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Gasoline may not be so high after all
Years ago when I was in high school and working part time in a gas station, a new Cadillac came in for a refill
and I managed to get $5.00 worth of gas in it's big tank (about 20 gallons) at 25cents per gallon; today
that same tank of gas would cost about $50.00. (20 gallons at $2.50 per gallon) Did I do my math correctly?
However, houses that would sell for $500,000 today could be purchased for about $15,000 when I was in high
school. That is an increase of 33 times. If we multiply that 25cent gallon of gasoline by 33, we get $8.25 per
gallon. The fillup in the same Cadillac at those prices would be $165.00. Again, did I do my math correctly?
I don't like the high gasoline prices either, but considereing the above facts, I think I can go on and worry
about something else for awhile.
July 17, 2006
Refi of your home means going deeper into debt.
Despite what the finance company or bank tells you, refinancing your home to get back cash (to buy stuff) is simply
about borrowing money and going deeper into debt. (exceptions to this might include a refi to pay off high
interest rate credit cards, get into a fixed interest loan instead of a variable interest or getting a lower rate of
interest) In a sense, you are selling a part of your home instead of paying off the mortgage. Paying off your home is
one of the best long range plans for retirement there is, namely lowering your cost of living (no more mortgage payments)
when you quit working.
In most cases the refinancing loan is a so called variable interest loan. This means if (when) the interest
rates increase, your interest payments will rise, sometimes substantially. If it rises enough, you could be out on the
street long before retirement age if the payments exceed your ability to pay. With the government social security system heading
toward being broken in a very few years, the last thing a young couple needs is to lose their home. Pay it off and then start
an investment program with the saved mortgage payments.
The next time you simply can't live without some item (a new car, vacation, boat etc..) and decide to refinance
your house, think long and hard about the long range disadvantages. The best investment in your future can be a paid
off home.
OK Phil-A-Buster, how do I get my equity money out of my house if I shouldn't refinance it?
Answer: You sell your house in a high priced area and move to a lower priced
area. This is what a lot of people do when they retire. They take the money from the sale of their high priced
house (gains are usually tax free) and buy a smaller house (for cash) for less money in a lower cost of living area.
That extra cash (generated from the difference between your high priced house and your new low priced house) will come in
handy and you still have a rent free roof over your head. Yes, jobs are usually not as plentiful or pay less in low
cost of living areas, but who cares when you are retired anyway.
Other people are forced due to poor health to move into a retirement or nursing facility. They
can then sell their house (usually tax free) and use that sale money to pay for the rent of the facility. This could
be an alternative to long term care insurance which is usually very expensive.
Another way to pull cash out of your home without moving is the so-called "reverse mortage". This is usually for
older people who have a severe cash flow problem and have no other way to generate cash to live one. This can have some
pitfalls and problems and is not recommended without consultation with a good attorney, CPA, or financial advisor.
FUTURE DISCUSSION SUBJECTS .
-Drawing up a will (Do it yourself or hire an attorney?)
-Family Trusts (Could help reduce inheritance tax)
-Do you need a tax advisor?
-Do you need a financial advisor?
GOOD NEWS/ BAD NEWS ABOUT RETIREMENT
First the good news: You no longer have to put up with a bad boss who doesn't appreciate you.
You can sleep in. You are your own boss. You can get caught up with all the things your have been putting off.
You can travel. your time is your own. I could go on and on about the advantages of retirement.
Now the bad news: You no longer have a paycheck to live on. If you haven't paid off your
house yet, you won't have the mortgage payment every month. With no money, you have time to travel, but no way
to pay for it. How will you pay the bills? What will you live on?
If you have a good pension plan or sufficient investments, you will probably be OK. But how much is enough?
If your house is paid for, most people can probably live a pretty good life style on, say, $35,000 a year, maybe a little
less if you are really frugal, maybe a little more if you like a higher life style. Lets say $30,000 to be on the conservative
side if your house is paid for.
How much money will you need from a pension? Most pensions are taxable, so you will need about $40,000
each year before taxes (at the 25% rate for federal and state income taxes) to have $30,000 left over.
How much money will you need if you have no pension, but only investments? Well, in order to get income
each year from investments, lets say at an interest rate of 4%, you will need about $1,000,000 in investments. ($1,000,000
X 4% = $40,000 less 25% federal and state taxes of $10,000 = $30,000)
Will you be able to retire when you want to? DO THE MATH YOURSELF.
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They pay me not to come to work
it is called a pension; I can't
make it on social security alone
I try to listen to Rush Limbaugh every morning for a few minutes to identify the important issues of
the day plus read (or scan) at least two newspapers and check out several websites Including the Drudge Report. This
sets the tone for the rest of the news day. I rarely listen to large network news TV, (too bias to the left)
I like Fox TV News cable.
"Whats so Amazing About Grace" by Philip Yancey
"Screwtape Letters" by C..S. Lewis
"Mere Christianity" by C.S. Lewis
"Christianity for Dummies" by Richard Wagner (highly recommended)
"A Purpose Driven Church" by Rick Warren
(same author as "A Purpose Driven Life" which many of you have already read, also excellent)
OTHER BOOKS
"World History for Dummies" by Peter Haugen. (get up to speed without the need of a college masters
degree)
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CUT UP THOSE CREDIT CARDS AND THROW EM AWAY!!
"Please pay off your credit cards" is listened to
in a similar fashion to "Please refrain from teenage sex". They both are ignored.
The "pregnancy" for credit cards, however, comes later in the form
of bankruptsy or the lack of resources to retire when you are old.
YOU DO NOT WANT TO GO THROUGH BANKRUPTSY UNDER THE NEW RULES!!!
July 17, 2006 - IF YOU INSIST, KEEP ONE OR TWO CREDIT
CARDS FOR EMERGENCIES
Pay them off every month; don't use them to borrow money because the high interest rates will
kill you.
March 24, 2005 - DRAFT YOUR OWN WILL AND OTHER ESTATE PLANNING
DOCUMENTS?
Take a test to find out your legal skill level on this web site
March 27, 2005 - I hope you did better than 60% which is what I got when I took
the legal skill level test above. (basically I flunked) Sad!! I used to teach
this stuff in college. The laws have changed plus I have gotten rusty in my retirement years. Luckily, I
hired an estate tax attorney to do my own estate planning. I would suggest you do the same unless you have a very simple
estate and a very small net worth with no heirs other than a spouse.
Phil A. Buster
March 17, 2005 = BA asks, "What is your opinion on Public verses Private Schools?"
Phil sez:(I am just shooting from the hip with my opinion on this one, no research)
I don't like much of the social spending by the government when they use my taxes to
pay for it. (I realize that is the price I pay to live in a Republic, for which I am grateful )
However, too many able bodied people have learned to "work" the gov. social system and are "riding in the wagon" instead of
helping to "pull the wagon" No, I am not talking about the old, poor and sick people who really need help,
but the several generations of younger freeloaders off the tax roles and on the dole. (I applaud Bill
Clinton's efforts to correct a lot of the welfare abuse)
Having said that, however, there are certain programs modern civilized societies have decided can be
handled best by the government and "education" is one of them. (Roads, bridges, dams, police, security from outside
enemies are others that come to mind) I don't mind sharing in the cost of those "essential" things within reason.
(I also don't want convicted felons to get bigger tv sets in prison than me)
Private schools may well do a better job of teaching than public education. (depends on
the school and the faculty) If anyone can afford to send their kids to a private school, more power to them.
I don't even have a problem if the government refunds the actual cost savings (per child) to the taxpayer for their child
to not attend public schools.
On the other hand, I would much prefer to see the public schools fixed; I think that is a better solution.
Kids in private schools are going to have to face the real world at some time or other, and learning to cope with other children
of various backgrounds just might be a good way to start.
(c) 2005 Phil S
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