The old fora included the "On the Money" section. In lieu of that, here's a thread to discuss financial matters.
I have a typical question:
I've got 13 years to go on a 20 year mortgage at 3.375%. No PMI. Approximately $180K left on the principal. Thinking of retiring about 13 years from now. I have a reserve of emergency savings that will cover a full year of expenses. And I'm basically maxing out my 403(b) retirement account contributions. Returns on savings accounts and bonds are now close to zero. Should I now start paying down the principal faster than the mortgage requires?
What sayeth you, o' wise ones?
I have a much smaller-scale conundrum...
It looks as if I can't use the banking machines here to deposit checks to my credit union account in other states.
Mailing them is an option, something called "mobile deposit" is another option.
They will also cut and mail me a check. (I only need once per month, all my other bills are payable online).
So, once it's set up, I'll be good to go, and I have some backlog, so it will cover the ramp-up period.
But the time lag for the first two weeks (our mail is super-slow) is going to be interesting.
M.
Quote from: spork on March 19, 2020, 08:19:04 AM
The old fora included the "On the Money" section. In lieu of that, here's a thread to discuss financial matters.
I have a typical question:
I've got 13 years to go on a 20 year mortgage at 3.375%. No PMI. Approximately $180K left on the principal. Thinking of retiring about 13 years from now. I have a reserve of emergency savings that will cover a full year of expenses. And I'm basically maxing out my 403(b) retirement account contributions. Returns on savings accounts and bonds are now close to zero. Should I now start paying down the principal faster than the mortgage requires?
What sayeth you, o' wise ones?
The money experts always say that there is no point paying down a debt at low rates when the stock market on average give you returns at a higher rate. However there are other benefits to paying off your mortgage besides maximizing net worth. Once it is paid off you have one less bill to worry about. Decreasing debt makes you more creditworthy to get another loan if you need one. That was my thinking when I focused on paying off my student loans before worry about anything else involving money.
Careful about such money expertise: The interest savings from paying down the mortgage are certain; the returns from investing in the stock market are uncertain. If one had invested only last week, one would be out at least 25%.
Or, to use an analogy, using your unpaid mortgage to invest in stocks is like buying on margin, i.e. buying with borrowed money. Highly risky. Decision depends upon how much risk one is willing to bear.
Quote
Mailing them is an option, something called "mobile deposit" is another option.
Mobile deposit is easy. You need the bank's ap on your smart phone. To deposit the check, you log into your account through the ap. You sign the check. Then you simply take a picture of the check through the ap (it will help you with this ). Then you enter the amount of the check and then you hit Submit.
That is it! It saves time and even stamps!
Keep the check for a while. There is a time that you are supposed to hold it just in case there is a problem, but then you can burn or shred or otherwise dispose of the check.
I used to use have one bank transfer to another one of my banks through the ACH (automated clearing house). Then the bank (credit union, technically) decided unilaterally to switch it to a 'bill pay' where they mailed the check to the other bank. At some point, the check was lost or misplaced or something, so the money that used to be there, no questions asked, was 'lost' for a month becuase the sending bank wanted to 'wait to see if it turns up'. I fixed it by stopping the automatic transfer.
The lesson is that if you use mobile deposit, then you know if you got the check, and that it was or was not accepted for deposited. no risk of losing it in the mail, or whatever!
Get the AP!
Quote from: dismalist on March 19, 2020, 11:45:27 AM
Or, to use an analogy, using your unpaid mortgage to invest in stocks is like buying on margin, i.e. buying with borrowed money. Highly risky. Decision depends upon how much risk one is willing to bear.
With the key difference that you're not going to get hit with a margin call. That's what makes investing with borrowed money particularly risky: when stocks lose value, your broker will ask you to put additional money into the account to guarantee the loan. If you don't have that money, you'll be forced to sell stocks at a low. With a mortgage, the bank can't call you up and demand that you make additional payments because the value of your house went down. On top of that, even if you're trading $1m+ on margin, the best interest rate you can hope for is around 5.5% -- substantially higher than a mortgage.
Quote from: pigou on March 19, 2020, 12:55:29 PM
Quote from: dismalist on March 19, 2020, 11:45:27 AM
Or, to use an analogy, using your unpaid mortgage to invest in stocks is like buying on margin, i.e. buying with borrowed money. Highly risky. Decision depends upon how much risk one is willing to bear.
With the key difference that you're not going to get hit with a margin call. That's what makes investing with borrowed money particularly risky: when stocks lose value, your broker will ask you to put additional money into the account to guarantee the loan. If you don't have that money, you'll be forced to sell stocks at a low. With a mortgage, the bank can't call you up and demand that you make additional payments because the value of your house went down. On top of that, even if you're trading $1m+ on margin, the best interest rate you can hope for is around 5.5% -- substantially higher than a mortgage.
Yeah, one has put up one's house as collateral for the loan, not the stocks. It's gambling with borrowed money, though indeed one won't get nasty messages form broker when market falls. :-)
Quote from: spork on March 19, 2020, 08:19:04 AM
The old fora included the "On the Money" section. In lieu of that, here's a thread to discuss financial matters.
I have a typical question:
I've got 13 years to go on a 20 year mortgage at 3.375%. No PMI. Approximately $180K left on the principal. Thinking of retiring about 13 years from now. I have a reserve of emergency savings that will cover a full year of expenses. And I'm basically maxing out my 403(b) retirement account contributions. Returns on savings accounts and bonds are now close to zero. Should I now start paying down the principal faster than the mortgage requires?
What sayeth you, o' wise ones?
That's what I'm doing. I'm aggressively paying down principal on what's left of my mortgage. I'm not going to try to guess where and when the market bottoms out.
Quotend I'm basically maxing out my 403(b) retirement account contributions. Returns on savings accounts and bonds are now close to zero. Should I now start paying down the principal faster than the mortgage requires?
There is nothing wrong with paying off you mortgage. It may 'only ' be a 3.375 rate, but it is guaranteed 3.375 return. What risk free investment is paying close to that today?
However, this might be a good time to increase retirement accounts. How? Well, if you are over 50, you can contribute $25,000 (or more if the catch up got larger in January, I dont recall). in your 403b account. You can likely also contribute to an ira (preferably Roth). IN addition, if you are employed by a state (maybe a non profit) you may have access to a 457 plan with an additional 25K total limit.
Consider this, though, as I will be once I get married. ... Likely you began saving for retirement before the Roth accounts were available, so some of your retirement accounts may be 'traditional'. Consider converting some money now. You will owe taxes on the money now, but it is probably going to be a lot less than it will be later! (IF they work out a plan to give $1000 a person a few times a year and probably bail out all sorts of industries, will taxes be lower in the future to pay for this?
So consider converting your traditional accounts to Roth accounts and budget for higher taxes now from your surplus.
To further this thought.... think ahead. Currently you are married so you file "married, filing jointly" and get a nice 24+K standard deduction. Someday, "when death do you part" one of you will be single. Even if you think that you will be in a lower tax bracket later, WILL the survivor be in a lower tax bracket? The survivor may have a lower income (as the survivor will have the higher of the 2 social security checks, but not both), but will be single and will be paying at the single person tax rates, not Married, filing jointly. SO by converting NOW to Roth accounts, the money that the survivor distributes to live on will not be taxable (nor will it be counted to determine if Social Security is taxable either!)
The suggestions then are to CONSIDER:
Paying down on the mortgage (a Risk Free return)
Adding to retirement savings by adding a 457 plan (if eligible)
Rolling over Traditional retirement account balances to Roth account balances and paying the taxes now.
What do you think of those options?
Hi everyone!
I started a YouTube channel like 7+ years ago. Mostly I just post unlisted videos for my own students on the CMS, but gradually I made a few extra versions of videos public, mostly demonstrating APA/MLA stuff. These generated a tiny trickle of pocket change, until maybe four years ago when YouTube set a much higher bar for people to monetize videos.
Well over the past year or so, my videos, mostly older ones (there are 12 or so public ones), have taken off, and 10 days ago I hit the higher threshold to make money on YouTube with watch hours and subscribers. The trajectory is continuing upwards, so even if I don't make any new videos (which I actually will do), I am on pace to make like at least 5K+ a year.
How the hell do I report this or pay taxes on this? Through Googling, it looks like this kind of income is classified as royalties. Is there anything I need to do before tax time except set aside cash to pay taxes?
When I was consulting regularly, I would file Schedule C (which allowed a number of business deductions, like my 'consulting' /second cellphone, copy machine supplied, travel expenses and such). For Taxes, I did not pay quarterly taxes, BUT I did increase my withholdings from work. IF you think that you will earn $5k, I would not be surprised that you would have to pay $1000 (20%) in taxes. It may be a bit more, though. IF you do not beat the cap on social security, you may need to pay 'self employment taxes' (social security).(If you are paid once a month, then deduct another $100 a pay check and you should be close... As long as you deduct as much as you owed last year, you should not be charged penalties if you miss the with holding number).
For full details on royalty income and how to declare and file them, take a look at Publication 17 (from IRS.Gov). It should download as a PDF and you can search the documents. (You will likely get a specific 1099 ).
Clean, thank you for taking the time to respond.
Can you explain this to me just a little bit more in depth? What is the cap on social security and how do I know if I beat it?
It may be a bit more, though. IF you do not beat the cap on social security, you may need to pay 'self employment taxes' (social security).
I don't have the knowledge to help anybody else, but I do have a question:
We moved last year, and have a 29 years left on a 30-year mortgage, @ 3.875%, no PMI. No plans to move, for at least 15 years.
What would make it worth it to refinance, apples to apples mortgages?
Thanks in advance,
dc
Once you earn more than $137,700, they stop deducting social security taxes.
Otherwise, your self employment income will likely require that you pay both the employee and employer share of social security (FICA) taxes.
How do you know if you beat it? In my case, in the years that it happens, I get a 'raise in my December check. (If I teach a full load in summer, then in December, I have paid the maximum owed for social security ($8537.4 this year). So I owe a little less in taxes that month. IF your university income is less than $137,700, then you will owe the self employment tax until you reach an income of 137,700.
IF you use TurboTax or something similar, just make sure that you buy the version that covers the entire situation of your earnings.
The instructions for Schedule E indicate that you may be able to use Schedule C :
"Line 4
Report on line 4 royalties from oil, gas, or mineral properties (not including operating interests); copyrights; and patents. Use a separate column (A, B, or C) for each royalty property.
If you received $10 or more in royalties during 2019, the payer should send you a Form 1099-MISC or similar statement by January 31, 2020, showing the amount you received. Report this amount on line 4.
If you are in business as a self-employed writer, inventor, artist, etc., report your royalty income and expenses on Schedule C, not on Schedule E."
https://www.irs.gov/instructions/i1040se#idm140609575976000
From this, I would think that something like TurboTax Home and Business edition should be able to walk you through everything you need to file taxes. With a 1099 MISC, there should be few problems.
With Schedule C, you can deduct or expense a number of things to offset the royalty income and TurboTax will guide you through it.
QuoteWhat would make it worth it to refinance, apples to apples mortgages?
Investigate the cost to refinance. Investigate the new mortgage rates. If the interest savings covers the cost quickly ( <3 years for sure), then it may be worth doing
However, IF you desire to be debt free, consider a 15 year mortgage. I have not run the numbers lately, but you may be able to save 14 years of payments for just a few hundred dollars more a month (and the interest rate will be lower too).
Why the desire to stay in a 29 year mortgage?
There are certainly valid reasons to keep it, and many reasons to switch to a shorter term mortgage (if you can afford the additional payment anyway).
Quote from: zuzu_ on June 27, 2020, 08:23:41 PM
Well over the past year or so, my videos, mostly older ones (there are 12 or so public ones), have taken off, and 10 days ago I hit the higher threshold to make money on YouTube with watch hours and subscribers. The trajectory is continuing upwards, so even if I don't make any new videos (which I actually will do), I am on pace to make like at least 5K+ a year.
Wow, that's great, enjoy that revenue!
Quote from: Cheerful on June 28, 2020, 12:45:35 PM
Quote from: zuzu_ on June 27, 2020, 08:23:41 PM
Well over the past year or so, my videos, mostly older ones (there are 12 or so public ones), have taken off, and 10 days ago I hit the higher threshold to make money on YouTube with watch hours and subscribers. The trajectory is continuing upwards, so even if I don't make any new videos (which I actually will do), I am on pace to make like at least 5K+ a year.
Wow, that's great, enjoy that revenue!
Thanks! YouTube is a pretty unstable source of income. Any tweak to the algorithm or monetization policy change and I'm screwed. Account suspensions can also happen at any time and there is no meaningful appeal process. But I will enjoy it while it lasts! I'm creating this material for my students anyways, and it takes me an extra five minutes to make a public, monetized version of the same material. Somehow the Google algorithm puts my stuff at the top of search results. It's a happy accident, but I'm sure it can be accidentally undone at any time.
I wonder if the algorithm has to do with "most recently posted in, tops the listings going out"?
I'm interested in hearing more about the account setup and so on.
Not so much in monetization, but for use in replacing weekly tours that can't be done this year because, virus.
M.
Quote from: mamselle on June 28, 2020, 09:12:00 PM
I wonder if the algorithm has to do with "most recently posted in, tops the listings going out"?
I'm interested in hearing more about the account setup and so on.
Not so much in monetization, but for use in replacing weekly tours that can't be done this year because, virus.
M.
I pay for ScreenCast-O-Matic, which is one of the easiest and more intuitive softwares I've ever used. Support is excellent too, and you can connect it to your YouTube account for easy upload. I like to use YouTube for all instructional videos because it's extremely stable and plays nice with all browsers and devices.
I think I know the answer I'll get, but just to double-check, I'll ask anyway:
I have 148 months left on a 20 year, 3.375% mortgage with a monthly PITI of $1,434. I can refinance to a 10-year, ~ 2.75% mortgage which would increase the monthly PITI to $1,700. Or I can keep things as is and just pay down the principal faster than required.
If my calculations are correct, 120 months at the existing PITI total $172,080. The 28 additional monthly payments for the remainder of the current mortgage's maturity date total $40,150. Total remaining payout is $212,230 on the existing payment schedule.
The 10-year refi would be 120 months at ~ $1,700 for a total of $204,000. So a difference in total payout between the existing mortgage and the refinance is ~ $8,000.
If I keep the current mortgage, kick in an extra $3,000 per year toward the principal, it looks like I'll achieve the same effect as a refinance. Should I keep the current mortgage?
Quote from: spork on September 22, 2020, 11:46:04 AM
I think I know the answer I'll get, but just to double-check, I'll ask anyway:
I have 148 months left on a 20 year, 3.375% mortgage with a monthly PITI of $1,434. I can refinance to a 10-year, ~ 2.75% mortgage which would increase the monthly PITI to $1,700. Or I can keep things as is and just pay down the principal faster than required.
If my calculations are correct, 120 months at the existing PITI total $172,080. The 28 additional monthly payments for the remainder of the current mortgage's maturity date total $40,150. Total remaining payout is $212,230 on the existing payment schedule.
The 10-year refi would be 120 months at ~ $1,700 for a total of $204,000. So a difference in total payout between the existing mortgage and the refinance is ~ $8,000.
If I keep the current mortgage, kick in an extra $3,000 per year toward the principal, it looks like I'll achieve the same effect as a refinance. Should I keep the current mortgage?
If the choice is saving $8000 by either (1) doing the paperwork required to refinance or (2) simply adjusting my monthly payment in my bill pay account, I'll take option 2. Why? First, efficiency. Refinancing requires a ton of paperwork and adjusting bill pay, so I'll skip the refi paperwork. Second, flexibility. Option two allows me to drop back to slightly lower payment easily if I have a pressing need to reduce monthly expenses.
Disclaimer: I haven't checked your math. But doing refi paperwork to cut 28 months off mortgage doesn't seem worthwhile in today's low interest rate environment.
You can do all of the paperwork much faster than even 5-ish years ago. So, paperwork should only be a minor factor. It might be worth calculating the exact differences, including fees. If you have the means just to pay more and save money and time in the long run that way, then by all means, do so.
Watch out — the extra fee to do a Schedule C on TurboTax is high, and if you only have small royalties, they can easily be cancelled by the charge.
QuoteI have 148 months left on a 20 year, 3.375% mortgage with a monthly PITI of $1,434. I can refinance to a 10-year, ~ 2.75% mortgage which would increase the monthly PITI to $1,700. Or I can keep things as is and just pay down the principal faster than required.
..
There is something wrong somewhere.
First, we do not know how much of the payment is Principal and Interest (rather than principal, interest, taxes and insurance), so the calculations are skewed.
Second, even if we use the numbers provided, simply making the payment 1700 a month will pay the loan off in almost exactly 10 years. So why would it take 10 years at a lower rate to pay off the loan?
Math:
First step, (over)estimate the loan balance:
N 148 I 3.375/12 Pmt = -1434 FV =0 Then the payoff estimate is 173405 (which is too high as the payment includes taxes and insurance)
IF we change the payment to -1700 then the N calculates to be 120.39 MONTHS.
So how is it that you make the same payment (1700), at a lower interest rate 2.75% and pay off the note at less than one payment difference?
So, What IS the payoff of your loan TODAY?
Do you Itemize your taxes?
Can you afford the additional 264 a month?
Also, a note on a Spork math error. By subtracting the payments, you implicitly assume that there are not payments required after the 120 month mark on the 204K payment total. However, as the taxes and insurance are NOT paid off at the 120 month mark, you will still make those payments (reducing the 8000 'savings' estimated).
Anyway, I believe that there are math errors and if you want to PM me or post the correct payoff value, I/we can provide a better math answer for your consideration.
Here's my mistake (my apologies): the figures above are for principal and interest only, not PITI. So right now I pay $1,434 per month PI. Re-financing to a 10-year would raise this to ~ $1,700.
Then the numbers still dont make sense.
You owe $173405.24
(n=148 I =3.375/12 Pmt =-1434 Fv=0 solve for pv =173405
IF you change the payment to -1700 (without changing the interest rate), the loan pays off in 120.386 months
IF the interest rate drops to 2.75%, then the payment for 120 months SHOULD BE: -1654.47
The interest rate drop from 3.375 to 2.75 would save a little less than 1080 for the first year, How much would the refinance cost? IF less than $2150, then you would be saving money after 2 years or so.
The estimates I'm getting from a few different lenders are, as usual, somewhat vague, since I haven't bothered to actually apply for anything yet. In one case, point costs vary between $1,300 at 2.875% and $3,350 at 2.500%, with monthly PI payments of $1700 vs. $1670. And no one is being open about origination fees. I can afford to kick in $1,700 per month instead of the $1,434 required on the current mortgage.
Im not sure Im understanding the numbers you are getting.
Lets run this scenario and you can decide if it is a good deal or not.
IF we agree:
1. you owe173405.24
2. It would cost 3350 to to to a 2.5% loan for 10 years
Then
For no money out of pocket, (adding the cost of the refinance to the mortgage balance), then your payments SHOULD be:
N=120 I=2.5/12 Pv = (173405.24+3350)= 176755.24 Fv=0, then the payment should be 1666.27
IF you do this you would save just under 1430 in the first year. So at 3350 it would take at over 2 1/3 years to recoup the cost.
(The 1430 interest savings was found by:
.03375*173405.24 = 5852.42
- .025 * 176755= 4418.88
But as you pay off the loans the interest costs go down, so the max you save is roughly 1430. You will save less in future years as the loans are paid off)
IF you can afford a payment of 1700, then you can save the pain and aggravation of doing the paperwork and everything that goes with refinancing and the loan will pay off in just over 10 years (IF you can be disciplined enough to do this, and the bank correctly applies the payments).
IF you can refinance for no more than the costs described above AND pay 1700 a month, then in a little more than 117 payments, you will pay off the new loan.
Of course, this analysis assumes that you have paid off any higher interest debt, as that would be the better use of the money.
Some will argue that it may be better to fully fund your retirement, if not doing so, than paying off the mortgage. You will have to decide which is better.
Others will argue that you should never pay off a low rate mortgage and invest elsewhere (but that ignores the added risk, as paying off your mortgage is a risk free choice, and investing is significantly greater risk).
I'll focus on this:
Quote from: clean on September 23, 2020, 09:40:33 AM
[. . . ]
IF you can afford a payment of 1700, then you can save the pain and aggravation of doing the paperwork and everything that goes with refinancing and the loan will pay off in just over 10 years (IF you can be disciplined enough to do this, and the bank correctly applies the payments).
IF you can refinance for no more than the costs described above AND pay 1700 a month, then in a little more than 117 payments, you will pay off the new loan.
[. . . ]
To me this sounds like six of one, half dozen of another. I'm a disciplined saver and would have no problem kicking in an extra $265 per month toward the principal of the existing mortgage ($1,700 - current $1,435 PI payment) for the next 120 months or so. (In reality what I would do is do an annual additional payment on the principal of ~ $3,200). And by not refinancing, I would still be able to pay only $1,435 monthly if I needed the money for something else.
Get the Present Value of payments [w/o taxes] including interest charges in both cases. If the difference in PV is bigger than refinancing costs, it's advantageous to refinance. Otherwise, not.
The only caveat would be if the sizes of the elements in the sequence of payments mattered, but that doesn't seem to be the case here.
Forgot to mention previously that I have no other debt. I pay off my credit card balance in full each month.
I was in a similar situation though in a time of somewhat higher interest rates and decided to double the amount of principal paid each month. I had read somewhere that it was a good idea to label the extra amount clearly for the bank so that funds intended for principal would not not be mistakenly applied to the interest. It was gratifying to see the progress, but I could have held off for a while if I had needed the funds
Faculty at my university are discovering a principle that Clean has repeated for years. Do not include your summer salary in your family budget.
At my university, administrative roles like program director for the MS in basket weaving, typically receive a stipend for summer work. The role often involves tasks done throughout year, but the stipend will be for a month or so of summer work. It's paid during the summer, not spread over the year.
At a recent budget update, an alert faculty member asked what the "Summer Budget Reductions" line meant. Were we going to reduce summer class sections? No, summer enrollment generates revenue so we will pay instructors for teaching courses that make. Instead, much of the savings is attributed to a 40% reduction in funds budgeted for summer stipends for nine month faculty who have administrative roles. Which summer stipends are being cut? That hasn't been decided yet.
At Faculty Senate, several days after the budget update, every faculty member who spoke on issue commented on how this not-a-salary-cut would affect the family budget. As I listened, I was thinking, "Clean has been warning about summer pay for years." Clean, have you ever thought of writing a personal finance guide for faculty? This week, it might sell.
QuoteClean, have you ever thought of writing a personal finance guide for faculty? This week, it might sell.
Wouldnt sell.... faculty dont have money!!
Quote from: clean on October 07, 2020, 06:52:41 PM
QuoteClean, have you ever thought of writing a personal finance guide for faculty? This week, it might sell.
Wouldnt sell.... faculty dont have money!!
I can guarantee you that if such a book ever comes out, the ILL offices of every institution that buys a copy will be inundated with requests for it within a few weeks after release. I saw something much like that happen many years ago while working for ILL lending.
I think many faculty probably have decent net worths, especially as they age. The problem is that we do so with fairy boring investments, such as workplace retirement vehicles and staying in the same modest house for decades. So, probably not much extra money to invest in anything fancy and to make us worry much about tax solutions. Some of the most boring millionaires are probably academics, and not even the ones who necessarily had 6 digit incomes.
Quote from: Vkw10 on October 07, 2020, 06:47:25 PM
Faculty at my university are discovering a principle that Clean has repeated for years. Do not include your summer salary in your family budget.
At my university, administrative roles like program director for the MS in basket weaving, typically receive a stipend for summer work. The role often involves tasks done throughout year, but the stipend will be for a month or so of summer work. It's paid during the summer, not spread over the year.
At a recent budget update, an alert faculty member asked what the "Summer Budget Reductions" line meant. Were we going to reduce summer class sections? No, summer enrollment generates revenue so we will pay instructors for teaching courses that make. Instead, much of the savings is attributed to a 40% reduction in funds budgeted for summer stipends for nine month faculty who have administrative roles. Which summer stipends are being cut? That hasn't been decided yet.
At Faculty Senate, several days after the budget update, every faculty member who spoke on issue commented on how this not-a-salary-cut would affect the family budget. As I listened, I was thinking, "Clean has been warning about summer pay for years." Clean, have you ever thought of writing a personal finance guide for faculty? This week, it might sell.
Something similar happening here. A lot of people planning to pay bills with extra service payments are wondering if they are ever going to come. The uncertainty may or may not be deliberate; it is certainly freaking people out.
Similar issues face those who spent their raises. No sign of said raises, although a lawsuit is in the works.
Apparently, personal savings rates have gone up during Covid. No doubt it's partly due to stimulus money, and to the fact that it's hard to blow money on a vacation when there's nowhere to go. But I think also that many of us are spooked, and putting away everything that we can.
As, of course, Clean has been advising all along.
I vote for Clean's book, too. I've thought for many years that your input would be welcome.
You could call it something alliterative, like, "Finances for Faculty in Freefall."
Or, maybe just "Finances for Faculty"....
;--}
M.
Here we are paid for nine months, but spread over 12 months. So no summer stipend. How would this work? Put your entire summer salary aside?
Quote from: fourhats on October 16, 2020, 12:01:48 PM
Here we are paid for nine months, but spread over 12 months. So no summer stipend. How would this work? Put your entire summer salary aside?
We are too. But in the summer we are being paid in arrears for work already completed, and we are technically off duty. This has two outcomes.
1) If you leave the university at the end of a spring semester, they still owe you 1/4 of your salary, which will get paid over the following three months.
2) If you are making summer salary (from a grant or administrative attachment), then during one or more summer months you get ginormous checks that are your normal paycheck plus 1/9 of your total salary. So in the clean model, you should not be depending on that extra money to live on.
As far as the scenario Vkw10 describes, if you are paid in the summer for work you did the previous year, and they are deciding not to pay you after all for a job you are already doing, then I a) would throw a fit on that basis, rather than making the "I can't pay my bills" argument and b) would stop doing whatever (now uncompensated) work was associated with that job. They can (try to) find someone who wants to do it despite a lack of compensation, or live without it.
Quote from: onthefringe on October 16, 2020, 02:35:18 PM
Quote from: fourhats on October 16, 2020, 12:01:48 PM
Here we are paid for nine months, but spread over 12 months. So no summer stipend. How would this work? Put your entire summer salary aside?
We are too. But in the summer we are being paid in arrears for work already completed, and we are technically off duty. [snipped]
As far as the scenario Vkw10 describes, if you are paid in the summer for work you did the previous year, and they are deciding not to pay you after all for a job you are already doing, then I a) would throw a fit on that basis, rather than making the "I can't pay my bills" argument and b) would stop doing whatever (now uncompensated) work was associated with that job. They can (try to) find someone who wants to do it despite a lack of compensation, or live without it.
At my university, the first of the month is regular pay day. The nine-month faculty who opted for twelve-month pay have earned their base pay, so they get it as usual. The tenth of month is adjusted pay day for stipends, overload pay, summer school pay, and anything else that isn't base salary, so faculty with a one month summer appointment get an adjusted check on June 10.
Scuttlebutt is that some chairs and deans followed the Provost's suggestion and told faculty who have been paid stipends for part-time administrative duties to consider those duties as part of their service for the year, resulting in lots of undone or marginal work.
My dean reviewed stipends with chairs, looking for options that didn't result in uncompensated or undone work. Of the three faculty in my department who had stipends, one is getting same amount this year, one is getting half stipend and a work study student for the year, and one is getting a course release spring semester. None of us are happy that we didn't learn about the summer stipend issue before the year started, but the faculty were willing to accept alternative compensation this year. I don't expect them to agree next year.
If you think your employer might not meet payroll in the coming year, contact HR and get your paychecks over nine months. But also ask about whether shifting from twelve-month distribution to nine-months will have any effect on your employer-provided health insurance benefits.
We used to be able to choose between being on a 12 or 9 month cycle. (Insurance was not relevant as we were covered for the summer IF (and only IF) we had not said we would not be back in the Fall. (IF you tell them you wont be back, they dont pay the state's share of your insurance! - our summer insurance premiums were deducted from the last paycheck, so they didnt owe you a refund).
NOW we have switched to Workday and lots of things have changed! We now get paid over 9 months. NO option. Our insurance for the full year is deducted over the 9 months. IF you tell them you wont be back, then they Might or Might NOT pay you for the insurance you have overpaid. (I simply advise folks to resign no sooner than August 2 - the last summer start date.... I dont write the rules, I simply must play by the rules the ADMIN set up! remembering that IF you are not looking after YOU, then NO ONE IS).
TO budget for summer, you would simply take your 9 month check and deposit 25% to a savings account. That will provide you enough money to have equal pay each month of the year.
(For example: IF you get $4000 a month, you deposit 1000 into a savings account right away. That leaves you with $3000 to spend. By the start of summer you have saved $9000 or $3000 for each of the 3 summer months).
When I started doing this, the interest on the account meant something. Not too much but maybe a Big Mac Meal. Now, it is not even that! But NOW we have no choice but to be paid over 9 months.
At my first job we got paid every 2 weeks (the 1st and 15th). IF you decided to get paid over 24 checks instead of 18, your last payday had 7 direct deposits! (the last, plus the six for the summer!) It was nice to have six extra checks hit on the same day, especially IF you were teaching summer classes and would get additional checks over the summer!
Quote from: clean on October 17, 2020, 01:49:17 PM
We used to be able to choose between being on a 12 or 9 month cycle. (Insurance was not relevant as we were covered for the summer IF (and only IF) we had not said we would not be back in the Fall. (IF you tell them you wont be back, they dont pay the state's share of your insurance! - our summer insurance premiums were deducted from the last paycheck, so they didnt owe you a refund).
NOW we have switched to Workday and lots of things have changed! We now get paid over 9 months. NO option. Our insurance for the full year is deducted over the 9 months. IF you tell them you wont be back, then they Might or Might NOT pay you for the insurance you have overpaid. (I simply advise folks to resign no sooner than August 2 - the last summer start date.... I dont write the rules, I simply must play by the rules the ADMIN set up! remembering that IF you are not looking after YOU, then NO ONE IS).
TO budget for summer, you would simply take your 9 month check and deposit 25% to a savings account. That will provide you enough money to have equal pay each month of the year.
(For example: IF you get $4000 a month, you deposit 1000 into a savings account right away. That leaves you with $3000 to spend. By the start of summer you have saved $9000 or $3000 for each of the 3 summer months).
When I started doing this, the interest on the account meant something. Not too much but maybe a Big Mac Meal. Now, it is not even that! But NOW we have no choice but to be paid over 9 months.
At my first job we got paid every 2 weeks (the 1st and 15th). IF you decided to get paid over 24 checks instead of 18, your last payday had 7 direct deposits! (the last, plus the six for the summer!) It was nice to have six extra checks hit on the same day, especially IF you were teaching summer classes and would get additional checks over the summer!
In your state, do you get unemployment for those 3 summer months? Some state force their teachers to be paid over 12 months, so unemployment doesn't have to be paid (unless the state is one of those states where teachers and other types of employees with 9-month recurring contracts, by law, are not to be paid summer unemployment, in which case it doesn't matter).
I've always been surprised by people who choose to receive their salary over 12 months. It's not just the tiny interest you get from putting aside some of it on a savings account, but it also helps deal with unexpected expenses. It's much better to dip into a savings account for your summer salary than to not pay off a credit card and pay 20% interest. But then I've seen people choose a 12 month salary while carrying credit card debt, and I'd be mortified to look at what the rest of their financial planning looks like.
QuoteI've always been surprised by people who choose to receive their salary over 12 months. It's not just the tiny interest you get from putting aside some of it on a savings account, but it also helps deal with unexpected expenses. It's much better to dip into a savings account for your summer salary than to not pay off a credit card and pay 20% interest. But then I've seen people choose a 12 month salary while carrying credit card debt, and I'd be mortified to look at what the rest of their financial planning looks like.
I worked with someone that took the bigger check (over 9 months) but was unable to save for summer. Therer was ALWAYS an "unexpected expense". He found himself in the position of HAVING to teach summers (for 2 schools! ) to get by because even in summer, there were ALWAYS "unexpected expenses"
Once he bit the bullet (after his divorce, if that matters) and went to 12 months, then he was better able to budget. For some, IF they have the money they spend it! Even when it means 'eating your seed corn' IF it was there, it was gone. Better that he didnt get it, than to have spent a 12 month salary in 9 months (or less)!!
So SOME people are better off getting the money in 12.
For me, the first year I was at the old school, I took 12 because it lowered my taxes the first year (as my income was lower since I took home less that first year because the rest was paid in the next calendar year), and after that, it didnt matter.
I sent a paper check for $3,000 to my mortgage lender. I wrote "apply to principal ONLY" on both the check and and payment form that I put in the envelope. The bank applied the majority of the $3,000 toward next month's payment, even though I have automated monthly debit to my mortgage from my checking account with the same bank. I called to complain and was told that the error would be corrected by Wednesday of next week.
In other personal finance news, I correctly diagnosed the reason the washing machine was leaking water onto the basement floor. The replacement part cost less than $22, which I apparently installed successfully. And the part arrived at my door from an out-of-state warehouse via FedEx less than 24 hours after I ordered it. Local appliance repair shops were out of stock and quoted me higher prices. Hiring someone to do the job would have cost me at least $150. And the price of a new washer, which would be a front-loading model rather than the top-loading one we have now, is $1,200.
Quote from: spork on October 21, 2020, 10:23:04 AM
I sent a paper check for $3,000 to my mortgage lender. I wrote "apply to principal ONLY" on both the check and and payment form that I put in the envelope. The bank applied the majority of the $3,000 toward next month's payment, even though I have automated monthly debit to my mortgage from my checking account with the same bank. I called to complain and was told that the error would be corrected by Wednesday of next week.
In other personal finance news, I correctly diagnosed the reason the washing machine was leaking water onto the basement floor. The replacement part cost less than $22, which I apparently installed successfully. And the part arrived at my door from an out-of-state warehouse via FedEx less than 24 hours after I ordered it. Local appliance repair shops were out of stock and quoted me higher prices. Hiring someone to do the job would have cost me at least $150. And the price of a new washer, which would be a front-loading model rather than the top-loading one we have now, is $1,200.
I find it so satisfying to fix things myself (and with some help). Services are expensive! Glad you saved some money!
Just noticed this, which might apply to homeowners in the US generally, (i.e., beyond the state in which the article was published):
https://whdh.com/news/galvin-warns-mass-homeowners-of-looming-refinance-fee/
M.
Somehow I missed this perfectly general advice -- All the Personal Finance Advice You'll Ever Need, on a 3 x 6 card -- which went viral some years ago..
https://kottke.org/13/09/all-the-personal-finance-advice-youll-ever-need (https://kottke.org/13/09/all-the-personal-finance-advice-youll-ever-need)
I'm sure this has been discussed extensively in the old forums, but I'm here to ask again since the answers I'm getting online are not helping me much: should I buy or lease a car?
My car is dying and I need a reliable car (just moved to a new city, 2 kids, parenting alone, zero knowledge about mechanics, and all that). I've always bought used cards, but I'm inclined to buy a new car to have peace of mind, even with a limited budget. I have about 2,500 for a down payment, and could afford $300 of monthly payments maximum. I'm looking for a car in the $22,000-27,0000 price range. My brother in law is trying to convince me that leasing is a best option because I would not have to worry about maintenance cost, and could certainly find something in the $200-250 price range for monthly payments. He also insists that I should not make down payments, and save the money instead. I had never even considered the lease option, because I always though that it would cost more in the long run. But I agree with him that it would be nice not to have to worry AT ALL about unexpected maintenance costs for 3 years.
Can anyone help me make a decision? Pleeease?
Also, I'd be happy to know if anyone has a make/model they recommend (I've always stuck with Honda and Toyota, but have been curious about Subarus...)
Lulu, when I looked into this (granted years ago) I was firmly convinced that the arguments for leasing would not work for me. While the costs over three years may look cheaper, they frequently ignore several fees that you have to pay up front and at the end of the lease. They also ignore the fact that many companies require you to maintain pretty expensive insurance on a leased car, so your costs may go up there. And if you drive more than 10k miles a year or so, you may have to pay excess mileage fees.
But more importantly at the end of the three years you either have to buy a car, or lease another car, robbing you of the cheaper part of owning a car where it's paid off but still reliable.
But things may have changed, and I do buy new cars as opposed to the more financially savvy plan of buying a relatively newer used car that has gotten its steepest depreciation out of the way, so I think there's some room for non-financial concerns to weigh into the decision.
Quote from: lulu on July 23, 2021, 09:44:42 AM
I'm sure this has been discussed extensively in the old forums, but I'm here to ask again since the answers I'm getting online are not helping me much: should I buy or lease a car?
My car is dying and I need a reliable car (just moved to a new city, 2 kids, parenting alone, zero knowledge about mechanics, and all that). I've always bought used cards, but I'm inclined to buy a new car to have peace of mind, even with a limited budget. I have about 2,500 for a down payment, and could afford $300 of monthly payments maximum. I'm looking for a car in the $22,000-27,0000 price range. My brother in law is trying to convince me that leasing is a best option because I would not have to worry about maintenance cost, and could certainly find something in the $200-250 price range for monthly payments. He also insists that I should not make down payments, and save the money instead. I had never even considered the lease option, because I always though that it would cost more in the long run. But I agree with him that it would be nice not to have to worry AT ALL about unexpected maintenance costs for 3 years.
Can anyone help me make a decision? Pleeease?
Also, I'd be happy to know if anyone has a make/model they recommend (I've always stuck with Honda and Toyota, but have been curious about Subarus...)
The buy/lease question can be resolved based on your expected behaviour patterns. If you plan to get a new car every few years, then leasing makes some sense because you don't have to deal with the trade-in hassles. However, if you plan to get a car and use it until it drops, it never makes sense to start that relationship with a lease. During the lease period, you are paying extra for the priviledge of not owning the car.
In general, buying a new car is not the best financial decision, since the car itself depreciates by several thousand $ upon leaving the dealership. However, I do not live my life exclusively based on least-cost analysis. For me, having a reliable car is worth spending the excess dollars. My most recent vehicle came with Toyota-care, which included 2 years of no-cost servicing (including oil changes). If they are still running a similar program, I would argue that that is even more reason to purchase, not lease, since you get the same benefit of free servicing for several years.
There are some calculators to help compare lease with buy. Here is one https://www.allstate.com/tr/car-insurance/buy-or-lease-a-car-calculator.aspx (https://www.allstate.com/tr/car-insurance/buy-or-lease-a-car-calculator.aspx)
With a lease, you make payments for 3 years and at the end you have nothing, but a need to find a new ride! IF you overestimate the miles you will drive, you pay more than you need to pay, and if you underestimate the miles, then you are stuck with a HUGE payment at the end of the lease, OR as I have known people do, have no choice but to park the car for months to prevent going over the limit.
You will pay higher insurance with a lease as the lease will require more insurance coverage. You may well get charged for normal wear and tear that the dealer determines is above the norm. (So if you have small kids that may spill something, you may be paying a bundle at the end of the term).
The myth that new cars require no maintenance or that used cars will leave you stranded is just that, a myth.
The best financial decision i have ever made was to buy a 2 year old, higher mileage car (a Toyota Avalon) and religously keep up with the preventative maintenance. Change the oil every 5000 miles, rotate tires every 10, replace belts and hoses even before they break or completely wear out. I purchased it with 44000 miles and sold it 17 years later (If I remember correctly) with 265000 miles. (It needed a new water pump and timing belt, and IF I could have got the job done for up to $700 I would have fixed it, but it required 1100 and that was just too much.
My 'new car' is a 2000 Mercury Grand Marquis I bought from an estate. It had less than 50,000 miles, was garage kept and the deceased owner kept it well maintained.
I have said before, "The best place to buy a car is the obituaries". A lot of people will buy a car upon retirement or even older will buy a new car years into retirement. They do not travel much, and tend to keep things well cared for, so you may find a calendar old car that has only a year or 2 of actual mileage.
I dont even believe in the warranty that dealers will charge. Those 'all oil changes included" are far more expensive than the cost of getting an oil change, and the work that they cover is not all inclusive! (And you may be charged 'dealer labor' charges to do the work they 'say' you need done, but miraculously isnt covered).
It isnt pleasant, but take your time. Look at dealerships and check with the your friends to see if anyone knows of a car that is available. If you are worried about 'being stranded' get AAA Plus (it will tow you 100 miles! -- how often are you more than 100 miles from home?)
Do not Lease!
Buy a car. Pay it off, and then keep making a payment into your savings account earmarked for the next purchase. (Now that I am married, we pay ourselves $400 a month to build up a car fund, because my car is 21 years old!! and her car, though much newer is not the quality I would have picked... but I was not asked about this premarital purchase!)
Leasing generally isn't a good financial option unless you must have a recent model car at all times, for all the reasons cited above.
Most financially savvy people advise buying a recent model used car, because the value of car drops dramatically during the first few months. Disadvantages to buying used include lack of warranty period, state lemon laws generally don't apply, and difficulty in finding a good deal in recent years. If you can find a good low mileage used car, buying used is smart.
I buy new cars, from local dealership with good reputation for service. I budget for routine maintenance, maintain my cars carefully, and have no worries about spills or minor dings. I also drive my cars at least a decade. Financially, buying a low mileage used car may be smarter, but I enjoy that first year of a new car.
And if buying a used car, I'd recommend buying directly from the owner rather than a dealer, and not trying to snag a serious bargain (that's how you get ripped off). Figure out what your price point is, and what you want from your car, and be cool with just paying that much for whatever it is that you want when you find it. Sometimes you find a deal and that's great, but you don't want to wait for months and look at dozens and dozens of cars, or keep being beaten to the punch (in a non-rural location the real deals will get bought up really quickly--within minutes or hours of being advertised--so don't hold out for one, because it's tough to get there in time), or spend $3000 on a deal that turns out to be a lemon1.
1A few years ago we bought a car for $3000 which was a really, really good deal. A total steal. It rained hard that evening and we discovered--on the highway, going up a hill--that the electrical system shorted out in the rain. It was a really, really scary situation, actually. We got our money back, thankfully, and the lesson has been learned.
Thank you, everyone. Reading your answers validates my initial perception. I'll check the calculator dismalist posted. I also had not thought about higher insurance and hidden initial fees, so that's good information for me to have.