”.  Being a member of the so called “Generation Y” myself the title caught my eye.  The article mainly profiles Frank and Erin Lennon who just got married in October and Kristen Ammerman a senior from Michigan State who is graduating with a degree in journalism.  The article is full of interesting (and also scary) statistics and facts on young people today from the public policy research group Demos.

“Their generation is the first in a century that is unlikely to end up better off financially than their parents, the Demos report said.•Only 58% pay monthly bills on time, a National Foundation for Credit Counseling (NFCC) 2010 survey said.

•Nearly 70% of Gen Y members are not building up a cash cushion, and 43% are amassing too much credit card debt, says a November MetLife poll.

•On average, Gen Yers each have more than three credit cards, and 20% carry a balance of more than $10,000, according to Fidelity Investments.

•Millennials are graduating from college with an average of $23,200 in student debt, according to the most recent data from the Project on Student Debt. That is a 24% increase from 2004.  Even before the recession, nearly half of college students dropped out before earning a degree, the Demos report said.

Add all of that up and the data is kind of depressing.  This really does not come as much of a shock to me.  Talking with friends, family, and coworkers you always wonder how people my age could afford going on nice vacations and buying nice cars.  Well the data suggest they are faking it by going into credit card debt.  Although these quotes below kind of made me chuckle:

  “It was only when [the Lennon’s] were married in October that they became aware of their total credit card and college loan debts.

“The real shock was on our wedding day, when we realized that we were $104,000 in debt,” Frank says.

Surprise!  The thing that shocked me most was not that fact they were $104K in debt, but the fact they just found out about it on their wedding night!  You would think it might have come up some time in the dating or engagement process right?  Ultimately though this quote sums up what most twenty-something’s are feeling today:

  “When you get a little bit of money, what do you do with it?” asks Mikala Shremshock, 27, who works for Veeco Instruments near Philadelphia. 

“Do you pay off your credit cards, put it toward student loans, make an extra payment on your house or car, or put it in your IRA? I don’t have enough to really make a big dent in anything. If you get a bonus, why not just spend it?”

This shows the hopelessness and short-term thinking that so many people have right now which is the “Thank God it is Friday and oh no, it is Monday” mentality of buying stuff whenever you feel like it and paying for it later.  Twenty-something’s have dug themselves a hole, but it is not a hole they can not get out of, nor do I believe that it is absolutely certain they will be worse off than their parents.  What most of us are lacking is clearly defined financial goals and a plan to carry them out.

April 22, 2010

Employee Stock Purchase Program 1st quarter ’10

Filed under: Excel fun, Personal Finance, Real Example — Tags: , — thebalancedspreadsheet @ 8:00 am

The 1st quarter for my employer ended on March 31st. That means another stock purchase through my employer stock purchase program (ESPP). You can read a review of the entire process in my 2nd Quarter 2009  report.

It was nice to finally have a capital gain again after two straight quarters of capital losses. The 13.92% total gain is one of my highest one quarter gains since I have been participating in the Employee Stock Purchase Program. All of the gain will go into the Car/Vacation fund.  Overall a pretty easy way to make  $700.

April 20, 2010

Stock Market Recovery

Filed under: News Review, Real Example, Uncategorized — Tags: , , , , — thebalancedspreadsheet @ 7:30 am

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Have you checked the US stock market lately?  Most of us stopped looking when the financial crisis hit in late 2008 and early 2009, but if you have not done so already take a peak and you will notice that it has quietly risen in the past year or so Goldman Sachs withstanding.  I wrote back in November how the stock market had gone up over 50% since its low point on March 9, 2009 and these gains have now carried on into the 1st quarter of 2010.  Tom Petruno from the Los Angeles Times wrote an article on the stock market’s 1st quarter performance in an article titled “Tenacity of stock investors pays off”.  Some of the interesting tidbits:

 Most stock mutual-fund categories scored gains in the first three months of the year; it was the fourth straight quarterly advance since the meltdown of 2008 and early 2009.

The average U.S. equity fund posted a total return of 5.1 percent in the quarter, lifting the 12-month return to 49.4 percent, said the data firm Morningstar Inc.

 “[Stock Market] beat the 2 percent average return of bond mutual funds and the near-zero average yield on money-market funds.”

“U.S. stock funds overall still are experiencing net redemptions, meaning more cash is going out as investors sell than is coming in via purchases. Instead, Americans continue to pump record sums into bond mutual funds.”

 

I went ahead and compiled a chart of how well the three major US Markets (Dow Jones, NASDAQ, S&P 500 have done in the 1st quarter of 2010.

For those of us who have continued to stay in the stock market it is nice to see a good return especially on the stocks that we bought low back last winter and spring.  Still, how is the stock market today compared to when the economic crisis really hit back in the fall of 2008?  I went ahead and pulled up some 2 year graphs showing the change from April ’08 to April ’10 for all three major indices:

Dow Jones

Chart forDow Jones Industrial Average (^DJI)

S&P 500

Chart forS&P 500 INDEX,RTH (^GSPC)

NASDAQ

Chart forNASDAQ Composite (^IXIC)

As you can see all three have rebounded nicely since the fall of 2008, while the Dow and S&P are down 15% from April 2008 and about 25% off their high in October 2007. Meanwhile the NASDAQ is about even over the last two years.  While the 15% decrease is nothing to sneeze about it pales in comparison to the 70% drop during the Great Depression.

As mentioned before it is encouraging to see stock increase in the beginning of 2010.  However, one needs to look at the big picture when investing in stocks and not just a three-month time horizon.  According to Petruno’s article many people are still weary of the stock market.

 “U.S. stock funds overall still are experiencing net redemptions, meaning more cash is going out as investors sell than is coming in via purchases. Instead, Americans continue to pump record sums into bond mutual funds.

David Kelly, strategist at JPMorgan Funds in New York, believes that investors will come to regret their caution. Given that bond yields are low while corporate earnings are rising, “The bond market still looks too expensive and the stock market still looks cheap,” he said.”

I have to agree with the bond market.  Bonds typically do well with low-interest rates and currently we are in one of the lowest interest rate environments ever.  So interest rates have only one place to go and that is up so therefore bonds will become less valuable.  Overall though it is nice to see most of our retirement accounts in 401(K) and IRA’s recover since the economic downfall.

April 17, 2010

Entitlement Spending Projection

Filed under: Personal Finance, Videos — Tags: , , , , , — thebalancedspreadsheet @ 9:30 am

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Have you ever looked at your paycheck and wondered what the FICA taxes withheld from your pay are for?  Well FICA stands for Federal Insurance Contributions Act and it is a payroll tax that funds programs such as Social Security and Medicare.  It is often referred to as Entitlements.  Since everybody who earns money pays into this system the question should be asked, how is my money being spent?

The two video’s below are from John Stossel’s Fox Business show on March 26th titled Stealing from our children.  Both are about 9 minutes long, but if you are short on time I recommend starting at the 3:20 mark and going through the end in the first video and going from the start to the 2:11 mark in the second video.

You might know Stossel from his work on ABC’s 20/20 show or from this famous incident with pro wrestling back in the mid 1980’s.  Even though I do not agree with him or his guests on everything I find the show to be really interesting each week.  What really stuck out to me towards the end of the video were the projected tax rates coming up in the near future.  I always knew that social security was in trouble and if I were under the age of 40 I would not count on social security in its current form.  It is just disheartening to see 6.2% (12.4% if self-employed) coming out of your paycheck each month going into a program that is heading towards insolvency.  Good thing I am not planning on Social Security for retirement income.

April 15, 2010

2010 Standard Deduction Spreadsheet

Filed under: Uncategorized — Tags: , , , — thebalancedspreadsheet @ 10:43 am

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With the deadline to file your 2009 Federal income taxes today, I am already thinking ahead to 2010’s Federal income taxes!  I know most of you probably do not want to think about 2010 taxes until it is time to file, but it is always good to plan ahead.  With that in mind I went ahead and created a 2010 Standard Deduction template. 

The format is the same as the 2009 template updated with 2010 taxes rates and deductions.  For those of you who itemize please take a look at 2010 Tax changes that I blogged about in January.

You can always find this spreadsheet and others I have created on the The Balanced Spreadsheet Spreadsheet’s Tab

April 13, 2010

Cash Breakdown March ’10

Filed under: Excel fun, Real Example — Tags: , , , — thebalancedspreadsheet @ 12:00 pm

With things changing around our household, I thought it would be good time to update our breakdown of our cash and see where we stand before we go down to one income.

Emergency FundStaying pat at $10,000.  This number still represents about 5 months worth of expenses and is an amount that we feel comfortable with.  It is great to know that we have ten grand in the bank in case of medical emergency or job loss. 

Insurance Accrual-This currently includes 10 months our life insurance accrual as well as 4 months worth of Car Insurance.  Since we pay our car insurance semi-annually (June and December) and the our life insurance annually (June), I need to “accrue” monthly the cash needed to pay the bill when it is due instead of having to come up with the full amount on the month it is due.  I simply just take premium due and divide by 12 for the accrual.

IRA Funding-About $400 is marked for my wife’s IRA funding.   

Car/Vacation-Nice to see almost $12,000 in our car/vacation fund.  We will be going on vacation in May and we already have our flight and hotel booked and paid for so the only other expenses on the trip will be car rental and eating out.  The Financial Counselor training that I will be doing later on in April is paid for as well as the flight down to Nashville.  We will be dipping out of this account however for my wife’s college that she will be finishing up in the summer as well as her home business.  My goal when all the vacations, college, and all start up business expenses are paid is to have about $8,000 left for the car fund.

April 10, 2010

Changes In The Balanced Spreadsheet’s Family

Filed under: Personal Finance, Real Example — Tags: , , , — thebalancedspreadsheet @ 12:30 pm

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Sorry for the lack of quality posts lately.  I have been really busy at work recently, but things should be calming down shortly and a regular schedule of quality posts will resume soon.  Today I would like to share some big changes to Mrs. Balanced Spreadsheet and myself.  These changes will not impact the blog any; however they are things will impact our personal finance situation over the short and long-term.

If you have read our 7 financial goals before you know that one of my dreams has been to always have my own business.  Well after reading many career books from different sources including Dan Miller’s 48 days to the Work You Love and No More Mondays, I have decided to put my knowledge of finances to use and become a financial coach!  I am both nervous and very excited about starting my own financial coaching business but it is something I have a passion for.  Part of my training will include attending Dave Ramsey’s Financial Counselor training starting April 20th  in Nashville, TN.  This is pretty exciting because I have always been a big fan of Dave’s financial principles and the way he presents them.  My plan is start the business slowly and build a solid customer base before I pursue it full-time.

The change is not limited to me however.  My wife will be leaving her current position in May to pursue finishing up some courses to get her undergrad degree.  In addition she will also starting up a home business on the side to help replace her lost income.  This is really exciting as she is only two classes short from her undergrad degree and the timing of the classes lined up perfectly to do this over the summer.  We are also excited about the business as it will help replace some of the lost wages initially and is something she can continue to work on even when we have children someday.

The next few months should be busy for us and we will definitely be going through some changes in the next few months.  Some initial changes will be that our income is going to drop initially as we will go down to one fixed income.  Our budget is based on my income anyway so we will be fine there, but we are going to be slowing down our accelerated mortgage payoff plan for now.  We will pick that up as soon as our businesses become profitable.  So while in the short-term it will be a little chaotic, things will be better going forward.  We know it will be a challenge but we have prayed about this and carefully plotted out a plan to make this all work.

April 5, 2010

New Short Sale Program aimed to speed up the process

Filed under: News Review — Tags: , , , — thebalancedspreadsheet @ 7:49 pm

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With the recent downturn in the housing market a phrase has made its way into mainstream.  That phrase is “Short Sell”.  A Short Sell is when a house is sold for less than what is currently owed on the mortgage and therefore the borrower is “short” of what they owe to the bank.   With an estimated 50% of homes predicted to be underwater by 2011, Short Sales are predicted to increase.  The problem however is that to get a Short Sale approved the bank must first accept it.  Recently banks have been swamped with so many Short Sale requests that many sellers have had to wait weeks even months before hearing back from the bank.

To help speed up the process a new federal program went into effect today called HAFA. 

Some of the highlights include:

-Only available to those who could not get a mortgage modification.

-Must be behind on payments

-A list price from the lender that the lender will accept as a short sale within 30 days of a request.

-Closing within 45 days of offer accepted.

There are disagreements on whether this will help speed up the process any.  Here is a list of articles I have found on the subject.

Columbus Dispatch– New real estate rules streamline process for short sale

Orlando Sun-Sentinel-Will new short sale rules help the housing market?

KGTV-San Diego-New Rules may help relieve Short Sale Pain

Reno Gazette-Journal -New federal program for short home sales starts today

Time will tell if this will help any or not.  Anybody have any good experiences with short sells?

April 3, 2010

Refinance Breakeven Spreadsheet

Filed under: Excel fun, Mortgage — Tags: , , , — thebalancedspreadsheet @ 8:55 am

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On the heels of releasing the mortgage amortization schedule, I thought it would be nice to follow that up with a refinance breakeven calculator.  With mortgage interest rates at 40 year lows most people are rushing to refinance before rates rise again.  There are several things to consider before you refinance and this spreadsheet will help determine two of them. 1.) How much interest you will save if you refinance and 2.) How long it will take you to recoup your closing costs.   All you need to do is input 6 numbers:

Refinance Breakeven calculator

1.)    Current Loan balance-In cell B1 input your current loan balance.  Note that this is your current balance not the original amount you paid for the house but rather how much is owed currently.

2.)    Current Interest rate-In cell B2 enter your current interest rate.  Enter as a percentage (IE 5.5% interest rate would be 5.5 not .055)

3.)    Current Payment-In cell B3 enter your current principal and interest payment per month only, not taxes or insurance.

4.)    Refinance Rate-In cell E1 enter your refinanced rate the same way you entered in your current interest rate in cell B2.

5.)    Length of New Loan-In cell E2 enter the length in years of your new loan.  If doing partial years divide the partial year’s months by 12 and enter that number in as a decimal. For example, a 17 years and 3 month amortization you would enter 17.25 (17 years and (3 months/12)).

6.)    Refinance Costs-In cell E4 enter the total refinance cost.

Notes: After entering all six figures cells B16 and E6 will give you your results.  B16 is the total interest savings over the entire length of the refinance and E16 is the number of months it will take until your interest saved is greater than your closing costs.  Also note that all these savings are pre-tax.  Like the mortgage amortization schedule you can plug-in extra principle payments in the ‘Current’ and “Refi’ tabs if you choose to determine how much faster they will help pay off your mortgage.

The most important number is the months to breakeven figure.  As mentioned before when we were considering a refinance, if you do not think you will be in the house after the breakeven point, refinancing will actually cost you more in the long run.

You can find this and other helpful spreadsheets that I have created and shared on the spreadsheet page.  So please come back soon as that page will be continually updated.

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