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

May 24, 2010

Media Monday: Term vs. Whole Life

Filed under: Uncategorized, Videos — Tags: , , , — thebalancedspreadsheet @ 7:20 am

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Today’s topic is Term Life vs. Whole Life insurance.  I wrote back in July about life insurance and compared term vs. whole  and wrote about my decision to go with Term.  I feel that term is a superior product to whole life insurance.  Below is clips from Financial guru’s Dave Ramsey and Suze Orman and their feelings on term vs. whole


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.

September 25, 2009

Cash For Clunkers not such a great deal after all?

Filed under: News Review, Personal Finance — Tags: , , , — thebalancedspreadsheet @ 12:37 pm

William Jeanes wrote an amusing but thought provoking article on AOL Autos titled “Cash for Clunkers Buyers suffer Buyer’s Remorse, won’t save fuel”.  It is based on research done by CNW Research of Bandon, Oregon.  I wholly recommend reading the full article, but here are some of the highlights from it:

“more than 17 percent now harbor “some” doubt or “serious” doubt about letting a government subsidy convince them to go further into debt.”

“The significant revelation of the CNW survey, however, is that under normal conditions only 6 to 8 percent of new-car buyers suffer the shouldn’t-a-done-that syndrome.”


“The actual C4C numbers were an average loan length of 49 months and an average payment of $317”

That is a total payment of $15,533

“CNW surveyed drivers involved in the purchase of the first 239,000 C4C vehicles. The average intended annual mileage was 10,894, up from the actual clunker mileage of 6,162. For those of you without a calculator falling readily to hand, that’s nearly double.

But what about that miles-per-gallon improvement we were promised? Well, we got it. The average fuel economy reported by C4C buyers rose from 16.3 mpg for Old Dobbin to 24.8 for the new carriage.”

That is about 61 extra gallons a year by my calculations.  Meaning consumers will pay about $130-$150 more in gasoline a year.  So people are going into debt over $15K on average to pay more in gas each year?

“Three revealing line items in a separate CNW survey noted that the drain on the family coffers would be offset by reducing the pay-down of credit card debt, deferring home improvement and removing money from non-targeted savings.”

Double Yikes!

As always there are two sides of every story.  Dave Ramsey as always has an entertaining review on his website.  It hit me though when reading this article that I do not think our country really has not learned anything from this recent recession.  Going into more debt at the sacrifice of savings and paying down existing debt is not the way to go long term.

Anybody else have any thoughts on this issue?

August 26, 2009

To pay down or not to pay down?

Filed under: Goals, Mortgage, Personal Finance — Tags: , , , , , — thebalancedspreadsheet @ 2:47 pm

One of the greatest debates in the financial world today is whether or not to pay off your mortgage early or ride the mortgage out for the full term.  There is very passionate debate in the blogosphere world from both sides on this.  There are those like Ric Edelman who believe in never paying off your mortgage, while others believe in paying off the mortgage ASAP.  If you have read our financials goals summary or the full post you know that my wife and I believe in paying off the mortgage, but only after 15% of our pre tax income is going towards retirement.  This plan is similar to the one Dave Ramsey uses.  Below are some points each side makes followed by what my family settled on:

Reasons to keep the mortgage-The main reason to keep your mortgage and not pay it off is because you can invest your money at a higher interest rate.  While most mortgages are in the neighborhood of 4.5-7%, there are many mutual funds that have a long track record of returns greater then 10% annually.  Instead of paying down the mortgage, just invest extra into these funds and over time you will have more wealth.  Another argument made by people who keep their mortgage is that you get a tax write off on the interest paid on your federal income taxes if you itemize.  So essentially a portion of your interest on the mortgage is being paid by the federal government.

Reasons against keeping the mortgage- To sum it up in one word . . . . RISK!  Finding investments that earn greater returns then your mortgage rate sounds great but what happens if when your investment returns go south and your house value plummets?  If it sounds like I am talking about our current housing environment, it is because I am!!!  In the last few years we have seen housing prices plummet all over the country.  By not paying down the mortgage you could be underwater (you owe more on the house then it is worth) and your investments worth about 60% of what they were two years ago.  You get handcuffed because if anything happens to you like you lose your income due to job loss or have health problems and need to move, you will not be able to move unless you can pull off a short sell.

Reasons to pay down the mortgage-Not owing anybody a dime is a felling that I can only imagine.  Paying down the mortgage is a safe, guaranteed investment.  My paying extra on the mortgage it is essentially like a savings account at whatever interest rate your mortgage rate is.  Since interest rates are currently at all time lows, paying down the mortgage is a better “investment” then a CD or money market account.  For those who struggle savings this is a good tool because it is a lot harder to get the money out in equity in your home then to take out money in the bank to make impulse buys.  In addition, once the house if fully paid off there is increased cash flow.  Mortgage payments makeup somewhere in the neighborhood of 25-35% of take home pay for the average worker.  This freed up cash allows them to make other investment as well as enjoy more things.

Reasons to not pay down the mortgage- Having a mortgage is a good hedge against inflation.  I am not going to explain in detail how having a mortgage can be a good thing during periods of inflation.  Truthful lending explains it a lot better then I ever can.  However this is a really interesting point to ponder because most people feel that will all the government borrowing we have had in the past year that inflation is due to occur.

After taking arguments from both sides and comparing the pros and cons, my wife and I decided that paying off the mortgage will be the best thing for our financial future in the short term and the long term.  Being able to walk through our house while having title free and clear will be a great feeling as well as free us to do save more cash which will in turn create more wealth. 

Coming up in the next few posts I will explain our plan to pay off the mortgage sooner.  That will include an amortization schedule, possible refinancing issues, as well as plans that help you pay off your mortgage sooner such as bi-weekly plan and mortgage acceleration plans.

So what is your opinion of the mortgage?  Get it and keep it or get it and pay it off?  Let me know your experiences below.

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