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!

November 2014 Monthly Update

Net Worth Standing for November 1, 2014:

Assets: $999,498.78 - Liabilities: $89,930.17 = Net worth: $909,568.61

Net Change = increase of $356,823.74

I know November is just about over before I am getting this post out there, but a lot has happened in the past month.    My wonderful, frugal grandparents left me a sizable inheritances which is now reflected in our net worth.  I am working on a separate post to review what we did with this money.

So this month you will see a huge jump on the chart, this has helped move us MUCH closer to our goal of retiring early.  We are just over $500 shy of a Million Dollars in Assets.  Time to get the debt paid down.

October 2014 Monthly Update

Net Worth Standing for October 1, 2014:

Assets: $642,642.08 - Liabilities: $89,897.21 = Net worth: $552,744.87

Net Change = decrease of $391.34

So October starts off with a drop as the markets in September took a bit of a tumble.  However we are still continuing to put money into our accounts (buying stocks at a discount!!!).  So our total net worth only dropped $391.34.  Not too bad.  We continue to pay down our debt and rebuild our assets, which took a hit when we pulled money out of our cash accounts to pay off our Chapter 13.

Our credit is slowly starting to build back up.  I was shocked when I was declined for a credit card, I guess I thought that with such little debt and a large income we would be accepted, but it will take longer than I thought to dig us out.  So we got a secured card with a $200 limit through Capital One.  This will allow us to have an active credit card that is reporting to the credit agencies and shows responsible payments and debt management.  We also called our primary mortgage and asked them to start reporting our mortgage payments to the credit agencies again.  This is a key reason why we do not plan to pay off our mortgage in the next year or two, we want to show responsible payments on our credit reports.

We recently went through a number of losses in our families.  We are still grieving, but now have a new financial situation to deal with.  We will be inheriting a fairly large amount, and now we have to decide how to invest this money.  It is going to help push up our date with early retirement, and now we are looking at how to ensure we reach this goal and that we don't fall victims that so many people do when they receive large sums of money.  In fact, I read in multiple articles that stated most windfalls are gone within 5-7 years after they are received.

By having our goals already determined, and knowing we want to retire early, this will allow us to put that money to go use to reach the goals we had already determined.  So we will continue to miss our family and friends, but we are grateful for the ability to reach our dreams even earlier because of them, and their ability to live below their means.

Why does it cost $500,000 to raise a child?

Free Water Fountain to Play in! What fun!

After this past long COLD winter, we finally had a chance to enjoy the outdoors and the sunshine this summer.  What has been amazing to me recently is all of the activities that we enjoyed with Baby Breeze!

Recently I read an article that stated the average cost of raising a child from birth to 18 (this is NOT including college) is anywhere from $100,000 to $500,000.  Wow.

So I was looking at all the expenses I have spent on Baby Breeze this year, and without the consideration of his portion of the electric, gas, and home costs, we have very few expenses with the exception of Daycare.

What I found was the number of activities that cost absolutely nothing, or very little, that we have been engaging in lately.  So I thought I would list them to see if it will help others generate their own ideas:

- Our neighbor gave us their old turtle sandbox, and with a little scrubbing we were able to bring it back to life.  It still has the lid [helps keep the neighborhood cats out of it]. So for a $3.00 bag of sand at WalMart, Baby Breeze has been learning how to fling sand, dig tunnels, make simple sandcastle and just have a great ole' time.

- We have a plastic baby pool that we bought for our dog a few years ago, but he didn't like it. Baby Breeze is now having a blast playing in the water, blowing bubbles, splashing Momma and Daddy. What could be better than water and sand.

- We have also being going to the local parks around us.  We are surrounded by three parks:
1. An Island park with a bike path, and splash park
2. A large park with tons of playground equipment
3. A Children's garden with a waterfall, walking paths, remote control airplane field and small lake.


- Childrens Science Museum - In our neighborhood we have a Children's museum that allows the kids to explore science, such as the planets, gravity, hydrolics, recycling, the court system, and running a restaurant and grocery store.  There is also a small Zoo attached with River Otters, Meerkats, ducks, bobcat, and many others.  We purchased a family membership as a Christmas gift for $125.  If we go just once per week, and there are three of us this is less than a $1 a visit.  Plus they are open year round (great place to go during the cold winters).

- Dairy Farm - We took Baby Breeze to a local dairy farm/ice cream store.  He had a blast mooing at the cows, and petting the goats.  Sure we just "had" to buy ice cream [now a new favorite word], but for $5 bucks we made an afternoon out of it.

-When Baby Breeze was just 2 months old, my husband started talking him for walks in a Baby Bjorn someone gave us.  Since they used it so much, I purchased a nice Opsrey baby backpack when he was around 6 months old.  This was about $300 at REI, but I knew they would use it.  Baby Breeze and Daddy have over 150 walks with that backpack.  Which puts it at $2 per use.  It should last us another year, so I expect to come down to about $1 per use or less.  I find that when we look at larger expenses this way, we tend to use the item and get our value out of them.

- Plus other fun activities like visit the grandparents and visiting Mommy at work.

All of these activities have allowed us to spend time together as a family, make memories, and bond with Baby Breeze, yet I can't imagine how this is going to add up to over $100,000 over his childhood.

I would love to hear other low cost ideas you have with your children.

September Monthly Update

Net Worth Standing for September 1, 2014:

Assets: $644,213.14 - Liabilities: $91,076.93 = Net worth: $553,136.21

Net Change = increase of $14,941.67

The markets came back this month, after last months dip so we saw our Net worth continue to climb.  We also decided to put $1000 extra each month towards our mortgage, which is our last bit of debt.  Financially it doesn't make sense to pay down a mortgage if you can make more investing, due to the low mortgage rates of today; however, after feeling the freedom of paying off all our other debt we are energize to live debt free for a while.


We signed up for Credit Karma.com as a free credit monitoring device.  I found some things that I thought were discrepancies, so when I called on them (specifically credit cards that says they are still open) I was told that no the cards are closed and that is what was reported to the Credit Agencies.  I pulled our reports and they are correct, so I am not sure where Credit Karma is getting it information from or how it calculates its FICO score - as it is about 70 points off on my score.  Just thought I share this with those of you who may have used their free service, or if you are getting out of debt be careful of information that is not directly from one of the three Credit Agencies.

Time to Grieve

Just posting a little note, to share why we have been so silent on this blog.  Over the past three months we have lost 5 people who were close to us.  Their passing has affected our family deeply.  They include my boss, my grandfather, two close family friends, and one of my students.  It has been a tough time for all of us and we took time to grieve and heal as we dealt with each week.

It reminds me that life is precious, and to spend time with those that we care about now while we have the chance.  One again I am energized to achieve my goal of spending more time with Baby Breeze as he is growing up so quickly.

These deaths have given us time to reflect as a family, and have also created some new financial opportunities which I will blog about in future posts.

As we remember those that lost their lives on 9/11 and those that have passed recently I ask you to take time to give those who are special to you and give them a hug!

The Power of Accountability

We all have urges, whether it is to eat or spend money on something that is not a need!  It is okay to give into those urges from time to time as well.  Recently we have paid off the Chapter 13.  For the first time in years our debt is just our primary mortgage and is below $100k.  We are putting away a good portion of our income into retirement and we actually have cash available.

All this leads me to want to go out and BUY!!!  I have a bad habit of searching Craiglist, and while I have been able to save money on some of the things we have needed to buy, I find myself looking at other items that are not needs.

For example, there was a great deal on a 5th wheel RV - complete with heavy duty truck, lot on the river, and even a golf cart!  This great deal for everything was about $50,000.  I kept looking at the pictures and dreaming of spending vacations with Mr. Breeze and Baby Breeze, and enjoying time together.  I thought, I have the money now, I could even buy this cash, this wouldn't increase our debt.

I was close to picking up the phone, when I decided to look over my Blog post.  Here I made goals for this year to pay off our debt, increase savings and increase our Net Worth.  Purchasing this "cool deal" would cause our Net Worth to decrease (as I wouldn't count these items).  I didn't want to fail in the eyes of my readers, nor do I want to miss achieving our goals for the year.

Why did I want this purchase so badly, because I was dreaming of spending time with my family.  But wait, my goals were set so that I can retire early and are helping me spend more time with my family already.

So I turned off the Craiglist, and went and played "Choo Choo" with my son!  Yep, this blog has helped me to keep focus and kept me accountable!  So thank you!

August 2014 Monthly Update

We continue in our quest for savings, here is how we stand for August.

Net Worth Standing for August 1, 2014:

Assets: $630,441.11 - Liabilities: $92,246.57 = Net worth: $538,194.54

Net Change = increase of $8,127.50

The markets took a little bit of a tumble at the end of July, but we were able to put a large amount into savings (buying stocks on sale, as I am trying to convince myself!).

The emotional weight of the Chapter 13 being paid off has been huge.  We feel we can finally breath without that monster on our back.  But this is no time for a spending spree, if I want to continue to work towards early retirement, then we need to take those funds and put them into savings.  In July, I put $2917 into my 457b (this amount will allow me to put in the maximum for this calendar year).  Since our bankruptcy payment was $2950 each month this doesn't really change how we are living.  In fact, since the Chapter 13 taken out after tax and the 457b is taken out pretax it is actually less.  So my paycheck, even after put money into savings went up $800.  Oh the joys of pretax savings.  We have already learned to live without the money, so the now we get to enjoy watching our savings grow.

Our credit scores have also gone up 5 points since our Chapter 13 was discharged.  We are hoping to continue to improve our scores hopefully get us back to Excellent credit rating.

So we continue to plug along and even with a drop in the market at the end of this month, we are still coming out ahead.  Keep putting little bits away over time, and it will continue to grow.  Until next time. . .

July 2014 - Monthly Update

Another month, and another update.

Net Worth Standing for July 1, 2014:


Assets: $622,464.26 - Liabilities: $92,397.22 = Net worth: $530,067.04

Net Change = increase of $10,427.14

We decided to do something crazy this month.  The emotional toll of the Chapter 13 was weighing heavy on us, and since Mr. Breeze is now working full time and we have been able to save some money, we decided to take our savings (which was only making 1%) and just pay it off.  This didn't affect our Net Worth by much, but as you can see we took a hit in the Assets, but that is offset by the much a much smaller Debt amount.

So our only debt is our Primary Mortgage on our house.  We will probably start paying that down soon, but right now we are going to funnel the money that was going to Chapter 13 payments into the 457b that I am eligible for at work. This allows us to take advantage of Pre-tax savings, and the 457b doesn't hold the penalties that a 401k or 403b does if I have to tap into it before I turn 59.5.  This makes it perfect for an early retirement fund for us so we are going to try to fully fund it first.  Since we were putting $35,000 a year into the Bankruptcy - we are hoping that we can fully fund the 457b (currently allowed at $17,500) and then put the remaining towards our debt.

The stress of having the Chapter 13 (notice I even hate to type the work Bankruptcy), paid off is a huge relief on us.  It wasn't the amount of money they were taking out of our checks each month (we quickly learned to live without it and it didn't hurt all that much believe it or not).  It was the fact that we just owed this huge amount and we were not able to open any credit or have any flexibility.  We were always good with our credit cards and used to rack up the rewards points and travel points, but we always paid them off at the end of the month.  We got ourselves too stretched when it came to houses and mortgages and then a job loss and business loss caused our downfall in 2009.

Now we have to focus on rebuilding our Credit Scores, and have found that we really don't need all that much to live on.  Our jobs continue to stress us out each day, and we are looking forward to early retirement.

Monthly Update - June 2014

Here is our Monthly Update:

Net Worth Standing for June 1, 2014:

Assets: $653,209.26 - Liabilities: $133,569.36 = Net worth: $519,639.90

Net Change = increase of $13,121.58

The month of May flew by, and we are now finally enjoying some warmer weather.

Thanks to the markets rallying again at the end of May, we have increased our Net Worth and continue to decrease our debts.  Our debt is significantly dropping (love to see those red bars going down).  We are a little over 1/2 way to our goal of increasing our Net Worth by $100k this year.  Since we are only at the beginning of June, we should definitely hit our goal, and hopefully even exceed it.

Mr. Breeze and I both had some serious concerns regarding our corporate jobs.  We know that both of our positions are high paying, and could easily be on the chopping block in the near future.  My boss was asked to step down so that has caused a bit of turmoil and stress in my office, and Mr. Breeze has had some employees leave so as manager his job is causing him more stress.  The levels of stress we are trying to each manage has caused us to be snippy with each other.  We are working towards achieving Financial Independence, so that at least one of us is able to leave our corporate job soon.

We continue to strive to increase our savings percentage and went from saving 10% of our income to now saving 25% of our income, and if you count the Ch. 13 payments (which is paying down debt) we are closer to 44% of our Gross income!

Baby Breeze is enjoying the warmer weather and we are trying to spend as much time as we can during the longer evenings and weekends.  We are amazed at the free things we can do with Baby Breeze (which I have been putting together in another post).

Monthly Update - May 2014

Here is our Monthly Update:

Net Worth Standing for May 1, 2014:

Assets: $643,393.40 - Liabilities: $136,812.08 = Net worth: $506,518.32

Net Change = increase of $11,906.68

Once again we have increased our Net Worth and continue to decrease our debts.  During April, we got our tax refund and put the complete amount toward our Chapter 13, which helped to reduce the debt.  The markets came back a little bit, so we had some small gains.

It is such a nice feeling to see our Net Worth over .5 million, and I cannot wait to double that and see our Net worth reach $1 million.

Our goal is still to reach $550,000 in Net Worth by the end of the year, and we are well on our way to getting there.

Net Worth Breakdown - From Real Estate to Retirement

Now that we are approaching a half million in net worth I have been asked the question of how do we calculate our net worth (i.e. what do we include).  So here is my stab at answering that request:

Total Assets: $641,676.80

$346,696.20 Retirement Accounts (401k, Roth IRAs, Pensions - age requirements)
$128,990.77 Cash, Savings, CDs, Taxable Accounts (i.e. Betterment and Individual stocks)
$123,000.00 Real Estate (primary house)
$  37,381.00 Personal Possessions, 2 vehicles, and 1 Boat (harder to access or liquidate)
$    5,608.83 Medical HSA [Health Savings Account]

Total Liabilities: $147,002.16

$54,018.78 Chapter 13 repayment plan
$92,983.38 Mortgage on Primary Home

Net Worth: $494,674.64

So that is our breakdown.  At one time, about 7 years ago, we had over $1 million in assets but over $700,000 of that was in Real Estate, since then due to the housing bubble, loss of jobs, we have had to file Chapter 13, and now we just have our mortgage on our primary home.  It was a huge shock to the system to watch our Assets go from over $1 million to less than $300,000 at the time.  Our Net Worth was negative due to the mortgages, which let to part of the reason we had to file Chapter 13.

Right now, we are probably a little heavy in cash/savings, which are only making between 0.5% to 1% on average but once the Chapter 13 is paid off we plan to increase our investments.

I don't include Life Insurance policies (no fun, since I won't be around to spend the money anyway!), and currently Baby Breeze's college fund is a part of our Cash/Savings category since it is pretty insignificant, but I will probably separate that out as it grows.

Ultimately if we are going to live off the dividends that our investments make, then we are really only looking at the top two asset categories, which are around $475,000.  Based on our spending needs, we need to double that number.  Our goal is to do that over the next 5 years.  This is where I got the goal to increase our Net worth by $100,000 each year.  I love playing with the numbers and hopefully we will blow this number away, but knowing that life happens, we are just going to track it year by year and continue to  . . . follow life's breezes!

Monthly Update - April 2014

 Time for our Monthly Update:


Here is our Net Worth Standing for April 1, 2014:

Assets: $641,676.80 - Liabilities: $147,002.16 = Networth: $494,674.64

Net Change = increase of $23,586.13

Thrilled to see an increase in our Net worth, especially since March was an expensive month.  Between both Baby Breeze and I being very very sick, and therefore not cooking the healthy meals we had planned, we ended up buying more food than planned and threw away a lot of food. Mr. Breeze ended up eating out a lot at work as there were no healthy lunch options for him.   Other than food, we really kept our spending to a minimum.  (Of course, being sick and not shopping probably helped that).

The big increase in our Net Worth has to do with the fact that I became vested in a third of the match the I receive for my retirement fund.  I haven't included this in my net worth until now since I wasn't really eligible to take advantage of those funds.  Now that I have 5 years in my current retirement plan, I am eligible to take 33% of the matched funds if I were to leave.  If I make it to 10 years then I get 66% vested match.

We also filed our taxes, and while we owe locally, we are getting a rather large return from our Federal taxes.  Our adoption of our little guy is a huge benefit to our lives and our taxes! ;)

This will allow us to pay more on our debt as we agreed that any return we would put towards debt, so you will probably see that next month when we get our return.

Here's to paying down debt and working towards that early retirement goal!