2015 New Year Resolutions

I hate New Year's Resolutions, so before 2015 officially get here, I decided I would set some yearly goals for next 12 months. 


Goals for 2015:
- Spend more time with my son [each day set down the electronics and get down on the floor and play for a minimum of at least one hour - this might be tight during the weekdays, but I am going to make the effort]
- Increase Net Worth by another $100,000+ [through reduced debt and increased savings - more details to follow]
- Reach $1,000,000 Net Worth status
- Establish Healthy Habits [focus on healthy eating more healthy dinners at home and eating out less than 5 times a month, lose 25 lbs. by January 2016 and getting out and moving for at least 5 hours each week; and riding my bike]

We didn't do so well on that last goal in 2014; Mr. Breeze and I ended up gaining weight and moving less.  We need to find ways to motivate us.  I will have to think about how I can do that.  I do know that it will be important to lose weight and be healthier as we have to start covering our own insurance once we retire early.

Here we go, I am ready to bring on the New Year!!!  Here's to 2015!

To Save or To Pay off the Mortgage

Originally I was a big proponent of paying off my mortgage and being debt free.  However in light of the fact that we are looking at moving, and are in the process of rebuilding our credit, we have diverted that money to a large down payment on our next house and here is why. . .

For those that file for Chapter 13, it is nearly impossible to qualify for a conventional mortgage until at least 2 years after the discharge date (which is usually 60 months or 5 years after filing).  We were able to pay off our Chapter 13 and receive a discharge in July 2014 which means we would not be able to qualify for a loan until June 2016.

We also found that we had to request our mortgage company to start submitting our payment history to the credit bureaus after we received our discharge.  They are not allowed to report anything during the chapter 13, and it is important for them to re-start submitting your on time payments in order to help rebuild your credit once you have received your discharge.

So we are still paying our mortgage on time and adding extra to the principle, but we are putting aside a large chunk of cash to be able to help put a large down on our next home, as we may not be able to get a conventional loan.  We may wait until June 2016 to purchase another house anyway, but this will still give us a large down payment.

So while I am a huge advocate for being debt free, and especially by the time you are planning to execute your retirement, we have learned a few lessons that may help someone trying to rebuild their credit or purchase their home.

We currently have enough of our retirement set aside to pay off the mortgage in full, and we are adding $1,000 a month extra to principle to lower our mortgage, but we are showing on time payments by keeping our loan.  Plus with the low interest rates we are really paying very little in interest right now, so the benefits of keeping the mortgage outweigh the benefit of paying it off. 

December 2014 Update

Net Worth Standing for December 1, 2014:

Assets: $1,023,475.94 - Liabilities: $87,599.45 = Net worth: $935,876.49


Net Change = increase of $26,307.88

Wow, our Assets have finally reached the Million Dollar mark.  However that debt does knock our net worth down to $935k - so I don't quite consider us Millionaires yet.  The markets treated us well in November, and we were able to put more money into savings and higher interest funds.

As 2014 comes to a close we continue to SAVE SAVE SAVE, and are eagerly looking forward to early retirement.

In fact, in November Mr. Breeze jumped the gun and left the work force [okay there were actually mass layoffs an he was one of the casualties].  Living off of as little of our income as we do, we really are in a position where it is optional if he even goes back to work.  For now he is going to do some work on the house (that has been neglected over the past few years, while we were both working full-time crazy hours at work) and we changed Baby Breeze to a part-time daycare, so he will be getting more Daddy time.

We will continue to save, although it will be slightly lower without Mr. Breeze's income, but we should still be able to pay down our debts and increase our net worth . . . early retirement here we come.

What to do with a large Windfall

What to do if you receive a large windfall . . .

Picture from Forbes.com

Most people only dream of winning the lottery or receiving a large inheritance, but what happens when you actually do receive this money what should you do with it?

In our case, my grandparents were from the Great Depression era.  They always lived well below their means, and allowed their investments to grow.  When my grandfather passed away this year, I found I was to inherit a lump sum of $350,000.

Honestly, this was about the same amount of retirement savings that I have managed to save over the past 10 years, so this was like doubling my retirement savings.  What to do with all that money.

1. Pay off Debt.  In most cases this is what I would recommend others to do.  However in our case, our only debt is a low interest rate primary mortgage.  Since we are rebuilding our credit from a Chapter 13 bankruptcy, it is important to show the consistent payment on loan.  So instead, I set aside $88,000 which is the amount I owe on the house to allow me to pay off the loan at any time, and we will be adding extra to our principal each month in order to pay down the loan in the next couple years.

2. Build an emergency fund.  We already have 1 year worth of savings in an emergency fund; again this was not necessary for us.

3. Max out Retirement plans - since we are already maxing out our 457b, 401k, and Roth IRAs for this year, this is also not necessary.

4. Set up a taxable EARLY retirement fund.  This is what we are doing with a bulk of the money.  We are putting the money into a Vanguard account that will allow the money to grow through investments and dividends.  Since we don't need this money for another few years and even then we will only be pulling out a small portion of it, we have a considerable amount in stocks.  Plus by putting such a large amount in, we are able to take advantage of Vanguard's Admiral Funds, which significantly reduces our fees.

5. Have some fun.  We actually went to visit my grandparents home before it was sold, and got to take picture of Baby Breeze in the house where I have so many memories.  We also did a short trip to Disneyland and the Beach.  It was wonderful to create such great memories with our son, and spend time together as a family.

Did we do the right thing?  Did we put my money in the right investments?  I don't have a crystal ball, but I am confident that over time we will watch our money grow.  We have enough in savings to avoid pulling money out during a down turn in the market even if it does start to drop, as many have predicted.

We are now reviewing our finances and our "early retirement launch date".  Originally my goal was to retire by 40, but now that date might be even closer!