Reader Mailbag: Black Friday Results

What’s inside? Here are the questions answered in today’s reader mailbag, boiled down to five word summaries. Click on the number to jump straight down to the question.
1. Car trade-in math
2. Putting others at ease
3. Safe savings
4. Refinancing timing question
5. Board games for young ones
6. Retirement account diversity
7. Personal finance intervention
8. Mortgage readjustment
9. Mortgage prepayment versus savings
10. Blog focus

On Black Friday, I attempted exactly one sale – an online one. I failed to be at the site in time for the sale. No major loss.

Instead, I spent almost all the day with family members and friends, which took the “black” out of Black Friday.

Q1: Car trade-in math
My wife and I just moved out of our house after doing a short-sale. We were fortunate to live there long enough to pay off our credit card debt and essentially wipe the slate clean. Now at the age of 26, we are living with my parents with close to no bills and a decent monthly income and trying to save as much as possible to position ourselves for a better future. We own a 2008 Nissan Titan, which we financed for 27,000 out the door. Its our only real debt and I believe we owe less than its value because we pay slightly more every month than the minimum. I’ve been considering trading it in on a 2011 Hyundai Sonata for a few reasons. Assuming the dealer paid off the Titan in full, I should be able to negotiate a lower monthly payment on the sonata, the insurance is the same, the gas and maintenance would be much less. So all in all, I think by doing so I could save an additional $200 dollars a month to be reinvested. I understand that all the money we’ve paid into the truck would be “lost” but in the “wiping the slate clean” phase we are in, and with the primary goal to be save as much as possible, do you think this would be a wise decision?

- Beau

From what I can tell from your description, you’re wanting to trade in a vehicle that you borrowed $27,000 for (likely giving you payments of about $500 a month, depending on how you purchased it) essentially for the current value of the car in hopes that the amount will be enough to pay it off, giving you a break-even on that car. Then, after that, you want to buy a Sonata, ideally with a loan that gives you payments around $300 a month, “saving” you $200 a month.

I agree with trading in the Titan. $500 a month is pretty steep for a car payment and if you can easily get yourself out of it, that’s a good thing.

I’m not in favor of replacing it with a brand new Sonata if you’re having to take out yet another car loan to finance it. I would get a late model used sedan for about half as much as you’d pay for a new Sonata, pay that off as fast as possible, then save at a significant rate for its replacement.

Why? If something goes wrong in your life – you lose your job, etc. – you either have a paid-off sedan or, in the worst case, a car with much lower monthly payments than if you “bought” a new one.

Never buy a new car unless you can write a check for it.

Q2: Putting others at ease
I noticed you mentioned the ability to “put others at ease” in a couple of recent posts. I am a caseworker for social assistance in Ontario, Canada and I would like to improve my ability to do just that, to help the clients I work with to feel at ease with me. Are you able to recommend any reading on this subject or do you have any further observations in regards to developing this specific skill?

- Kyla

The best book on this is probably Dale Carnegie’s How to Win Friends and Influence People. I would suggest that for detailed reading.

The easiest method I’ve found for putting other people at ease face to face is by figuring out what they most enjoy about their life and asking them about it as a conversation starter. Look for clues. What’s on their clothing? Do they have a keychain with a picture of a child on it? Just look them over for things that identify what they’re passionate about.

When you have an idea or two, ask about them. Get them talking about something that makes them feel good and they’ll begin to feel more at ease with you.

Q3: Safe savings
I’m saving $30,000 for animation school which I won’t be attending for about 3 years. In the interim, I’m going to finish my fine arts degree. After that, I’ll then use the money saved towards animation tuition. While I’m working on my degree, though, what should I do with the $30,000? What’s something that is safer, yet allows my money to grow? It needs to be locked away, essentially, since I’ll be on student loans during the three years. I was thinking GIC’s, but the return is only 2.5%. Others have said I should put a down payment on a house and then sell it. What would you suggest?

- Tighe

I’m pretty certain that Tighe comes from Canada, where GICs are roughly the equivalent of treasury notes in the United States.

The real question is how stable Tighe wants his savings to be. If he has zero tolerance for losing any of the balance – well, in truth, there is no zero-risk investment but you can get the risk pretty small – a GIC is probably a very good choice, especially at 2.5%. Another option would be to simply stick it into a savings account somewhere, wait, and perhaps move it as interest rates rebound over the next few years.

If you start looking at things like buying a house, you’re introducing significant risk into the equation – you’re banking on an open market, where the value of the home can go in either direction. If that specific market falls from where it’s currently at, then you’ll lose money. The risk in buying a house strictly for a return in three years is pretty significant.

Q4: Refinancing timing question
My husband & I are expecting a large investment to pay off in the next year or so. It would pay off half the value of our home. After we make that payment, should we keep paying off the mortgage as it stands (rate of 6.25%) or refinance? Which would prevent us from paying the most interest on a home loan?

- Stephanie

Your best bet is to refinance, considering you can refinance down to 4% or below. Any time you can drop your interest rate more than a percent or so, it’s probably worth it to refinance.

Can you refinance now? If it is possible, now is the best time for you to refinance so that you can spend the next six months or so paying 4% interest instead of 6% interest on your home loan.

Of course, you might not be able to, particularly if you’re underwater. If that’s the case, make your big payment in 2011, then refinance as quickly as you can.

Q5: Board games for young ones
I want to get my 4 yr old twin daughters involved in board games. Could you recommend a couple to get them started. Maybe some that your kids have enjoyed that really get them thinking.

- Justin

I currently have a five year old and a three year old, so my best suggestions for you would be the ones that the two of them request and play together.

The one the two of them most often request is The Kids of Carcassonne, which really helps the younger one with spatial skills. The older one sees a bit of strategy in it and is thus often able to beat his younger sister.

They also have a copy of Travel Blokus that they play against each other quite often. As with the above game, my son sees the game differently than his sister and usually wins.

My older one’s favorite game is Hey! That’s My Fish!, which is similar in complexity to checkers but with much cuter pieces.

Q6: Retirement account diversity
What are your thoughts about having all your retirement accounts at one financial institution? I have a 403B and Roth IRA at Vanguard. My part time job boss is starting a SEP IRA for me and gave me the option of starting it at Morgan Keegan or any other institution of my choice. my initial reaction is just to stick with Vanguard, but what if they go bankrupt? Would I lose all my accounts? Is it safer to put the accounts in a few different places?

- Jennie

Vanguard’s funds (as are those of virtually every investment house) are protected by the SIPC, which ensures that most missing investments are reimbursed.

The SIPC protects your investments up to $500,000 in total value (up to only $100,000 in cash). If you have investments exceeding that, you may want to consider diversifying across various investment houses.

If you’re nowhere close to that, I wouldn’t worry about it at all. Pick the best investment house and stick with them.

Q7: Personal finance intervention
It recently occurred to me (I finally admit) I am dangerous when it comes to my personal finances. I quite honestly don’t know what to do — how to create a budget, how to keep a budget, how to manage monthly expenses… all of it.

I realize I need help… and the best help I can think of is to find someone who can teach me how to manage a budget on a month-to-month basis… kind of like taking piano lessons. I need to take lessons in personal finance. What do you recommend I do as a first step?
- Phillip

The actual “learning” of how to create a budget and use it from month to month is something you can teach yourself. In itself, it’s not challenging.

The challenge comes from sticking with it, and that’s a matter of psychology and motivation. The best thing to do with regards to this is to find a “money buddy” of sorts – someone who you feel comfortable enough with to openly talk about your finances with, both your successes and failures.

There’s no need to pay for someone like this – you probably have such a person in your social network. Do you have a close friend who might also be going through such a period of financial re-evaluation? That’s the type of person you’d want as your “money buddy.”

Q8: Mortgage readjustment
My husband and I recently bought a single family house. We got a loan for 392k after 20% down payment and the interest rate is about 4.5%. The monthly payment is about 1986.21 and I pay 2000 per month. Apart from our mortgage, we don’t have any debt. Both of us work and we don’t have any kids right now. We both put in around 10% of our pretax income into our 401k and have a healthy emergency fund to fall back on. I’m currently searching for a new job and recently sold all the stock that I had in ESPP from my company – around 35k. The question is regarding what to do with this money. We have 2 options – one is to put this money into our mortgage. If we put this down and readjust our mortgage($250 charge), the monthly payment goes down by approx. $200. A concern I have with this option is that with the housing market down, should we put down more money into our house?

Other option is to invest this money in a CD or mutual funds. I’ve checked out the CD rates and they’re very low – around 1.5-2% at the most. I’m not very familiar with mutual funds and am hesitant to take a risk in putting such a large amount into the stock market.

Are there any other options I should consider?
- Shanna

One mistake I think you’re making is tying the value of your home to your mortgage. Unless you’re considering walking away from your mortgage – which you shouldn’t even be considering unless you’re way underwater – making extra payments on your mortgage shouldn’t hinge on the value of your home. It should hinge on interest rates and minimizing the overall amount of money you’re handing to the bank in the form of interest.

When you choose to sell your home, you’re going to have to deal with the mortgage on it, regardless of whether you sell sooner or later and regardless of whether your home value goes up or down. The more you’ve paid down your mortage, the more likely it is that you’ll have a surplus when you decide to sell.

In your case, I would absolutely pay down the mortgage first. It’s essentially a risk-free way to maximize the return on your money.

Q9: Mortgage prepayment versus savings
I have ~$450K in retirement savings and $27K in emergency funds (4 months worth). My mortgage has 28.5 years to run at a 4.1% fixed rate, which I can reduce to 10.5 years if I prepay $1K/mo (which would basically require an either/or choice to add to the emergency fund or to prepay). I am 43 years old, job is fairly stable, no looming risks that I can see. With company match, currently contributing 17% of my pre-tax salary to 401(K) with plan to increase that at the rate of 1% per year. Should I be prepaying?

- Brent

Do you want to retire on the first possible day or do you not mind waiting a few years beyond that for a more stable retirement?

That’s really the question here. If you prepay, you’ll have your mortgage gone at age 54 – otherwise, it’ll be at age 70.

If you’re shooting to retire on the first possible day, meaning you’re maximizing your retirement savings, you’re going to have mortgage payments for the first decade or so of retirement, making it much tighter to make ends meet.

Really, the “best” choice relies on being psychic about the future of the stock market – and no one can really predict it.

If I were you, I’d figure out a retirement age at which I’d like to retire, then figure out how much extra I would have to pay each month on my mortgage to make the mortgage vanish at that date (or just a bit before). Then, I’d use the remainder of that $1,000 per month and put it into retirement.

Q10: Blog focus
Sometimes you write posts or include questions in your reader mailbag posts that have little to do with personal finance. Nevertheless, you maintain the focus of The Simple Dollar very well and people seem to enjoy (and request) these little diversions. I’m guessing a lot of that has to do with regular readers wanting to get to know you better. How do you maintain your blog’s focus while allowing for this flexibility?

- Christine

That’s because The Simple Dollar isn’t really a personal finance blog per se.

Yes, on the surface, I talk about money issues a lot. The real focus of the site, though, is finding a balanced life – and I’m using my own life as something of a laboratory for finding it.

Personal finance is a key part of that balance and it was the first part of it that I really understood. Without having your money in order, it’s very difficult to build a better life for yourself.

But it goes beyond merely being all about the dollars. It’s about time management and knowing what you want out of life. It’s about setting goals and reaching them. It’s about relationships with others and the career that you want. These are all tied in with money, of course.

It took me a year or so of doing The Simple Dollar to really start understanding that it wasn’t really about money. It was about finding a better life and using myself as a lab to do it, with the implicit understanding that good personal finance is a very key part of it. That’s what I’ve stuck to ever since – and it allows me a pretty broad range of stuff to write about.

I find that it takes a while for every good blog to really figure out what it’s about. It’s usually not immediate – it takes some time for the idea behind the blog and the person (or people) writing it to really come together. Often, it winds up being something completely unexpected. I didn’t think The Simple Dollar would end up being about the things I write about now when I started writing pure frugality posts in late 2006.

Got any questions? Email them to me or leave them in the comments and I’ll attempt to answer them in a future mailbag. However, I do receive hundreds of questions per week, so I may not necessarily be able to answer yours.

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31 thoughts on “Reader Mailbag: Black Friday Results

  1. RE #5. My granddaughter LOVED the game Race to the Roof when she was 4 and 5.

  2. Kevin says:

    A GIC is a Guaranteed Investment Certificate, the Canadian equivalent of a bank CD (Certificate of Deposit), not a treasury bill. Canadian treasury bills are Canada Savings Bonds, and can only be bought during certain times of the year, directly from the government.

  3. Beth says:

    I suspect Tighe is in the Toronto area based on the schools? Experts think we Canadians are going through a housing bubble at the moment, so I wouldn’t treat property as an investment — especially if Tighe plans to move. There are many ways to lose money here — taxes (including the HST on real estate agent commissions), mortgage insurance, moving costs, etc. I would really do the math on this one!

    Trent, you couldn’t know this but another option is for Tighe to put his all or part of his money in an RRSP (like a GIC, etc) depending on his income. There’s a program in Canada where you can borrow from your RRSP for your education — but you have to pay it back in ten years.

    Tighe should also consider a TFSA to shelter the money from taxes. If he had opened one when they first came available, then he’d have $15,000 contribution room as of January.

  4. Evan says:

    @Phillip: I came to the same realization a few years ago and one of the best resources I found to start was Dave Ramsey. His plan is 100% focused – there is no wavering or uncertainty. His plan is laid out in steps. Do step one, then step two.
    He has a free daily podcast which I listened to religiously to basically brainwash myself into thinking his way instead of mine.

    He also explains how to budget but mostly that the ONLY way to get your money under control is to be out of debt. There’s no point budgeting if you’re willing to go below $0.

    Give him a try and good luck!

  5. Adrienne says:

    UNO is a great game for young kids.
    Also I can’t say enough about Monopoly Jr. (so much better than Monopoly…)

  6. kristine says:

    Q7: I recommend “How to get out of Debt and Live Prosperously” as a great start. You can get it on audio book. I knew nothing about handling my finances, and found it incredibly useful as step one.

  7. 8sml says:

    @#3 Beth: From what I understand, you get $5000 contribution room per year for a TFSA regardless of when (or if) you opened a tax-free savings account.

  8. todo es bien says:

    Prepaying a long-term fixed rate mortgage is almost certainly a large financial mistake. Scenario 1: Moderate to high Inflation – in this scenario your loan becomes progressively cheaper, by the end your payments would be negligible relative to your income. Scenario 2: Deflation – in this scenario you will likely default ultimately, if not, you will have lost most or all of the value you prepaid anyway. Scenario 3- Long term Low inflation – you are saying in a low inflationary environment that the BEST investment idea you have is to pay down a low interest long term TAX DEDUCTIBLE loan. Are you kidding? Given any one of the above scenarios, how is prepaying a win??? There is a reason that most major companies are booking as much long term low cost debt as they can right now, and many are realizing record profits. I realize that intuitively it is great to be debt free, but use your excess capacity to get a better return elsewhere… Put another way… you approach me and offer me 1 million dollar business loan @ 4.5% tax deductible. Oh, and I get to write off the interest. And if I default no recourse…. I will take my chances and NOT prepay it back!!! In fact, if you any of you want to book that loan contact me. If you dont want to book that loan, then ask yourself why you would want to prepay it when it is offered to you… Hope this rant makes some sense to someone. Peace and best holiday wishes.

  9. jim says:

    Q8 Shanna: Make sure to figure the tax impact of that stock sale and put aside enough money to cover the tax bill. If you don’t know the tax impact then make sure to figure it out. You could easily owe the IRS thousands of dollars from that stock sale.

  10. Erin says:

    #8 todo es bien – prepaying is a win because if you lose your job, or want to quit a job you hate, or you want to retire early, or you become unexpectedly disabled and can’t work, or you have kids and want to stay home with them… in other words if life happens… life will be way easier without a mortgage payment to worry about.

  11. JJ says:

    Re Q1: I don’t remember if I heard this saying from Dave Ramsey, or Thomas Stanley, or somewhere else, but it sums up the answer pretty well:

    When considering a purchase, wealthy people think “how much is it?” and broke people think “how much is it per month?”

    You have to get out of the paycheck mindset and into the “net worth” or “balance sheet” mindset. If you lower your monthly payment, but are back at square one on having equity in your car, and have several extra years of payments tacked on, what good is that? In the long-run, you’re paying way more, and that’s going to impact your goal of savings.

    So I agree with Trent on this one. Think of how much you would have left to put into savings if you had no car payment at all! Don’t put that day off any longer than necessary just because you’d rather have a 2011 model.

    JJ

  12. Johanna says:

    @Erin: Actually, in most of the situations you describe, you’re better off *not* prepaying your mortgage, but putting the money in savings instead.

    First of all, until you pay off the mortgage entirely, you still have a mortgage payment to worry about. Layoffs and disabilities can strike at any time – they’re not so considerate that they’ll wait around for you to pay off your mortgage.

    Second, even if you don’t have a mortgage payment, you still have other bills. If you need to pay those bills out of savings, it’s better to have more money in savings.

  13. Beth says:

    @8sml You learn something new every day! :) Thanks! I signed up as soon as they came out, so I didn’t realize contribution accumulated for everyone over the age of 18.

  14. Daria says:

    Todos es bien:

    My husband and I paid off our loan long ago in the 90′s in 8 yrs. It was paid off when our children (4)went off to college and we put them through loan free. We are debt free and have the capital to take advantage of the housing market in Florida where we have bought two houses near the ocean. One is rental property (and we are prepaying the mortgage) and the other (no mortgage) is being occupied by my brother who needed a place to live. This brother is the only one of siblings who didn’t pay his mortgage off early, he took out home equity loans and he lost the house in a divorce because he didn’t have other assets to buy it from his spouse. We are currently buying a house two houses from us that was offered in a short sale. We will rent our paid off home and use the rental money to pay for the house we are buying. We stay in the same neighborhood with the same friends and neighbors, fix up a property that needs it, and we are getting it at a great price. We will prepay this mortgage too so that it is paid off in 8 yrs before my husband is eligible for early retirement. Why pay $1 in interest to get $0.25 in tax deductions? We’re still out $0.75.That is money that went into savings. Paying off a mortgage early has offered our family bigger dividends than being in debt for 30 years to take advantage of a tax deduction.

  15. Stacy says:

    We’ve never had a tax deduction for our mortgage – around here, the average home ($100,000-$150,000) just doesn’t generate enough interest at 4-5% to go over the standard deduction.

    Guess we’ll just prepay it, since there really is NO incentive for us to keep the mortgage 30 years. :-)

  16. Erin says:

    @Johanna – I was thinking of those scenarios if you paid your mortgage off early. Which is much easier to do if the writer who is getting enough cash to pay off half her mortgage does so! But yes, in the short term if one of those emergencies happened to me or was about to happen, I would sock away savings rather than pre-paying my mortgage.

  17. Sarah says:

    If young kids haven’t played any board games before start with Snakes and Ladders (Sesame Street has an awesome version that teaches little life lessons!) to learn how to move around a board and then move on to something more difficult.

  18. Michael says:

    The biggest question re: prepaying one’s mortgage is whether one is disciplined enough to save the money that is not applied towards the loan. Those who would waste it anyway should prepay. Even if the return on prepayment is not ideal, it is the best option for people with little self-control.

  19. Pankaj says:

    Hi Trent,

    I have a question regarding refinancing mortgage. We got a great rate of 4.625% earlier this year but I hear that the rates have dropped even further. Does it make sense to refinance so early (within a year)? How low should the rate be in order to justify refinance costs?

    Thank you,

    Pankaj

  20. Amanda says:

    Beau should include selling his truck on craigslist or through classifieds in his decision making process.

  21. deRuiter says:

    “Why pay $1 in interest to get $0.25 in tax deductions? We’re still out $0.75.” Daria #14 is BRILLIANT. And she and her husband will retire with a nice cash flow, and no financial worries. A 25 cent tax deduction is no where near the return you get prepaying your mortgage. We retired early and live very cheaply in our paid off house with several pieces of paid off rental property. And if you decide to sell the rental property (do an installment sale on this if your state allows) and hold the paper for the buyer with stellar credit, and make a high interest on your money. You will be able to sell no matter what the banks are doing, and you will earn a lot more than selling outright and putting cash in a CD. With an installment sale you have no risk of having to forclose. Daria, you and your husband are geniuses! I salute you!

  22. Steve in W MA says:

    @Q1

    Buting a car from the dealer is a very expensive way to buy a car, and trading in a car to a dealer is an expensive way to sell a car.

    Sell your car to a private party.

    Then buy another car, say a 5-7 year old car, for about half the price of the proceeds. In cash. With no payment.

    Then take the other half of the money and put it aside (in a separate bank account if you have no other way of doing this in your budget). You can use it to defray future repair costs and as an emergency fund.

    You will come out ahead of even Trent’s suggestion.

  23. Steve in W MA says:

    @Q7,

    Budgeting is both a method and a habit. You want it to become part of your daily and weekly and monthly routine. Daily–in recording expenses and income–and weekly–in updating your budget totals and revising your plans if necessary. Monthly–in that every month you create a new budget for the month.

    There are a number of sources for learning to budget. One is Mary Hunt’s book,–The Complete Cheapskate. Another is software such as YNAB or the online forum that YNAB hosts.

  24. Steve in W MA says:

    @Q1, the new Sonata purchase.

    I also agree with JJ, #11.

    You really want to look at the total cost, not merely the monthly cost0 of the new car purchase compared to the total remaining ongoing cost of your current car loan. Compare the two as part of your decisionmaking process. The 5 year loan at $300 per month is going to cost you more going forward than the remaining 2 years of $500/month. (Of course, gas in the Titan is going to be a killer).

    But if you can pull enough out of a sale of the Titan to pay off your loan, then purchase a good used car for $5000 or so (very easy to do) and finance it directly with a bank, then you will come out way ahead in the long term compared to buying a new Sonata that will lose 30% of its value within the first 3 years. Versus a used car that you car probably drive for another 10 years and which has already taken the bulk of its depreciation.

    If you are really short on cash, you may have to finance the car. BUT you can still finance a car that you’ve bought from a private party. Just get a car loan from the bank. The private party sale/private party purchase scenario will almost always put you way ahead of the game financially compared to going to a dealer.

  25. Claudia says:

    Even when I was young and stupid, I could never figure out why someone would keep a mortgage for 30 years for the tax deduction? “I think I’ll pay $1,000 in interest this year so I can save $200 on my taxes.” Oh yeah, that works!
    Same thing when people argue that housing prices have gone down so your house is not worth what it once was. Therefore, you shouldn’t pay it off. Well, you always need somewhere to live don’t you?

  26. Geoff Hart says:

    Just to confirm what others have said: “GIC” is “guaranteed investment certificate”, and it’s the equivalent of an American CD. However, Canada Savings Bonds aren’t the same as treasury bills; they’re government bonds packaged in consumer-friendly terms, which is similar but not the same thing. They’ve traditionally been a lousy investment compared with the alternatives, though I haven’t checked the specific rates for a few years. Maybe they’re competitive again. If memory serves, you can’t buy Canadian T-bills directly, but can get them through various forms of money market fund.

    GICs can be purchased in a variety of maturity dates, so it’s easy to “ladder” the GICs to take advantage of interest-rate swings. However, with $30K to invest, there are better options. I’m not an investment advisor, so I’ll only say that there are several high-yield money-market funds available if you have that much money to invest. The returns more or less fluctuate along with interest rates, but assuming you choose one that invests in high-quality debt (i.e., government T bills etc.), it’s safer than just about any other form of investment and will give you a competitive rate of return compared with other fixed-income investments.

    The best advice thus far in these comments for the money is to put as much of it as possible into a TFSA (tax-free savings account); you’re limited to $5K per year, but any income earned is tax-free. But check the withdrawal details carefully with your bank or trust company to be sure you understand how withdrawal works.

  27. JJ says:

    Re: The mortgage payoff debate…

    The way I like to look at it is that the martgage interest tax deduction is merely a subsidizing of a portion of your interest rate. So if the bank is charging you 6% and you’re taxed at 25%, then your effective rate is 4.5%. You get the other 1.5% (25% of 6%) back as a refund from the government.

    This tells you two things. First, despite the deduction “benefit”, you’re still paying money to the bank! The deduction doesn’t yield a net gain, it merely reduces the loss to the bank. The old “hang on to the mortgage in order to get the deduction” excuse just doesn’t cut it.

    Second, paying off the loan early is equivalent to a risk-free investment that pays back a guaranteed 4.5% (or whatever your effective rate winds up being).

    You can’t really compare the pay-off to putting the money in, say, the stock market because the risk profiles are vastly different. You have to compare apples-to-apples.

    Using my example, if you can find a nearly risk-free investment that beats 4.5%, you should put your money there instead of paying off the mortgage. But you’re not going to find it. The closest thing to equivalent risk would be T-bills, and they don’t pay anywhere near 4.5%.

    JJ

  28. Heather says:

    @Putting people at ease. There is a captivating book that I have just finished called “Just Listen“ by Mark Goulston that looks at making people feel interesting by being a good listener. If you make people feel interesting, they generally feel very good in your presence. Some great tips and interesting case studies.

  29. Georgia says:

    “If you buy a large container of honey, you need to use it before it crystallizes.”
    Wrong. All you have to do is melt it & it is perfectly useable.

  30. todo es bien says:

    Here is why you should pay a dollar in interest to save 25 cents…. Take the money and invest it elsewhere at a MUCH GREATER RETURN. I am not saying dont save, I am saying paying off a low interest long term loan with no recourse is a poor investment decision in virtually all scenarios. (See my comment above). I realize this site is more oriented towards frugality then investing, but to give you an overview, in the last two years I have been able to get about 70% + – compounded annually (OK, I admit, the last two years have been the greatest stock market buying opportunity ever) returns in low beta investing… Compare that to if I had taken that money and used it to pay down my 4% house. Obviously, if the choice is prepay mortgage or blow the dough you should prepay. But if you can get money so cheap 4%+- no need to prepay it. Use it elsewhere. If I had used that money to prepay my mortgage I would own the house. Instead, in two years, I have enough buy 2.5 for cash. Warren Buffet had it precisely correct, “be afraid when people are greedy, and greedy when people are afraid”. Can make you wealthy.

  31. Steve in W MA says:

    @ Q1, the refinance:

    “It’s an interest only loan at 7.4% and I pay just under $1500 a month for the mortgage.{…it’s going to reset in July}.”

    ?? you didn’t say what the contractual terms are for “reset” of the loan. Without knowing that it’s very hard to give advice. It clearly isn’t a balloon loan or you would be freaking out right now. My guess is that it will reset at market, and the market is extremely good for mortgages. You will likely end up at a sub-5% rate. The current lender will likely have to deal with the fact that it’s underwater–they aren’t going to not finance it because it’s underwater as they’ve already got skin in the game and it’s unlikely that the lending contract gives them the right to boot you and foreclose just because the house is underwater.

    Anyways, without more info it’s kind of academic. You really should be talking to a mortgage broker and your lender anyways, not to the internet.

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