josh.overmyerAlternative investments Personal Finance

Soured on Precious Metals

Originally drafted July 11, 2016.

In an attempt to become a diversified investor, I began purchasing precious metals in mid-2012. Earlier, in 2011, Silver had touched $50 to match the all-time high experienced in the 1980s, and Gold had broken out to new highs above $1900. By the time I started investing, Silver had retreated 30% to around $35/ounce, and I was not looking to get into Gold near its all-time highs.

So began a series of novice investor mistakes, especially in the realm of precious metals investing. The first place I started was eBay, since it is so familiar to most of us and easy to bid on an auction or click “buy it now” and have your order on its way to your door. I began buying premium silver products and graded silver coins, both with massive premiums above the “spot” price. Spot price is basically like a stock’s price, there is a Bid and an Ask price at any given point in time. As silver continued to slide, from around $35 when I started buying, all the way down into the $13.xx range in early 2016, I chased the price down, down, down by buying more, more, more silver.

I also eventually got into the Gold game by buying expensive fractional gold rounds and coins 1/10 or ¼ of an ounce at a time. Fractional pieces come with their own premiums attached, because it is expensive to mint such small coins/rounds when calculated on a per-ounce basis. For example, it takes 1000% more time, dies, equipment to pump out 100 ounces of 1/10th ounce fractional gold pieces as it does 100 one-ounce gold coins. Due to the extra expense of the premiums and the falling gold price from 2013-2016 years, I found myself down about 25% on my gold purchases. In June 2016 I sold all of my gold coins and rounds, as I had decided to close out my investment in Gold.

But back to Silver, I have occasionally made some money in Silver, even with the falling spot price. Usually around payday, I would stop in at local antique shops, coin shops and jewelry stores to see what silver coins they had for sale. I once bought a Spanish Ocho Reale (pirates called these “Pieces of 8”) for $20 and sold it on eBay for $60.

I also paid $20 for a 20 gram silver coin from the Monnaie de Paris and sold it to a buyer in China for $64.

But for the most part, I lost money each and every time I bought silver because the spot price continued its helter-skelter decline from $50 in 2011 to less than $14 at one point in 2016. I was able to accumulate nearly 1,000 ounces of silver by making small irregular purchases over the course of about 4 years, but my silver only held about 1/2-2/3 of the value of what I had paid, even with the “dollar-cost averaging” that I thought I was employing.

Luckily for me, silver prices bounced a bit, crossing $20 in 2016 before retreating back into the $16-17 range for much of 2016. Back then, I sold off some pieces that I had bought at lower prices, and then in 2017 I sold off approximately 60% of my silver to put that money to better use in my taxable Vanguard brokerage account. I no longer blindly purchased precious metals for investment’s sake. (2021 update: I sold my remaining silver in 2020/21 and currently have 0 ounces).

So here’s my case against holding physical precious metals:

Cost of storage (bank safety deposit box, private facility storage, or a safe inside your home)

Unlike many other investments, there are no dividends

Not very liquid, especially for premium pieces. You might be able to unload at spot price or a little below, but you won’t get true market value without selling each piece individually on a site like eBay, and then you will pay listing fees and PayPal fees to the tune of around 13%

Very volatile, especially silver. Sometimes can swing in price by 3-4x the amount that is typical in the broad market index funds. This amount now seems tame, in comparison to cryptocurrencies and their wild roller-coaster price changes.

Despite all of this, I am still thankful for my journey into silver coins, bars and rounds. I was able to satisfy my “spending” urge, while buying something that actually retained some/most of its value. Instead of buying a new video game or another piece of electronics equipment that was out of date within 6 months, I bought items that have been appreciated for sometimes more than 100 years. This helped me get into the habit of saving instead of spending, although I really wish I had put this money into a Roth IRA back in those years because I would have more than doubled my money instead of taking the loss that I have experienced.

I also spent a lot of time in those years cataloging my purchases into spreadsheets as well as a YouTube channel.

If you’re extremely bored or want to see what I was so obsessed about, check out my old Jover Silver channel where I still have 20 videos posted. Look at the shiny goodness! No wonder I couldn’t resist.


josh.overmyer6 Comments on My mortgage payment jumped 106Home ownership Personal Finance

My mortgage payment jumped 10%

In the world of Personal Finance media, there is a never-ending battle between renting and owning the home that you live in. This article is not going to get into that. I followed the traditional advice and followed “The American Dream” to buy my own home just 11 months after college graduation. That’s almost been 15 years ago now, and I can look back with clear eyes and see that I would have been so much better off had I rented, maintained location flexibility, and didn’t have a bunch of upcoming expensive capital expenses on the horizon.

But that is not the reason I’m up this morning and typing into my laptop. One of the arguments commonly given as a Con to renting is that your landlord can raise your rent every year, so it’s better to own and get a fixed-rate mortgage so your payment won’t fluctuate at the whim of your bank (AKA your landlord since they own the house until you pay off the mortgage in full).

I started off with an Adjustable Rate Mortgage; it was a special loan product at my credit union for first-time home buyers. This was in 2006, and I had to put 3% down, with a 4.75% interest rate for the first 3 years. After that, it would adjust annually based on some prevailing interest rates and a bit of cushion for the credit union. After the 3rd year, we were into the Great Recession, so the rate had dropped to the contractual interest rate “floor” of 4%. I had the benefit of that 4% rate for 9+ years, since prevailing interest rates have been so low for a long time. But I always had a fear that rates would eventually rise, and when they started to do so in 2019, I looked into refinancing my mortgage so I could lock in a fixed rate for the new loan. I was able to refinance into a 15-year fixed rate mortgage at 3.125%, my payment went up a few bucks a month, but I shaved off 2+ years from the remaining 17-ish years on my original 30-year ARM. I was ecstatic to save money on interest and save time at the back end of the loan.

heap of american money cash and vintage light box
Photo by Karolina Grabowska on Pexels.com

Stepping back, a monthly mortgage payment often covers not just the Principal and Interest on the loan with the lender, but also Property Taxes and Insurance that gets collected into an escrow account to be paid when those bills come due each year. Here in Florida, I am protected from skyrocketing property taxes by both my Homestead exemption, but also a program called “Save Our Homes” which limits the amount of annual increase in assessed valuation to just 3% or the rate of inflation, whichever of the two is lower. Therefore, my annual taxes have increased very slowly the past 10 years from a low of $129.15 in 2010 to the $221.93 I paid in November 2020. Yes, those are annual tax bills – this provision kicked in for me at the bottom of the Great Recession and the timing could not have been better.

But taxes are just one part of the monthly mortgage payment that can fluctuate. The property insurance portion can vary wildly, and I have not one, but two different insurance policies on my home. Depending on your location, you could have 2 or more, as well. (I’m thinking earthquake coverage is another standalone policy).

cutout paper appliques of insurance inscription under umbrella
Photo by Gabby K on Pexels.com

A standard homeowners insurance policy does not include flood insurance, which is something I am intimately familiar with as a Certified Floodplain Manager in my day job. Insurance policies often have an automatic escalation clause written into them, so you get higher amounts of coverage each year because home prices generally rise over time. Not only that, but the cost of repairs and/or reconstruction become more expensive over time as materials and construction labor prices increase, so it isn’t all bad that these policies auto-escalate.

But because I recently refinanced, I had an appraisal that showed my building value was WAY less than the amount of coverage they were trying to sell me. Sure, I could pay for that much coverage, but there was NO WAY they would ever pay out that much insurance when the value was 40% less than that coverage cap. So I had my insurance broker work up a replacement cost estimate, and the value dropped by around $20,000. Still quite a bit above my appraisal (which I always suspected was low to begin with), but at least I could drop the coverage amount and save on some of my premium.

A month or so after that, my flood insurance renewal paperwork came in. Fortunately, with flood insurance, you as the consumer get to choose the amount of coverage for building (up to $250,000) and the amount of contents coverage (up to $100,000). I kept my coverage amounts in place from last year, but the National Flood Insurance Program also increases flood insurance premium rates each year to both keep things in line with rising construction costs. They also increase to make up for the subsidized rates that have been in place for older home such as mine that were built before the first Flood Insurance Rate Map was established in the community. For example, my home was built in 1981, but my county did not join the NFIP until 1984, therefore my home wasn’t built to a required flood elevation standard that had not been established yet. Because of this, my home has qualified for subsidized flood insurance for being Pre-FIRM (pre Flood Insurance Rate Map) and as long as I keep the coverage in place, I get to keep the subsidized rate.

But the cumulative increase from the minor increase in property taxes, the big jump in homeowners insurance and a smaller increase in flood insurance premium has caused my escrow account to run a shortfall. Basically my 2020 mortgage payments collected a smaller amount into escrow than they had to pay out in payments, so they are increasing my mortgage payments in 2021 to catch up. But they are jumping a fairly large amount (9.7%) to both make up for last year’s shortfall and also to cover the higher expected payments for taxes and insurance in 2021.

9.7% is a pretty big jump for a mortgage payment that is assumed to be fixed. I am in a fortunate position to be able to weather that kind of a jump without running into any kind of financial hardship. I doubt my rent would have jumped almost 10% in a year like 2020 where most landlords are just happy to keep paying tenants.

Have any other homeowners experienced big jumps in their monthly mortgage payments? Should I pay this place off so I’m not required to carry so much insurance? Should I sell and enjoy being a renter for a few years?

josh.overmyer2 Comments on Lifetime Wealth RatioFinancial Independence Personal Finance
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Lifetime Wealth Ratio

Have you ever wondered how much you have made (from W-2 income) in your life? If you started as a teenager like me, it can be hard to remember allllllll the way back to the stone ages (1990s – before the iPhone was invented and every teenager dreamed of crafting the perfect AIM away message)…

One clever hack is to enroll in the Social Security Administration website at ssa.org/myaccount to take a look at your taxable income history. This comes in two flavors: Taxed Social Security Earnings and Taxed Medicare Earnings. Some of you might wonder: Aren’t those the same amounts?! And you’d be mostly right, most of the time. But as my buddy J.D. Roth points out, Social Security earnings are capped and Medicare earnings are not. Also, I’ve worked in some “temporary” positions in local and state government that did not participate in Social Security, so I have whole years of income with $0 in the column for Social Security Earnings.

So once you have your total taxed Medicare Earnings, what do you do with that info? Well for J-Money and others, you calculate your Lifetime Wealth Ratio! The LWR is a simple fraction: current net worth on the top, and lifetime Taxed Medicare Earnings on the bottom.

If you’re early in your career, the LWR number is probably small, like 1/10th or 1/5th of your lifetime earnings being the dollars that you’ve kept and added to your own personal bottom line. It might even be negative for a while if you are carrying student loan debt or consumer debt from cars to credit cards. But the important thing to realize is this is just a starting point!

As your career takes off, and you pay off debt and accumulate wealth, your LWR might pass the 50% mark. At this point, you have half of every dollar you’ve earned to show for your years and years of effort in the workplace.

Admittedly, the Lifetime Wealth Ratio is a pretty useless metric, in terms of actually providing a rigid comparison tool. But since you should only be comparing yourself to Past-You, it’s a great measuring stick to see how far you’ve come!

Downsides: The Net Worth number you use is in the Numerator is comprised of all the money choices you have made over your lifetime, not just a reflection of your day job income. This includes investment accounts (which hopefully grow over time), loan balances, house equity (if you’re someone who includes the house, since not everyone does), and the cash you’ve saved from your lifetime of paychecks. If you had great luck with a house appreciating or a stock shooting to the moon, you have a LWR that could be considered artificially high, but that’s your number and you own that Net Worth, regardless of how it was earned.

So have you calculated your LWR? As of January 2019, mine was 44.9%, up from about 25% when I first heard of this metric in 2015 from J-Money’s blog BudgetsAreSexy. My income increased 3 times in those 4 years, but my net worth has increased at a faster clip since I started maxing out my 457 and Traditional IRA, seeing some increase in my home value (after the huuuuge drop from 2007-2010), and generally getting better with my money. Isn’t that what it’s all about, anyway?

UPDATE: As of the end of 2020, my LWR is up to 57.84%. This nearly-13% jump in 2 years was because my net worth increased more in 2019-2020 than I earned in my W-2 job. For example, my 2020 net worth increase was 41.7% MORE than my earned income in 2020! Part of that was a recovery in housing prices (remember, I bought at the peak in 2006 and spent 12.5 years underwater on my mortgage), and of course a lot was the bonkers stock market in 2019-2020.

We all work too hard to earn those paychecks… shouldn’t you have something left at the end of the month or year to show for yourself?

josh.overmyer4 Comments on ChangeFinancial Independence

Change

It’s the beginning of a new year, which always seems to be people’s favorite time to start some new habits or make other (big or little) changes in their lives.

We’re installing a new Presidential administration later this month (despite what the incumbent and his cult would have us believe).

Gyms (if allowed to be open by local regulations) are most likely packed for the next few weeks.

The Covid-19 vaccines are being deployed across the US and around the world, albeit not as fast as we all had hoped.

Travel and tourism, considered dead for the past 10 months, are beginning to pick back up, hopefully staving off further job cuts in the airline and hospitality industries.

Around here, I’ve been contemplating a few changes myself. In the financial independence blogosphere, the growth of the CoastFI and SlowFI cohorts have shown us that it’s possible to build a life you love while on the path to full financial independence. And in that vein, I signed up for a course on becoming a Virtual Assistant (<– affiliate link) to monetize some of the things I already do, or build a small side-business that I might grow into something more robust if/when I pull the plug on my full-time employment.

I’ve already had a couple offers from seriously BIG NAME bloggers in the space, but I am having a terrible time establishing a brand new identity as a newbie VA versus a statewide expert in my career field. In my day job, I have presented at state and national conferences, and I’m the Chair of my statewide professional organization, but now I’m this a completely novice VA, especially when it comes to setting my prices. I may not be new at sharing content, moderating Facebook groups, running the behind-the-scenes of a webinar, scheduling tweets, or many other tasks that Virtual Assistant performs, but I’m brand spanking new at putting a price on my time and efforts.

I sat down last month to do some goal-setting for 2021, and I came up with 15 measurable goals in 7 different categories including learning, business, friends/family, travel, health and financial goals for the year. Some of those were small enough that I got the boost of being able to check them off quickly. But some of them will take consistent effort all year, and I’ll only be able to look back in December to see if I’ve done what I wanted to do.

Towards these goals, I’ve already upped my water consumption, I plan to keep my alcohol consumption at 0 for the year, and I’ve walked more than I did in 2020. I bought the Pro version of Duolingo for my language learning goals, bought a Brita pitcher to help me drink more water and use fewer bottles of water, and submitted my time off to attend CampFI this upcoming weekend.

But this is where I feel like a failure. All of those are just nibbling at the edges of the big changes I want and need to make in my life.

I listen to the podcasts and have read the books on goal setting and habit formation. The biggest change I want to make is a one-fell-swoop type of change, not a habit I need to develop or a goal I can break up into little chunks.

How do you get comfortable making 1 big change that will affect EVERYTHING in your daily life, your financial future, and the way you operate in the world?

What about changing your earning AND living arrangements at the same time?

And not just dropping a job and leaving a house you’ve had for almost 15 years, but what about leaving the area entirely, as many of my friends have told me I need to do if I’m ever going to find a partner in life?

These are ginormous changes that would impact the rest of my life, my finances, my relationships, and everything in between. And I stand here on the verge of my 40s (less than 2 years away), feeling like it’s now or never.

I can’t decide what to do in this situation. Do I stay where everything is comfortable, even though clearly it is not? Do I forge a new path in life, even if it means giving up a whole identity I’ve built for myself over a career in public service? Or do I just hit the pause button and take a sabbatical or gap year to try to figure it out?

josh.overmyer9 Comments on 2020 Goals recapblogging Retirement accounts
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2020 Goals recap

Recapping 2020 Goals (which, TBH was a very hard year to meet any goals).

Here is what I wrote in my final post of 2019:

Looking ahead to 2020, I already have 2 trips planned for January, 1 in March, and hope to take many more. I’ll attend CampFI Southeast Week 2 in Gainesville again, and the following weekend is a trip to Little Rock and Nashville over the MLK Weekend. March will welcome the EconoMe Conference in Cincinnati, and I hope to see many of you there! Those three trips combined will take only 1 vacation day, so I’ll finally be building up a little bulk of time off from work.

I have already submitted paperwork to HR to increase my 457(b) contributions to meet the 2020 maximum of $19,500. This year it’s a nice round $750 per pay period (26) versus $730.76 and leaving 24 cents worth of contribution room! LAME! That TWENTY-FOUR CENTS could become a couple whole dollars by conventional retirement age! 😊

My 2020 $6,000 Roth IRA contribution is sitting in my Vanguard Money Market Account, ready to be deployed early in 2020 for the maximum “time in the market” to work its magic.

I’ll complete another minimum spending requirement on my current Chase business card just after the first of the year, so that means another 50,000 + 4,500 for the points earned on spending $3,000 in the first 3 months, will be posting to my account for future travel planning.

And one goal I didn’t even know I had for 2019 was to give more generously than I had in the past when I held more of a scarcity mindset. I am going into 2020 with the intention of giving more away than I did in 2019.

Travel

I’m glad I front-loaded my year with so much travel, because as we all know, that pretty much stopped by the middle of March. Not mentioned in the list above was the unofficial SkiFinCon trip to South Lake Tahoe, which I tacked on a night in Vegas and a night in Reno beforehand, and two nights in the Dallas/Fort Worth area on my way home to Florida.

I also made two road-trips to visit my parents in Indiana. Dad had spinal fusion surgery in July, and we thought it would be a good idea for me to be there for his first few days of recovery. But as it turned out, he was up and walking 5 miles before breakfast 2 days post-op. I also made a second trip at Thanksgiving, since I didn’t think I would want to make that kind of drive in December (and it’s snowing 12+ inches up North as I type this). Good call, Josh!

Retirement accounts

With my paycheck that arrives this week, I will officially max out my 457(b) plan for the very first time. Last year I was close, but those darn 24 cents kept me from getting the full $19,000 in there. I also made sure to contribute my $6,000 in Roth IRA contributions in early January, which happened to backfire this year since I put that full amount into a REIT index fund which lost a huge chunk of value when Covid-19 wrecked commercial real estate values and rents. No worries, I figured other index funds would recover more quickly, so I transferred the $5,237 that remained into the Vanguard Total International Index fund and I’m at $5,997 (plus September dividends that were reinvested into 1.172 shares now worth $37.67) with those dollars. Hooray, slightly above where I started in January with my 2020 Roth dollars – $6,034!

Credit Cards

I did indeed finish up my minimum spending on the Chase business card, and I got a couple referrals to friends on Twitter. And then Chase closed all of my personal and business credit cards. I transferred out some of my points (to Hyatt and Southwest) then cashed out over $3,000 in Ultimate Rewards to pad my Emergency Fund as the pandemic was beginning. I also called and recovered the annual fees from 3 of the cards, netting an additional $694 to help buffer against potential loss of income.

Income

The only loss of income I actually saw this year was the elimination of overtime, which we had previously been permitted to work as much as we wanted. Our workload didn’t actually drop any – we’re still setting new permit records – we’re just expected to do more work for less money. This is a primary reason I have been considering leaving my job sometime in 2021.

I was eligible for the full $1,200 stimulus payment back in April/May timeframe, but since I was suddenly flush with cash, I didn’t need that money. I quickly donated $300 to the ChooseFI International Foundation, a registered 501(c)3 that was ramping up efforts to help parents suddenly forced into accidental homeschoolers. The CARES Act allows a $300 Above-the-line charitable deduction on your 2020 taxes, so please consider giving this season before the calendar runs out.

I wound up donating nearly as much in 2020 as I did in 2019, and that was with the big reduction in overtime pay. By late November, my performance review raise kicked in, so I should end the year slightly under last year’s total income, although a 27th paycheck arrives on December 31st that would otherwise be paid on January 1, but the banks are closed for New Years, so the artificial total will be slightly higher because of 2 extra pay-weeks.

josh.overmyer10 Comments on I am not ok, and that’s okUncategorized

I am not ok, and that’s ok

Like most people, 2020 has hit me like a ton of bricks. I started out with plans to travel more than I ever had in any year before, and I even had 13 flight segments under my belt by March 8th. And then…

Well we all know what came next. Scrambling, struggling to find ways to make things continue to work, drop all plans for the year and come up with something … different.

Obviously everything that could be moved online went online. This made available the opportunity to attend Camp Mustache, normally held over Memorial Day weekend outside Seattle, and hear speakers like Vicki Robin, Doc G, and Lynn Frair. But then 2020 did what 2020 does, and Mr. Money Mustache couldn’t show up, with very little notice. Odd, but so is this year.

Around the same time, I was handed a laptop and allowed to work from home 3-4 days per week. Which is still funny to me, because I was finally allowed to work from home around the same time we re-opened our shuttered lobby to the public. And in January I had asked about the possibility of working from home even 1 day per week (I live approximately an hour away from the office) and all I heard back was “we’ll have to talk about that”.

Backtracking a little bit, Chase “unfriended me” as a customer in March, which is still perhaps the most bizarre thing to happen to me in 2020. Gone were all of my future travels that I’d hoped to use the lucrative Ultimate Rewards points to pay for nights and flights. I had just 30 days to redeem or transfer all 480K+ points, just as travel was shutting down for the long haul.

I started playing a free game on my phone, but as with all of these games, they aren’t much fun as a F2P (free to play), so I made in-game purchases here and there. To the tune of a couple thousand dollars at this point, and I’m one of the top 25 players on the server where I play. Freaking expensive, still dumb, and yet I’m addicted.

I’ve recently tried turning my addictive tendencies into something more fruitful. I’m using the Duolingo app to try and learn French. At this point, it’s only been 6 days, but I am really starting to get the hang of it. All 686 words I’ve learned thus far, anyway.

Speaking of addiction, I set out this year attempting my first Dry January. I had never set out to start the year so intentionally, except in 2019 with my step challenge with Miss Mazuma, et al. Shockingly, I was able to keep up the no-drinking thing until May 4th. I was also dry in July, but have not kept it up in subsequent months.

I live alone, and pretty much always have since I bought my place in 2006. I had a couple temporary roommates (summer interns at my government office jobs), but I knew where they worked and that they’d be gone as soon as the summer was over. This just means I have a lot of practice at being alone, not that I’m any better at it than the rest of us.

Living alone and “feeling” alone are two totally different things. Most of the time I’m the former, but sometimes lately I’m definitely the latter. Whenever people ask, I sputter out the old trope “I’m good” without thinking or intent to deceive. But it’s really hard to be alone most of the time, even as an introvert who generally prefers that.

Comparison is the thief of joy. It’s such a ridiculous way to hurt ourselves. I could go on and on about how couples or families at least have the company of each other during this time, but I’ve seen enough of the complaints about not having any personal time or personal space to know that’s a stupid comparison to make.

My thoughts are clearly scattered, and I don’t even know if I’ll publish this. But it’s what has been going through my mind since approximately April 10th, and I don’t feel like I’m making any progress anywhere, except now my French lessons, several dozen lessons along.

I’m very fortunate to have my safe, steady government job. The one I want to quit about 5 times per day (I say half-jokingly). The workflow has not only stayed high, it has increased since the beginning of the year, setting a new record high in February and again in August. And there are so many changes and challenges coming, the ones that result in more than a thousand phone calls from the general public that take 5+ minutes each time for me to talk through all of the changes, what they mean, and the implications.

And the new pattern is also wrecking havoc on me and my house. It took me 5+ months to actually go buy an office chair, since I wasn’t sure how long my remote work arrangement would last. I finally bought the chair after they sent me home with a new laptop, docking station and an extra monitor. But that has caused a lot of my costs to go up, including electricity bills. And my air conditioner is running 24/7 now, instead of getting a break during weekday work days. So of course it has crapped out on me, not once or twice, but more than 5 times. I’ve had service calls in April, June, August, and so far 4 repair calls in October alone. The system was fully replaced in 2016, so these components are just 4 years old. But even though they are under their original 10-year parts warranty, I’m on the hook for the labor costs. And that means I’ve spent more this year on my A/C and electric bill than I have on my car, travel, and that stupid phone game mentioned above, COMBINED. I just keep reminding myself this is why I have an emergency fund, save a considerable amount of my income, and how nice it feels to walk into a cool house during the hot Florida summer (March-November) haha.

Cases are picking up again, just as expected in the Spring. The holidays are fast approaching, and it is becoming more and more necessary to set your own boundaries because so many other people have given up on theirs.

And I haven’t even mentioned the racial reckoning and recession until now. Headlines in 2020 have been scary AF.

But we will get through this. And it’s ok to not feel ok sometimes.

josh.overmyer3 Comments on Purple LessonsFinancial Independence Uncategorized
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Purple Lessons

As you may know, I’m part of a group of nerds who writes about money on the internet. We find joy in helping others avoid some of our missteps, find better bank accounts and credit cards, and some of us aspire to retire early. One of my favorite money nerds is doing just that! On October 1, 2020, my friend “Purple” from APurpleLife.com is retiring at the ripe old age of THIRTY!

Today, on her final day as a working stiff, a bunch of us are writing to celebrate Purple. We’re doing this all over our blogs and social media accounts, because Purple has been an incredible addition to our community, and even won a Plutus Award for the Best Personal Finance Article in 2019!

Here’s the links to other posts from the group celebrating Purple’s achievement today:

Jess from Financial Mechanic wrote this post about Purple’s journey and is linking to the other posts about Purple from our group: https://financialmechanic.com/this-woman-just-quit-her-job-at-age-30-after-saving-500000

Angela dedicated one of her Women’s Personal Finance Wednesday posts to Purple yesterday

Women’s Personal Finance Wednesdays Spotlight: A Purple Life
Dillon from Dollar Revolution made this GIF

Darcy from We Want Guac wrote this A Purple Life blog review:

Blog Review: A Purple Life

Ms. Mod from Modest Millionaires wrote this post congratulating Purple for retiring at 30:

Congrats Purple who reached FIRE at 30!

Rich & Regular sat down with Purple and Momma Purple in this wonderful piece called “Conversations with A Purple Life”

Conversations with A Purple Life | Retiring at 30

Jessica from The Fioneers made her Purple tribute on Instagram:

View this post on Instagram

Want to know what today is? Today is the day that my girl, @apurplelife, retires early! ⠀ ⠀ Instead of just saying congratulations, I want to tell you all about how Purple has had an incredible impact on my life.⠀ ⠀ 1. Right when I was new to blogging, I was going through my severe anxiety episode, and I was struggling with the idea of going back to work. I had previously fully thrown myself into my work and neglected my own self-care and my needs. When I read a post by Purple about how the pursuit of FI has changed how she acted at work, a lightbulb went off in my head. I never saw work the same way again. I began to realize that financial freedom provided me with the ability to set boundaries, to say no, and to pursue what I actually wanted. ⠀ ⠀ 2. Yes, Purple is retiring at the age of 30, so you might think that is the antithesis of #SlowFI. However, it is NOT IMPOSSIBLE to design a life you love and still retire at 30 (as long as you have a high enough income to start). I've been continually impressed by Purple's approach to her work and her life. She specifically pursued a role that provided location flexibility, so that she could work from home 100% of the time. If she didn't enjoy what she was doing, she'd talk to her manager about it and get no new projects. She also didn't see work as the be-all-end-all. She's always prioritized having a fun and joyful life outside of work. Now she'll get to do those things with more of her time. ⠀ ⠀ 3. While I am a big proponent of Slow FI, the thing I care most about is that people are choosing their own life script. There are people who are pursuing the default path (work 40 years and maybe retire someday) and then flip to pursuing the default FIRE path without too much constructive thought about whether that's actually what they wanted. Purple does NOT fall into this camp. Purple has been incredibly reflective of her life and her pursuit of FIRE (including the retire early) was because she specifically wanted that for her life based on the unique things that she enjoys and wants to do. ⠀ ⠀ All this to say, CONGRATULATIONS Purple! I can't wait to see what the next few years bring! #apurplelife

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My post will be to share some of my favorite money and life lessons learned from Purple, complete with links to her blog articles so you can take a look at them, too.

Things won’t magically get better just because you land your dream job

Purple described searching for her perfect job, then landing it. But she came to the realization that:

“The perfect job equates in my mind to finding the most well decorated prison cell. It’s still a prison.”

It doesn’t matter if you get paid well, or you get to work from home, or have nice coworkers, or whatever. Your employer still lays claim to at least 40 hours of your time each week, plus the time it takes to get ready in the morning, commute to the workplace, your return commute home, and even some of your so-called “free time” as you think about work issues in the evening, as you lie awake restless at night, or on the weekends. Some even expect you to check your work emails during vacations, when you’re literally being paid NOT to work. It’s gotten ridiculous, friends.

Even those of us who are “lucky enough” to work from home, are now shouldering new burdens. My electric bill is higher, since I’m using my own air conditioning 24/7 plus paying for extra electricity for my work computer to run all day. If I didn’t already have it, I would need high-speed internet. I’m using my own bathroom all the time, which means more water use and using my own toilet paper instead of the scratchy stuff at my workplace.

My dream job a few years ago allowed me to work from home, have a company-issued vehicle, traveled frequently (both day-trips and overnights) and I got to explore new places in Florida that I’d never even heard of. I worked as part of a very cohesive team, and we implemented not one but two innovative new programs that were recognized throughout the country as effective new strategies to deliver services to our constituents. But it still wasn’t enough, because some micromanagement and some broken promises from management led our whole team to break apart and we all found new jobs that would compensate us for the knowledge and experience we brought to the table.

Jobs are Just Never-Ending Group Projects

For most of us high-achieving students, nothing struck a nerve quite like hearing the teacher/professor exclaim that this assignment will be a group project. You know the drill – small groups are formed, a project topic is provided, and then 1 or 2 kids are left shouldering the load for the whole group. Sometimes it’s laziness, sometimes it’s a lack of knowledge or skill, and sometimes there’s a perfectionist in the group that won’t let anyone else contribute. For all these reasons and more, Group Projects are The Worst!

Purple correctly points out that our grown-up jobs often require teamwork, which often looks just like those group projects of our school years.

“It’s the fact that the work I do involves teams – it’s all a group project. Instead of getting clear instructions and a set timeline like we did in school and setting off to complete the task on your own, we must coordinate between people, rely on them, bother them/remind them of their jobs and basically do what I had to do during group projects in school.”

I’m more of the “I trust myself to do my job and do it well” kind of employee, whereas plenty of other people on my “teams” have been the type to spend half the day standing around talking with other coworkers, taking 9 bathroom (or smoke) breaks a day, and just generally not getting their work done in the prescribed timeframes and hours expected. I would be quite happy to be a team of 1, reliant upon nobody else to get the work accomplished, and then all of the credit would be mine to claim, as well.

Knowing WHY she wants to retire

Purple’s answer is a lot more realistic than mine. She says:

“I want to see what I can get up to when my life is not a cycle of drain and recovery.”

For me, it’s to stop having anyone else lay a claim to my time and efforts. In a way, that’s similar to what Purple said, but I also want to be more clear about what I plan to do: I moved to Southwest Florida to live my dream retirement life now. I want to go to the beach, play golf year-round, and never worry about another blizzard again. In my retirement, I may wind up as a “snowbird” chasing an endless summer, but that will allow me to avoid Florida’s biggest drawback: Hurricanes.

I may find out that endless relaxation and leisure activities is not how I want to spend the rest of my life. And I may find that I come up with new ways to make money in my “retired” years, so I have no trouble saying that I won’t be done working for the rest of my life when I finally retire. But as I’ve heard from Tanja Hester, author of the Our Next Life blog and the book Work Optional, Financial Independence/Retire Early is how wimps strive for entrepreneurship. We build the nest egg we’ll need for the rest of our lives, and then it’s ok if some self-employment scheme or idea doesn’t pan out – because your retirement is still secure within your retirement and savings accounts.

Knowing your Why is so important on the journey to Financial Independence, and Purple has a great Why.

She lives the #SlugLife

Purple is obviously incredibly productive in her work hours (and extended hours since she writes a wildly-popular FIRE blog), but she also recognizes something very important.

“Busy does not equal productive…and productivity might be overrated.”

In this article, Purple claims she is an unproductivity advocate, because we all have different ways in which we recharge our bodies and minds.

In today’s face-paced society, life can feel like we’re constantly rushing to do something or go somewhere. There’s a reason McDonald’s now has double drive-thrus everywhere, we all want our stuff faster! Nevermind the fact that there’s still 1 payment window and they usually only serve from 1 serving window – having twice as many ordering boards makes us think it’s going faster!

But forget fast food, people are often rushing their kids around to different activities. They’re trying to rush up the corporate ladder, vying for promotions and raises, or job-hopping to take a marginal step up on a different ladder. Purple flips that on its head – do good work, but take time to relax, recharge, and enjoy the time that is yours.

Controls her spending

Living in a city that most of us would consider expensive, Purple has lived in Seattle the past several years spending less than $18,000 per year. Spending so little certainly allows her to save and invest more, and it also requires a lot less for her to need to cover in her many decades of retirement. She doesn’t have a car, which is an $8-10,000 expense every year for most Americans. She splits her apartment rent with her partner, immediately cutting in half one of the largest expenses most people have every month. She travel hacks some amazing international trips, meaning that the airfare and accommodations are covered by credit card points/miles instead of paying the full cash price.

I’m a homeowner in a very suburban area, so I have to have a car to get around and I currently live alone so my guest room is available for friends and family to come stay with me on vacations. Doing those two things keep my annual spending artificially high, since I have to pay all mortgage payments and utility bills on my own, and I have to keep my car in good working order, insured, and filled up with gas to complete my nearly 2-hour round-trip daily commute. I do my fair share of travel hacking too, but I still spend quite a bit parking said car at the airport, or paying for nicer hotel accommodations when an Airbnb would probably work out just as well. In 2019, I spent $20,016 combined on housing, utilities, car, and travel, while Purple spent $17,896 on her WHOLE LIFE in 2019, living in Seattle. I could definitely learn some things from the cost-conscious Purple.

She’s an incredible friend

But more than being a job-hating, early-retirement-obsessed, #Sluglife, penny-pinching miser (which she is NONE OF THOSE THINGS), she’s an awesome friend. I had the pleasure of hanging out with her in Washington DC and in Seattle in 2019, and she’s such an excitable, hilarious, and yes colorful young woman, set on living her best life after her required working life is out of the picture.

I’m so proud of you, Purple. You did it!

And now she starts her best chapter. I can’t wait to follow along.

Me, with Angela (Tread Lightly, Retire Early) and Purple (shown here as a purple Unicorn)
Me, with Angela (Tread Lightly, Retire Early) and Purple (shown here as a purple Unicorn)
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Superfan

It was 22 years ago, during the annual high school basketball County Tourney. I was a freshman in high school, trying to sit with the cool kids in the student section, with one eye on the basketball games and one eye on the cheerleaders. Back in middle school, I’d been on the basketball teams in 6th and 7th grades. But I didn’t get a lot of playing time, and my seat back in those days was at the far end of the bench. Partially obscured by the cheerleaders.

It was in middle school that I learned all the cheers. I can’t spell the word “aggressive” to this day without chanting “Be Aggressive, B-E Aggressive” to myself inside my own head. And I’d always had school spirit and a booming voice, so during that high school tournament, I was there all 4 nights, cheering on our girls and boys basketball teams, myself being louder than some of the other teams’ whole cheering sections.

At the conclusion of the tournament, the cheerleading coaches came up to me. Our school was a small farm school, so we definitely didn’t have a co-ed squad. I was perplexed, wondering why they wanted to talk to little ol’ freshman Josh. They would congratulate me on my enthusiasm and unbridled school spirit. They wanted me to be a part of the squad – as the school mascot!

My sister and I posing for a picture during my Junior year of high school, the year our team played in the State Championship

I wound up accepting their offer and was the school mascot for basketball games during my Freshman, Sophomore and Junior seasons. The boys team would go on to play in the State Championship game during my Junior year, which meant I got to be on the floor of Conseco Fieldhouse, where the Indiana Pacers play! This, despite me being the tallest kid in the school. Our MASCOT was the same height as our starting Center! 😊

And so began a lifetime of being a superfan. Please don’t get me wrong, I do not put this out there to make anyone think I’m a “fanatic” about things. I try to be supportive, cheerful, and encouraging. I become known for being the guy who is always there to support my team, my friends.

I’ve written quite a bit about being a fan of the work from others in the personal finance and Financial Independence community. I’ve listened to every episode of ChooseFI, Afford Anything, Bigger Pockets Money, Fire Drill, The FI Show, and many other podcasts. And since these shows are hosted by some people I consider my friends, and they often interview other people that are my friends, I continue to listen to every one, each week.

I was a huge superfan of the Playing With FIRE documentary, traveling to screenings in San Diego, Atlanta, Tampa, Richmond Virginia, and caught another one during FinCon in Washington DC. I was a Kickstarter backer, listened to the audiobook, and read the accompanying paperback that Scott Rieckens signed for me at the San Diego premiere. I had a chance to talk with Scott and his wife Taylor after the showing in San Diego, at an after-party in Atlanta, saw Scott again in Richmond, and talked with them both at FinCon. I joined the FI community after the bulk of the film was recorded, but I like to think I am a part of the film since so many of my friends are shown in it!

And I have become a superfan for courses and conferences that my friends are involved with hosting. Even though I don’t need some of the introductory courses in investing and personal finance at this stage in my life, I am so incredibly happy to support my friends by buying a seat or a coaching slot and allowing them to give those to a stranger. They win, another person wins, and I get to have a huge smile on my face knowing I made a difference. I’ll never attend some of these conferences for women or minorities, but someone will get to go because I’ve supported the amazing friends who make these possible.

I did get to take advantage of being the superfan for FinCon 2019 in Washington DC. I’d signed up to volunteer for four 2-hour slots during FinCon in Orlando, but wound up working 8 of them. When FinCon organizers reached out about speakers, I thought maybe there was another way I could get involved, more along the lines of being Volunteer Coordinator, and that was exactly what they’d had in mind for me. This gave me an opportunity to get my ticket price refunded, have my lodging covered, and get paid for my time during the conference. And that, in turn, allowed me to give back even further – supporting the Plutus Foundation by sponsoring an award category, and being a VIP donor for the ChooseFI International Foundation kickoff event.

Earlier this year, I attended CampFI SE Week 2, near Gainesville Florida in January. I’d attended the same weekend last year, and knew a couple people already from attending FinCon in Orlando (Brad Barrett, Jillian Johnsrud, Nick True, and had briefly met Chad Carson). This time around, I knew almost half of the attendees, and even more of them knew me (or knew OF ME) which seems ridiculous to say out loud. 9 of us returned from CampFI SE Week 2 2019, 3 others came from the 30 attendees at Adventures to FI Retreat in Montana, plus friends from FinCon, personal finance Twitter, and local meetups in Florida. Being a superfan and supporting this community had made me a known commodity in the FI world. And I could not be more excited to continue to be a part of it.

josh.overmyerblogging Financial Independence Personal Finance

FinCon is like a college reunion

Growing up, I had a lot of good friends, but never really any close friends. I attended multiple proms as a friend ask, not because I was ever actually dating my prom date. This continued in college, where even in my degree program where we took over half of our courses with the same 20-25 students the last 3 years, I was friendly with everyone but never matched up with any of the cliques. There were 3 of us who were studious and fun, but we called ourselves “the misfits” and we usually teamed up for group projects. I even roomed with the two of them during a week-long conference in San Francisco during our senior year, despite me being the only guy among the 3 of us.

So I don’t have the same fond memories of hanging with my buddies in college, or getting together years later to reminisce about the good times we had together. I’ve been back to campus several times and I have attended some of their sporting events both on campus and down here in Florida. But those have always been by myself or with my parents if they wanted to sit and watch a football game from the cold bleachers in Indiana.

But I do get that college reunion type of feeling when I visit the annual FinCon conference. While 2019 was only my second year attending, even my first one in Orlando in 2018 felt like I was hanging out with old friends, although I was meeting them all for the first time! We had inside jokes, we bought/brought each other gifts, and we protected each other from weirdos and scumbags. We watched each others luggage, shared rides to/from venues and even invited each other to celebrate a birthday with 20+ other attendees.

My best friends attend FinCon, and CampFI, EconoMe Conference, and Camp Mustache, and the ladies also have Statement Event, Cents Positive and Lola Retreat. People I’ve interacted with for nearly a decade, like J-Money, recognized me in 2018 and were genuinely happy to meet me and chat for a bit. Tanja gave me a tackle-hug when I waved hello, and JD asked me to write a guest post on driving rideshare within 30 seconds of meeting me.

In 2019, I stepped up my involvement in the conference as I took the role of Volunteer Coordinator. This led to a whole new batch of people on the lookout for me, as the volunteers reported for duty. It also meant that I was out and about throughout much of the conference wearing my Staff t-shirt and looking all official 😊 But it also helped that I’m tall (6’5”) and know so many people, I always had people coming up to me to see if I knew where so-and-so was, or if I’d seen them lately. Usually I was able to either point out where I had *just* seen them or I’d make a quick pass through FinCon Central and find them for the requesting friend.

I also made sure I always tried to make introductions of my friends from Twitter with my other friends from Twitter. I was sad to hear that there were so many missed connections during FinCon18. This time, I vowed to try and make sure if there was someone who’d hoped to meet someone I know, I would keep an eye out for both of them at the same time.

I’m so fortunate to be a part of this collection of friends who roll 2,500 deep into our nation’s capital for a week to hang out and nerd out about money. As I mentioned, my very best friends show up at FinCon – the ones I text or DM with daily, the ones who I’ve shared deeply personal stories with, the ones I’ve visited in different parts of the country, and the ones who take time to talk with me no matter how famous they are in this community and beyond. I swim with their kiddo (Hi HP, Uncle Josh wants you to keep working on blowing bubbles) or chat about swim team with the kid’s proud dad!

I shed tears talking about refocusing and plans moving forward. I cried myself to sleep knowing that I never feel so much love from so many people all at once, something I am definitely missing in my daily life. I smiled and laughed as stories were shared, friendships were grown, and new connections were made.

Best tips were shared on travel hacking, real estate, and tax optimization. Sites were seen, drinks were drank, and fried chicken was eaten – well almost, because Popeye’s hours of operation were listed wrong on Google Maps! I immediately made the edit on my phone to avoid future disasters 😊

Tanja’s Big Idea Talk was about authenticity and being honest with your audience. I hope anyone who met me felt like I was exactly what they expected, even if Champ thinks I’m maybe a more amped up version of myself at FinCon than I am in real life – and she’s not wrong!

Amped up for Donut Wall

Friends I got to meet for the first time at FinCon 2019:

(apologies in advance for missing anyone)

The Fioneers (Jessica and Corey)

A Purple Life & Ms. Mod (because I almost never saw one without the other)

Financial Mechanic (Jess)

Tread Lightly, Retire Early (Angela)

Bravely (Kara Perez)

Dumpster Doggy (Amanda Holden)

Berna Anat (Hey Berna)

Diania Merriam

Melanie Lockert

Brynne Conroy (Author of The Feminist Financial Handbook)

Cameron Huddleston (Author of Mom and Dad We Need to Talk)

Sarah Li-Cain (Beyond the Dollar podcast)

Whitney Hansen (The Money Nerds podcast)

Erin Lowry (Broke Millennial)

Kayla Sloan

Kristy Hymans

Liz Eischen

Bethany Bayless

Moriah Chace

Daniella and Alexandra (iliketodabble)

Melanie (Partners in FIRE)

Financial Pilgrimage (Mark)

StopIroningShirts (Robert)

Kim at The Frugal Engineers

How to Fire – John and Sam

Paul David Thompson

Lynne Somerman

Kathleen Celmins

Jamila Souffrant

Jackie Beck

Amanda (Debt Free in Sunny CA)

Lance Cothern (Money Manifesto)

Dragon Guy and Dragon Gal

The FI Old Guys

One Frugal Girl

Kristen – The Frugal Girl

Full Time Finance

Ms. ZiYou

Young FIRE Knight

Elizabeth (Owning the Stars)

Sarah (Smile and Conquer)

Jessica Moorhouse

Bob (Tawcan)

Becky (TwentyFree)

Kate Dore

Steve Stewart

Miranda Marquit

Amanda Abella

BC Krygowski

Waffles on Wednesday

ZJ Thorne

Andy Hill

Bobbi Rebell

Rich Jones & Marcus Garrett (Paychecks and Balances podcast)

And my roommate Dillon (Dollar Revolution)

Returning friends from last year’s FinCon or another CampFI or Playing with FIRE event:

Military Dollar

Erin ReachingForFI

Gwen Fiery Millennials

Bianca Miss Mazuma

Stephonee

Liz Chief Mom Officer

Champagne & Capital Gains (Annie)

Pete McPherson (Do You Even Blog)

Chelsea (Smart Money Mamas)

Allea Grummert (Ask Allea)

Penny (She Picks Up Pennies)

Abbie (I Pick Up Pennies)

Kevin (Financial Panther)

Lisa (A Lawyer and Her Money)

JD Roth

Jim Wang

J-Money

Tom Drake

Tanja Hester (I met her husband Mark this year)

The Luxe Strategist (wasn’t at FinCon last year, but we met up in NYC later that fall)

Michelle (Frugality and Freedom)

Bill and Amanda from Wealth Well Done

Piggy and Kitty from Bitches Get Riches

Leif (Physician on FIRE)

Carl and Mindy Jensen (1500 Days and Bigger Pockets Money podcast, respectively)

Brad and Jonathan from ChooseFI (Plus Ed and the whole crew, many of whom I met at the Richmond Playing with FIRE event)

Scott and Taylor Rieckens (Playing with FIRE)

Julien and Kiersten (rich & Regular)

Chad Carson

Karsten (Big ERN)

MK and Jason Williams

Vicki and Amy from Women Who Money

Laura (Every Day by the Lake)

Lisa Duke

Sean Mullaney (FI Tax Guy – whom I met at CampFI SE)

Jillian Johnsrud (Montana Money Adventures)

Deanna Broadus (Recovering Women Wealth)

Jennifer Mah (Confessions of FI and ChooseFI Admin)

Mike Damazo

Seonwoo Lee

Stephanie (Xennial Blogger)

Krystel (All She Saves)

Mr. Jamie Griffin

Doc G

PT

Jessica Bufkin

Nick True

Eric Nisall

Steven (Even Steven Money)

Cody Berman (Fly to FI, The FI Show, Financial Freedom Summit)

Justin Taylor (Saving Sherpa, The FI Show)

James and Emily (Rethink the Rat Race)

Adam (Minafi)

Kyle (Money @ 30)

Stephen and David Baughier

Chris Browning from Popcorn Finance

Paula Pant

Emily Guy Birken

Doug Nordman

Claudia and Garrett Pennington

Harlan Landes and Athena Valentine

Despite so many amazing friendly faces and growing or renewed friendships, I never planned on attending FinCon in 2020 in Long Beach, California. Now that it’s not happening, it doesn’t even matter that I’m still fairly new in my current job, and I don’t have a lot of vacation time saved up. Most of the vacation time I’ve taken between September 2018-February 2020 have been to attend FI-related events such as two FinCons, a SkiFinCon, two CampFIs, EconoMe Conference, plus 5 long-weekend trips to NYC, Charleston SC, San Diego, Richmond VA, and Lake Geneva Wisconsin to visit FinCon friends. But FinCon in Austin in 2021 may be in the plans, we’ll just have to see.

josh.overmyerUncategorized
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A Primer on Flood Insurance

Originally written on October 14, 2018

Updated August 27, 2020 on the day that another Category 4, Hurricane Laura impacted the Louisiana/Texas Coast.

Today, Louisiana and Texas were battered by Hurricane Laura, a Category 4 hurricane with over 140mph winds. 2 years ago, Hurricane Michael struck the Florida Panhandle with over 160 mile per hour winds as a Category 5 hurricane and brought with it an estimated storm surge of 14 feet. Since 2017, the US has been hit by three other Category 4 Hurricanes with Harvey in Houston (perhaps the wettest storm in history, dropping over 60” of rain in some locations), Irma in the Florida Keys and Southwest Florida, and Maria which decimated the US territories of Puerto Rico and the Virgin Islands. Untold millions of lives were disrupted by these 5 storms and their impacts across the coastal states of the Southeast US.

In 2018, Hurricane Florence weakened from Category 4 to Category 1 near landfall, but still became the wettest storm to ever impact the Carolinas, dumping more than 24” of rain in some areas. This heavy rainfall led to weeks of flooding as the inland rainfall flooded rivers all over North and South Carolina, and that water in the rivers had to make its way back down to the Atlantic Ocean by rushing down through watersheds throughout the area.

Unfortunately, most of the people impacted by these storms, and the others that have ravaged this country in the past several years, do not carry flood insurance. Many people incorrectly assume that their homeowner’s insurance covers them from all perils, including flooding, but homeowner’s insurance very rarely covers flooding, which is the most common natural disaster in the United State. The term “flood” is defined as a general and temporary condition of partial or complete inundation of 2 or more acres of normally dry land area or of 2 or more properties.1 A flood does not mean a burst pipe, or an overflowing bathtub, both of which may be covered by your homeowner’s insurance policy.

Two different flooding occasions on my street in 2015 and 2016. Please Turn Around, Don’t Drown

Some people incorrectly assume they will be eligible for free money from FEMA if their house is damaged by flooding or a hurricane. While FEMA does have programs that give cash payments to survivors of certain storms, these typically require the storm to have impacted a large area and have done widespread damage, enough to meet the damage thresholds required under the Stafford Act for a Presidential Damage Declaration. If the storm is not sufficiently damaging to a large area or a high enough total cost of damages, many of the elements triggered by a Presidential Damage Declaration will not become available. Even when programs like FEMA’s “Individual Assistance” (IA) program are activated, the average IA payment from recent storms have been $5,000-6,000, compared to the average National Flood Insurance Program (NFIP) flood insurance payment of $90,000+.

Other available programs include the Small Business Administration, which offers low-interest loans to people and businesses needing to rebuild, but these loans must be paid back. Long after the storm, mitigation assistance funding becomes available through the Hazard Mitigation Grant Program, but a homeowner typically needs to have already been working with their local government on a plan to mitigate or buy-out their property for the community to prepare a grant application and submit to their State or FEMA for HMGP or other mitigation funding.

Flood Insurance

By now, I hope you are seeing that Flood Insurance is the best option to protect the largest investment most people ever make in their lives – their home. Did you know that over the course of a 30-year mortgage, homes in the “Special Flood Hazard Area” or ‘flood zone’ has a 26% chance of flooding from a 1% annual chance flood (commonly referred to as a 100-year storm)? That’s about twice as likely as suffering a house fire, yet we all carry insurance that covers fire.

Flood insurance is most often sold through your typical flood insurance companies, on behalf of the NFIP, which assumes the flood risk. Flood insurance is available to homeowners, renters, and businesses. For residential properties, the maximum structural coverage is $250,000, with a maximum of $100,000 in contents coverage. Renters don’t need to carry the structural coverage to be able to purchase up to $100,000 in coverage for their belongings. Non-residential properties can purchase up to $500,000 in structure coverage, as well as $500,000 in contents coverage, since many businesses have expensive equipment necessary to run their business.

The private insurance market is small but growing in this country. Many private insurers may have similar coverage limits as the NFIP policies, while some have their own underwriting standards and coverage limitations. A hybrid approach is also available, with coverage up to the maximum of the NFIP coverage limits, and then a policy with a private insurer for “surplus lines” in excess of the NFIP limits. This is advantageous to the private companies because the NFIP flood insurance fund is on the hook for the first $250,000 in structural damage and the first $100,000 in contents. The surplus lines coverage would not have to pay out unless/until a major disaster wiped out at least a quarter million in the home’s value.

Some reasons that flood insurance may be cheaper through private insurance companies because NFIP premiums are collected into the National Flood Insurance Fund, which pays out flood insurance claims, flood insurance studies and mapping for participating communities, and for hazard mitigation programs such as Flood Mitigation Assistance and Pre-Disaster Mitigation grant programs. In addition, the Flood Insurance Fund is paying interest on money borrowed from the US Treasury to cover past claims, especially Hurricanes Katrina (mostly forgiven by Congress in 2018), Sandy, Harvey, Irma and Maria. Furthermore, FEMA has been tasked with building a reserve fund to pay future claims without borrowing from the Treasury. FEMA also has purchased “reinsurance” from large global insurance companies for the past 2 years to help spread the NFIP’s risk exposure.

Higher standards and a discount program

The NFIP makes flood insurance available in over 22,000 participating communities nationwide that have agreed to adopt and enforce development standards in their identified floodplain areas. Among these 22,000+ communities, approximately 1,500 communities have joined the voluntary Community Rating System that awards flood insurance premium discounts to policies in those communities for adopting higher standards than the minimum, and for other public education, outreach and other floodplain management-related activities. The three goals of the Community Rating System (CRS) are to:

  1. Reduce and avoid flood damage to insurable property
  2. Strengthen and support the insurance aspects of the NFIP
  3. Foster comprehensive floodplain management.

The CRS program is a points-based program, offering a 5% discount for every 500 points that a community earns from 19 Activities and 92 specific elements, subject to certain prerequisites. Discounts range from 5% for many beginner communities in the CRS program, up to 45% for 1 community in California that has earned the required 4,500 points to earn the highest rating of Class 1. These discounts are applied automatically to NFIP policies in the CRS-participating communities, so be sure to check your “declarations page” for a CRS discount. While “only” about 1,500 communities participate in CRS, those communities represent over 70% of the policies in the nation. This make sense, as the largest communities and areas with the highest rates of flood insurance coverage stand to gain the most by documenting their efforts to reduce and avoid flood damage in their communities.

If your property is not in a “Special Flood Hazard Area” or if you have been recently mapped into the SFHA, check with your insurance agent about receiving a Preferred Risk Policy. These typically can be had for a few hundred dollars per year, rather than the full-risk rate which may cost $1,000 or more, depending on the specific flood zone and/or the elevation of the finished floor of the home. The only way for an insurance company to properly rate a policy is with an Elevation Certificate prepared by a licensed surveyor. This will show information such as the community name and community ID number (to properly apply any potential CRS discount), the flood zone and required Base Flood Elevation, the elevation of the finished floor of the home or structure, the elevation of any attached garage or enclosure, and the elevation of any machinery or equipment servicing the building. All these factors are factored into the rate that each policyholder will pay for their unique flood risk on their property.

To recap:

  • Your homeowner’s insurance does not cover flood damage.
  • Flooding is more frequent than ever and has affected all 50 states since the year 2000.
  • Individual Assistance from FEMA averages $5k-$6k, while flood insurance pays out an average of nearly $90,000.
  • Your community is probably already working hard to earn you a discounted premium. If they are not, ask them to join the CRS to save their residents and property owners money on their flood insurance.
  • If your home is flood-prone, there may be mitigation grant money available to buyout or elevate the home.

Please feel free to reach out to me with any questions, as I have been a Certified Floodplain Manager since 2012, with experience in coastal and riverine communities, and previously worked 3.5 years in the State Floodplain Management Office in Florida. I currently serve as the Chair of the Florida Floodplain Managers Association, and I have presented at the Association of State Floodplain Managers national conference. I can be reached at Josh.Overmyer@gmail.com.

1 FloodSmart.gov, the official website of the National Flood Insurance Program (NFIP).