Impending doom!

By Josh July 31, 2018

If you’ve seen almost any headlines lately (and for the last 8 years, amirite?) the next big stock market pullback is just around the corner. Liz from Chief Mom Officer shared a headline recently that Morgan Stanley was predicting the biggest stock-market selloff in months! (insert scary music) Nobody should be afraid of a pullback that is the biggest when measured in Days/Weeks/Months…

With all of the gloom and doom in the news media, the links inevitably get shared across social media. These dark thoughts creep into our mind, and fear begins to set in. For those who are more risk averse, these feelings of impending doom may cause them to scale back their stocks and put more investable assets into bonds or cash-equivalents like a money market account.

I’m here to tell you, that’s the exact WRONG thing to do, just like trying to time the market.

First off, if you are reading my blog (thank you, thank you!), you are most likely in the wealth accumulation phase of your life. Due to your age and remaining years in the workforce, you should be heavily tilted towards stocks, rather than in “safe” assets like bonds and cash. Most of us can agree that cash is actually not a safe asset, since it is guaranteed to lose value due to inflation. Then what about bonds?

My problem with bonds is that the young investor investing in bonds is locking in a lower rate of return for the perception of additional safety from turbulent stock prices. When stocks run up double-digit percentages, bonds are earning a few percentage points. That’s 70% under-performance, if we’re talking 10% vs. 3%. And we all know that stocks go up over the long term, so why the fear of short-term losses with a portfolio heavily invested in stocks? Young investors should be giddy about lower prices, as long as they’re still putting money to work through workplace retirement plans, IRAs, HSAs and brokerages via dollar cost averaging. Who doesn’t love to buy their favorite things on sale?

So beware of the click-bait headlines, the talking heads shouting on TV, and the viral news stories. A successful portfolio has a well thought-out plan for the inevitable scenarios when stock prices do fall. A successful investor will stick with the plan, or make minor adjustments to their strategy given a changing marketplace. Chasing safety is just as bad as chasing performance, and in fact can do long-term damage to your portfolio advancement by causing you to lose years of compounded market gains during the accumulation phase of your investing career.

If you’re an older investor, it may make sense to have an allocation in bonds and cash-equivalents, but I hope you aren’t using the old “100 minus your age” allocation. That rule of thumb may have been appropriate in decades-past, but bonds used to return a solid 5% on average, and CDs used to return 8-12% in the late 1980s. Now, with rising interest rates, which means bond prices are falling, you’re lucky if you have a positive return on bonds at all. I hope you will consider adjusting the “rule” to 120 minus your age, or similar.

Fabled PF guru JL Collins has been early-retired for quite a few years now, and his portfolio remains at 75% VTSAX (stock index fund) and 25% VBTLX (bond index fund). If you look at the results of the Trinity Study, the 75/25 allocation yields one of the top overall returns, and yet provides a modicum of safety during downturns to smooth the ride.

Tracking every penny coming into my life

By Josh July 28, 2018

Ever since J. Money used to write about his “Challenge Everything” mindset/challenge/fund a few years ago, I have been meaning to do something similar and cut out all sorts of frivolous/wasteful spending in my life. But since I’m the ultimate lazy, single dude, I have definitely not completed that task yet. I did take away from his series that small amounts of money really add up! Sometimes that money comes in the form of unexpected sums from an insurance rebate, found money on the ground, selling a few items that are just sitting around your house, or in many Millennials’ cases, a side hustle.

Confession: Starting on January 1, 2016, I began tracking every penny, nickel, dime, quarter, and dollar that came into my life from every source OUTSIDE of my day-job paycheck. The results have blown my freaking mind!

First, the amount of money that must have passed through my hands, without “knowing it” in past years would have added up to a tidy sum. In 2016, my first year of tracking this, the total amount was over $17,000!! In 2017, that number ballooned to OVER $33,000!! So far in 2018 (7 months, more or less), I’m sitting at over $13,700, and I’ve cut WAAAAAY back on my side hustle.

Secondly, knowing that it has come into my life gives me a reason to put a purpose to where it goes. In the past, any extra money had a habit of disappearing on a new video game, DVD, some other technology, or one year I went back and tallied up nearly $3,600 in golf course greens fees <– same year, I put $0 in either my Roth or Traditional IRA. YIKES! Now I actually realize that I was paid back $3,430.97 in travel reimbursement/per diem for work travel in 2016, so I can apply those funds towards my IRA (I mean, that’s what I DID in 2016, and I maxed it out!)

Third, I don’t take any of this money for granted. When money is easy-come, easy-go (You’re welcome for planting Bohemian Rhapsody into your head), it’s very easy to think that another unexpected windfall is just around the corner to bail you out of a stupid spending decision. Now I have the empirical evidence to show me that this money has come into my life, and I better have something to show for it, or at least a very cool memory and story to tell!

I think at this point, I should just post a chart to show all of the money that has come into my life (again, outside of my day job paycheck) over the past 31 months:

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The amounts that stick out the most both came in 2017. First, I spent a lot of time concentrating on my Uber side hustle in 2017, because in August 2017 I bought my new-to-me Toyota Camry Hybrid, and I wanted to pay that sucker off as quickly as possible. In all, it took me 86 days to kill the car loan. The second (and larger) big spike was from selling nearly $10,000 of physical silver bullion that I had purchased over the years of 2012-2016, all the while the spot price of silver was falling, from around $35 down to under $14 per ounce.

Interesting or odd payments that fell into the Miscellaneous category:

$31.74 – My one and only paid blog article in 2016 (after PayPal fees)

$41 – total of 3 secret shopper tasks I completed.

$25 as a gift from a total stranger that I helped to save Christmas for her husband. Backstory, she lived in Colorado, but was purchasing a puppy for her husband as a Christmas gift. Unfortunately, the puppy was born in Indiana, so she was paying the breeder for the purchase and transport (airline) cost of getting the puppy to her in Colorado – or so she thought. Apparently, there’s more than just 1 Josh Overmyer, and his email address has some numbers mixed in with his name. Well my email doesn’t have those numbers, so when she sent me over $1,300 for a puppy that I had no idea I had 😉 I politely declined the PayPal payment, and sought to help her figure out what was going on, how to get the money refunded to her checking account, and overall just being a totally good guy, like I was raised to be in the Hoosier Hospitality state of Indiana. She was so thankful that I wasn’t an opportunist and ran off with her money, she sent me an unsolicited $25 as a thanks. This may be the best $25 I ever received… you don’t really expect people to appreciate you for just doing the right thing.

$41.05 – I received a $20 free play certificate from a local casino, and I put that voucher into the slot machine and punched a button for about 15 minutes, then cashed out my winnings of a whopping 205% hehe

$21.75 for selling old DVDs online.

Nearly $100 in iBotta rebates before I quit using the app.

And my bank bonuses and Tradelines payments round out the more exciting random money amounts of the past couple years. Bank account interest payments, though, have not added much to the bottom line ($147 or an average of less than $5/month).

Lending club withdrawals include both principal repayment and interest that I collected on my 366 loans.

Overall, I think this exercise was a major success, and I plan to continue tracking these sources of extra windfalls in my life, no matter how big or small.

 

Additional passive income sources

By Josh July 26, 2018

Despite making more money at my (new) day job than I’ve ever made before in my career, I am constantly looking for other ways to add to my banking and investment accounts. This post will cover two that are easy and relatively lucrative!

Bank Account Bonuses

Every once in a while, I receive fliers in the mail that are basically advertisements for banks trying to get me to open up a new checking or savings account with them. Until the past couple years, I would toss those straight into the trash, because I already had a free checking account, had been with my then-bank for 10+ years, and didn’t want to cause any extra work for myself in keeping track of multiple bank accounts across various banking institutions, credit unions, etc.

But as part of my growing travel-hacking knowledge base, I became familiar with Doctor of Credit, which also maintains a list of bank account bonuses that are available at any given time. This list opened up a world of *free* income to me, as long as I could read the fine print and comply with all of the listed requirements.

So what type of requirements does a bank spell out in order to get the bonus? Sometimes you have to set up Direct Deposit and receive a couple deposits from your employer or a certain amount of deposits such as $500. Other bonuses require a minimum number of debit card purchases/swipes, and I’ve been known to make 5 minor transactions in quick succession to meet the minimum requirement (pack of gum, 1 gallon of gas, a bottled beverage, etc). One bonus I am currently working on achieving requires either a direct deposit OR $2,500 minimum balance, 1 debit card purchase, 1 bill-pay of a recurring bill, AND a mobile check deposit. I will receive a $250 bonus for doing each of those 4 things!  The one I received most recently was for setting up a Business Checking Account, for my Uber business, duh! 😉 This offer required a $1,500 minimum daily balance for 60 days, and a combination of 5 debit card transactions and/or ACH deposit/payments. I did 5+ of both, just to be sure! Free $300 in my account just the other day, which is basically a 20% return in 60 days for the $1,500 I parked there for a couple months.

So why do banks offer these bonuses? First, they think most people aren’t going to follow-through with all of the requirements, so they won’t have to honor the bonus. Second, they get you used to using the account for debit purchases, direct deposits and bill-pay, so they think inertia will work against the consumer and they will stay-put. Thirdly, many checking and savings accounts have monthly fees, but there are *almost always* a way to have the monthly fees waived, which usually requires a minimum balance of $1,500 in a checking account or up to $15,000 in a savings account, to remain fee-free. But I think that if I can figure out how to switch my behaviors TO this new account, I can just as easily switch FROM the account.

If you decide to proceed with going after these bank account bonuses, the best thing I can tell you is to read the terms and conditions carefully, keep a copy of those terms, and make sure you meet them within the specified amount of time. The next best thing I can tell you is that these bonuses ARE TAXABLE INCOME and will be reported to the IRS on a 1099-INT form. But I have earned $1,350 so far this year from bank account sign-up bonuses, and that’s almost 2 whole mortgage payments ($680/month) for me, so this is not an insignificant sum in my budget. And finally, beware that many of the accounts have language that the account must remain open and with a positive balance for 6 or 9 months, or the bonus will be clawed-back upon closure.

Tradelines

This next topic is a lot scarier to many people, and I spent a lot of time trying to wrap my head around it before ultimately giving it a try last December. I want to caution you, dear reader, that this is something I tried, did successfully for about 5 months, then stopped participating because I had one of my oldest credit accounts shut down without warning.

Tradelines are basically any contract you have with a banking institution for a consumer line of credit. AKA a credit card. You have a contract in place to borrow up to a certain limit, with payback terms, including interest payments per the agreed-upon terms. These tradelines are reported to the credit bureaus, and they are what make up your credit report.

So how does one make money with Tradelines? You basically “rent” access to them! There are companies out there who need a supply of tradelines to sell as inventory to borrowers with poor credit who need a temporary bump in their credit score to apply for a home or car loan of their own. The process is to add the person as an “Authorized User” on your long-standing, excellent credit account, thereby having your credit card tradeline report to the borrower’s credit report for a few months. The borrower NEVER gets any information about you, and they never receive an Authorized User card – the card (if issued at all) will be sent to you.

It generally only took me about a minute to log into my online accounts with a given credit card, click “add authorized user”, type in their personal information (first/last name, address, email address, sometimes SSN) and they would begin to receive a credit score boost within a month. At the end of 2-3 months, I would usually need to make a phone call (2-10 minutes depending on how much hold-time) to remove the authorized user. The telephone agent will ask if you can get the card back from the user (which you can do, because you’re still holding onto the card in the first place), and you tell them yes. Then you destroy the card! And you get paid anywhere from $50-75 for cards that have been open 2-5 years, and can earn quite a bit more for older cards and/or higher credit limit cards.

So why did I stop? As I mentioned before, I had one of my oldest credit cards shut down by Discover. I opened the card in 2012, because I liked the idea of 5% cashback on rotating quarterly categories. Discover actually had one of the easiest processes to add AND remove Authorized Users, so I thought things were going along really well… that is, until I tried to remove my 4th and add my 5th Authorized Users on the same day. I think that must’ve raised red flags at Discover, because my online request was denied and I had to make a phone call. “No problem,” I thought… “Discover has excellent, US-based phone agents.” I was able to talk to an agent and get the request approved. But then, a month or so later, without any digital or mailed communication, my DiscoverMore Card was shut down.

In all, I “rented” out my good credit (score over 800 on all of my recent credit card applications and using all of the free tracking apps) on 17 occasions. This earned me a total of  $1,125 in 5 months, and I probably only spent a total of 2 hours online to add, and on the phone to remove, the authorized users. But after my Discover shutdown, I didn’t want to risk having the same thing happen with Chase (my beloved travel hacking cards issuer), so I stopped participating in the program.

The Wealthy Accountant has a good write-up about Tradelines, with more details than I have provided. Check out his post if you want to learn more.

Peer-to-Peer lending results

By Josh July 25, 2018

Peer-to-Peer lending sites have been around for quite a while now, so you’ve probably heard of them or even considered checking them out. If you’re not aware of Prosper or Lending Club, or the concept of Peer-to-Peer (P2P) lending sites, WomenWhoMoney has a great write-up on the pros and cons of P2P.

I initially read about P2P lending from Financial Samurai and Budgets Are Sexy, and I took the bait in April 2015. My main goal was to diversify my investments so that not everything I have would be correlated to the stock market. I took a look at both Prosper and Lending Club, but it seemed like Lending Club was the larger of the two sites and offered more loans for investors such as myself.

Every loan offered on the site would be for amounts up to $35,000 (later increased to $40,000) and individual investors would make a claim on $25 or $50 of each loan, to spread the risk of every loan across multiple investors. In that same vein, investors will spread their investable cash across dozens or hundreds of loans to spread their exposure to the risk of any individual investor defaulting.

In all, I invested in 366 loans, and all of my loans were $25 initial value. I also bought a few loans on the secondary market to test out that feature and see how those loans would perform. My total contributions were about $7,500 of my own cash, and I initially had the account set up to automatically reinvest the proceeds of my monthly payments into new loans.

After a few months, I decided to start screening loans by myself instead of using the Lending Club preset conditions. My personal parameters included annual salary of at least $50,000 and credit score of at least 750. I also tried to fund loans that were for “Green Loans” but they were often very rare on the platform back in 2015 and early 2016 when I was funding new loans.

My initial results were pretty good. Excellent, even. In my first six months of investing on Lending Club, my returns were nearly 10.9%. But then little cracks started appearing. After a few months, I had several loans that were beginning to become delinquent. Sometimes the borrower would catch up and pay a minor late fee, but a few slipped to 31-120 days late. Around the 1-year mark, I had my first two loan defaults. My returns slipped to 8%, but I had more winners than losers, which was the whole purpose behind investing in a few hundred loans.

At some point, Lending Club made major news for a scandal that rocked the company to its core. The CEO resigned. The news stories talked about a scam going on within the company where fake loans were being offered to investors by insiders, in order to prop up loan returns and rates. Fortunately all of that has been corrected, but I can’t help but feel like I was sold a lie and my returns have tanked in the intervening couple years.

So where am I now? After 39 months of investing with Lending Club, many of my initial loans have been paid off. In fact, of the 366 total loans I funded, 182 have been fully paid off, which is nearly 50%. Unfortunately, those are offset by 75 loans that have been “charged off” with no expectation of ever seeing another dime from those debtors. Of the remaining loans, 103 are current, 2 are in their grace period (up to 15 days after due date), 2 are 16-30 days late, and 2 are 30-120 days late so there’s a good chance those 2 will be charged off as well.Screenshot_20180728-085108~2

I started off with over 10% returns, which was awesome because it’s comparable to stock market returns, albeit with the risk of complete loss of principal from any given loan. Those shrank to 8% by the end of year one. As of today, I’m down to an annualized return of 1.55% return, which is pitiful! My online savings account with Marcus by Goldman Sachs pays 1.80% and there’s no chance of losing any of my starting principal! For this reason, I am withdrawing all of my loan proceeds (principal payback and accrued interest) and investing that money in my taxable brokerage at Vanguard (VTSAX, of course).

Overall, I’m glad I took a chance at diversifying my investment income, but I’m disappointed by the results. P2P lending has turned me off of other crowdfunding options such as crowdfunded real estate. Those site may work for some people, but I’m afraid of what happens when the next real estate slowdown causes pain for those investments.

Thanks to Liz from Chief Money Officer for the feature on her Weekend Roundup!

Travel hacking trips page

By Josh July 24, 2018 (This post will be maintained periodically)

I thought it would be a good idea to share a list of the trips that my travel hacking [obsession] has allowed me to cover in the past few years, since really taking up the hobby in March 2016. If you are interested in finding out more the various points and miles programs I use, please browse this page (contains referral links that may benefit me, at no cost to you).

So I lied. My very first travel hacking booking actually happened before I started this hobby. I was traveling a lot for work starting in December 2014, so by August of 2015 I had a lot of Hilton Honors points. I used 80,000 for 2 nights at the Embassy Suites in downtown Indianapolis to attend my cousin’s wedding. My parents stayed in the room with me, and I slept on the pull-out couch in the “living room” portion of the suite. But the points came free from my work travel, so it didn’t cost me anything to be able to help out my parents with lodging expenses and we all stayed a couple blocks away from the wedding reception venue (the Eiteljorg Museum).

August 2016 – I used Southwest Airlines Rapid Rewards points to fly back “home” to Indiana to attend my 15-year High School Class Reunion. The reunion was co-located with a local non-profit’s wine, craft and music event at a local winery, but thunderstorms throughout the day kinda ruined the evening plans. We had 100 students in our graduating class, and 13 of us showed up for the 15 year reunion…

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October 2016 – 2 nights in Downtown Orlando using Hilton Honors points. I was a Diamond member at the time, so I was able to book a special Diamond rate for 40,000 HHonors points per night, instead of the listed rate of 66,000/night.

Christmas-New Years 2016/17 – I live in Florida, but grew up in rural Indiana. I always get the mom-guilt-trip about coming home for Christmas, so I used Southwest Airlines Rapid Rewards points for my flights. I only paid $11.20 out of pocket to cover the September 11th security fee, both ways $5.60.

October 2017 – 2 nights in Orlando, across the street from Universal Studios. I used 80,000 HHonors points for a deluxe room with a view of the theme park. I could have saved (I think) 5,000 points per night by going with a standard view room, and I will actually do that going forward. It was impressive, but a little further away from the action at the park than I expected.

Christmas/New Years 2017/18 – If you haven’t noticed the theme, this is just a continuation of that same pattern. Moving along…

February 2018 – A change in my travel theme! This trip was a 2-day trip to Indianapolis, but for a very special reason. My hometown high school girls basketball team was playing at Bankers Life Fieldhouse (where the Indiana Pacers play!) in the State Championship game at the Class 2A level. I booked my flights on Southwest (again) for about 25,000 RRs. This was booked only 7 days in advance, so tickets were a little bit more expensive than I had seen only a few days earlier, but I waited until the buzzer sounded in their THRILLING OVERTIME VICTORY at the Semi-State game to book my flights. I also used 40,000 Hilton Honors points for a single night at the Homewood Suites in Downtown Indy, just 2 blocks away from Bankers Life Fieldhouse. Unfortunately the Lady Falcons did not win the State Championship, but they led at halftime and were very close the whole way, despite our two best players competing with torn ACLs. These girls are TOUGH!

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April 2018 – My parents were visiting with me in Southwest Florida, but their best friends (and practically my second set of parents) were in Orlando at the Gaylord Palms Resort, so we planned to spend a day with them at their resort and in the general area of International Drive. I used 35,000 of my IHG points to book 1 night at the Holiday Inn Resort near Disney Springs. By carrying my IHG card, I automatically have Platinum Elite status, which gave us free drink coupons, free parking, and expedited check-in & check-out. We had an awesome time visiting with our friends, had margaritas with chips & salsa at Señor Frogs, and the 5 of us were able to beat an escape room in 48 minutes and change! This was an amazing trip for just burning some IHG points.

May 2018 – I’ve got a whole post on My Freedom Trip to Los Angeles, Seattle and Boston. To recap, I used Delta Skymiles (AKA SkyPesos), IHG points, Hilton Honors points, JetBlue TrueBlue Miles, and transferred a couple thousand Chase Ultimate Rewards to Hyatt for a second Hyatt redemption. JetBlue TrueBlue points (again) rounded out the trip.

June 2018 – I had a business trip to Phoenix, with a very early morning flight scheduled out of Tampa. Since I live about 2 hours away from the Tampa airport, I didn’t want to leave my house at about 3AM to get there in time, so I drove up the night before and stayed at the Holiday Inn Westgate – Tampa airport, which allowed me to sleep in until almost 5AM and still make it with plenty of time to spare. This was a 20,000 point IHG redemption, and I stayed on a floor reserved for Platinum Elite members, with a complimentary lounge.

Upcoming trips (planned so far):

Thanksgiving 2018 – Fly home on Southwest Rapid Rewards points (a little over 17k) to be with family on Thanksgiving, but also to celebrate my parents 40th wedding anniversary on the Sunday after Thanksgiving.

A travel hacking sin

By Josh July 17, 2018

Sorry for the click-baity headline, but I truly committed a sin in the world of travel hacking earlier today: I bought POINTS with cash! To be more specific, I bought Starwood Preferred Group (SPG) Starpoints, and I used a card that will earn Chase Ultimate Rewards for the purchase today.

A little bit of backstory: SPG Starpoints are considered one of the most valuable travel rewards points/currencies in the game, for many reasons. First, they are difficult to obtain in large numbers, so they are relatively rare. Second, they are transferable at a 1:3 ratio with Marriott (which is absorbing/merging Starwood into the Marriott family of properties and closing down the SPG program completely on August 1). Third, and one of the most popular redemptions, SPG points can be transferred to several airline programs at a 1:1 ratio, but they will give you a 5k bonus in airline miles when you transfer your SPG points in bundles of 20k.

Since SPG is folding at the end of this month, I started to consider what I wanted to do with my Starpoints in terms of redemption. I started collecting Starpoints in February of 2017, when I signed up for the SPG personal card from American Express. It comes with a $95 annual fee, but I originally earned 35k Starpoints upon opening the card, and I called for a retention offer at the 1 year mark and they gave me another 7k Starpoints for spending $1,000 in 90 days. In addition to those 42k Starpoints, I also had earned some points by spending on non-bonus categories with the SPG card, earned a few points from stays at Marriott properties, and I completed the Sunday Twitter promotion with Marriott Rewards and the NFL last fall for 1,000 Marriott points per weekend.

But most recently, I have spent a total of 11 nights in Starwood properties (Sheraton Downtown Phoenix and Four Points by Sheraton San Diego – Sea World) for two work-related conferences. In addition to earning Starpoints for my stays, I earned Starpoints for participating in the Green Choice program, which offered 250 or 500 points per night for declining room cleaning services. I also signed up for a double-dip promotion that Starwood and Delta Airlines has had for the past couple years, and I chose to be awarded extra Starpoints. The sum total of these actions left me with 76,101 Starpoints when I woke up this morning. Remember that Starpoints are worth 3x as many Marriott reward points, so that means I had the equivalent of 228,303 Marriott points.

So why did I commit the cardinal sin of buying points? SPG is currently running a 35% off sale on Starpoints purchased between now and July 20th (THIS FRIDAY), if you purchase more than 5k Starpoints. I ended up buying 14,000 Starpoints for $318.50 (regular price $490) so that I could bring my total up to 90,000 Starpoints. By transferring my 90,000 Starpoints to Marriott this morning, I was able to bring my Marriott total to 270,000. WHY 270,000?? That happens to be the price of a “hotel & flight package” that will reward me most handsomely with a certificate good for a 7-night stay in any Marriott Category 1-5 property PLUS 120,000 Southwest Airlines Rapid Rewards points. Marriott has several of these packages available, with a couple dozen airlines, and different redemption values if you want a smaller amount of airline miles/Avios, or if you want a fancier hotel. My main goal was to get a “good” redemption for my Starpoints, while maximizing my Southwest miles.

So the math comes out like this: $0.022 per Starpoint, which is actually less than the value “The Points Guy” places on them at $0.027, so the sale is worth it from the start. If I had made the Marriott hotel and flight package redemption with only my 228,303 point balance from before the purchase, I would have received 70,000 Southwest RR miles. By buying those 14k Starpoints (equivalent to 42k Marriott points) I was able to get an additional 50,000 Rapid Rewards. The Points Guy values Southwest Rapid Rewards at $0.015 per mile, so I gained an additional $750 in value of Rapid Rewards for paying $318.50 to Starwood this morning. A great deal, if you can find a valuable redemption like I found.

A big warning to anyone who reads this: The SPG program is folding on August 1, 2018, as I mentioned at the top. Marriott has released the category charts for hotels as of August 1, and they will be adding additional categories and “off-peak” and “peak” pricing as time goes along. They also recently released the news that the hotel and flight packages are getting more expensive, and/or you won’t receive as many airline miles. That was the sole cause of my rush to use these Starpoints before August 1.

How much house do I actually own?

By Josh July 10, 2018

Hey reader! Overall, my home ownership story has been a truly awful experience that I wouldn’t wish upon anyone… but these days, I am finally seeing some light at the end of the tunnel.

Front door of Josh's house
My first house

Quick recap: Bought a 1,180 square foot townhouse in Southwest Florida in April 2006, for $175,000. My mortgage is through a credit union, and they only required a 3% down-payment for First Time home-buyers like me. That sounds like a good way to get people into their own homes for the first time, but very few people predicted what happened to the housing market. This was especially true in my area, which led the nation in foreclosures for years after the bubble burst.

Long story short, my home dropped in value by well over 50%. According to my assessed values, my house dropped from somewhere in the 100s down to a low of 27,430. While that was good for my tax bill (see below for past 10 years of property tax bills), I worked for local government at that time, and when local government isn’t collecting as much money in taxes, they make staffing cuts, and I quickly found myself with an underwater mortgage AND no job.

Property Tax history 2008-2017

So where am I now? A couple months ago, I passed the 12-year mark since I bought my first home. The recovery from the great recession has been slow, especially since Real Estate Rule #1 “Location, Location, Location” hurt me when the golf course that my property is located within went kaput! If you clicked the link above about foreclosures, you will see my neighborhood at the 1:15 mark. There are plans being considered by the County to permit a luxury development and revamp of the golf course, which should make my property worth considerably more in the next few years, but for the purposes of this post, I will stick with current Zillow value: $126,519

Twelve years of paying mortgage payments, and my house is worth $48,481 less than when I bought it. But I also had the good fortune to know about a grant program for distressed homeowners, such as myself a few years back, and I was awarded $50,000 towards my mortgage principal, which effectively makes my net purchase price $125,000. That 50k grant was actually a 5-year forgiveable loan, in $10k increments, so at the time of this writing, I actually still “owe” $10k on that grant, should I sell and walk away anytime between now and February 2019. For that reason, I will consider my purchase price $135,000 ($175k – 4x $10k)

Doing this math, I have zero equity. I am $8,481 in the hole.

Counting all of the mortgage payments I’ve made over 12 years, I currently owe $80,376 on the mortgage. Subtracting this from the Zillow value, I own $46,143 worth of house. Based on its current Zillow value, I own 36.5% of my house. That’s 430.7 square feet, or the approximate size of my master bedroom, living room and the half-bath downstairs. But I don’t yet own my master bathroom, nor the stairs to get up to my bedroom and guest bathroom. The kitchen, laundry room and dining room still belong to the credit union, too!

$48,481 isn’t a lot of progress in 12 years. Just over $4,000 per year or a little more than $336 per month.

I’m not really a proponent of paying off the mortgage early, if you have a low fixed-rate mortgage or an adjustable rate mortgage (like me) that is still sitting on the floor of the possible rates I could be charged. I’m glad my adjustable rate was low during the high balance years, so now I’m better able to withstand a rate increase without hurting my bottom line too much. If my rate goes up beyond 5%, I’ll start paying down my balance with more gusto, and above 6% I’ll discontinue putting money into my taxable brokerage to kill off the debt beast. Fortunately, my mortgage balance is now down to around $80k, so any interest rate increases won’t hurt me as badly as someone carrying hundreds of thousands of adjustable rate mortgage debt.

Thanks to Ty from CampFIREFinance for the feature on July 13! Check out more of the best from the web on his site, which features 3 posts daily.

My Freedom Trip – May 2018

By Josh Published June 30, 2018

Hello reader! As I began typing this post, I was sitting on an Amtrak train on the Coast Starlight route, from Los Angeles, California to Seattle, Washington. The trip took 34 hours, and included magnificent sights including the Pacific Ocean, Silicon Valley, and Mt. Rainier.

The trip was possible because I had scheduled 15 days of “Funemployment” between jobs. I needed to turn in my work vehicle and all of my work materials and computer equipment when I left employment with the State of Florida. But since I live in Southwest Florida, and the State Capitol is in Tallahassee (in the Panhandle), I started my trip with a 400-mile drive to Tallahassee for one last work day.

Day 2, in the morning I turned in my stuff and said goodbyes. In the afternoon, I took an Uber to the Tallahassee airport, and then I flew to Atlanta, Georgia, which is a hub for a large portion of trips to/from the Southeast US. I booked the flight on Delta, using 32,000 Delta Skymiles I had accumulated over the years, mostly from a 30,000 Skymiles offer on the Gold Delta Skymiles credit card from American Express a couple years ago. Don’t be like me, wait for a 60,000 or 70,000 point offer before you sign up for this card. American Express cards are usually only available once per “lifetime”.

While in Atlanta, I was able to use my Priority Pass Select membership (free with my Chase Sapphire Reserve credit card) to spend a free hour in the Minute Suites in Terminal B at Atlanta Hartsfield-Jackson International Airport. It was nice to unwind a bit, kick my shoes off, and have room to spread out, without having to keep a vigilant eye on my luggage.31557195_211205462988170_3385738348822790144_n

From Atlanta, I could arrive in just about any major city in the US, so I caught a cheap flight on Southwest for only $130. I had a voucher for $51 from finding a fare reduction on a previous business trip, so I only had to pay $79 out of pocket. I have developed the habit of arriving early and asking the gate agent if there are any available seats on the plane, and this time there were 32 empty seats. So my next question for the agent is to see if I can get an extra seat and pre-boarding due to my height and large frame. This has worked on each of my last 6 flights with Southwest. This way, I’m able to raise the armrest between the two seats and sit diagonally to gain some extra legroom.

I arrived at LAX and caught a quick Uber to my hotel a couple miles away. I had initially booked 5 nights of lodging at 3 different hotels in the Los Angeles area, but when I left a Facebook message for my cousins living in the Anaheim/Buena Park area that I was flying in that night, they reached out to me to have me cancel my stays and sleep in their guest bedroom. One night at the Holiday Inn LAX ran me 30,000 IHG points (and I got 2,000 back from an Accelerate promo), earned from the Chase IHG credit card last fall (100,000 point offer for $2,000 spend in 90 days), and I was able to check-out early and recoup the points that would have been spent for my second night stay. I was able to cancel my 4th & 5th nights stay easily and got the points refunded, but unfortunately I changed my plans too late for the cancellation window on my 3rd night stay at the Hotel MdR – a DoubleTree Hotel in Marina del Rey. I used 50,000 Hilton Honors points, and since I couldn’t get them refunded, I went ahead and borrowed my cousin’s car (she had left on a trip to Ohio the night prior) and I went exploring in that area, and went ahead and stayed in the hotel, since the points had been spent, anyway.

On Day 4, I set out to adventure with my counsin’s car. From Buena Park, I drove to the Santa Monica Pier, then went on the Pacific Coast Highway to Malibu, turned around and came back towards Hollywood via Sunset Boulevard to the UCLA campus, and on to Rodeo Drive before driving back to Marina del Rey to beat the evening rush hour. After checking in, I walked about 2 miles to Venice Beach and grabbed an early supper at Cabo Cantina, to munch on some chips & salsa and a quesadilla, while sipping a margarita and watching the Cavs-Raptors Game 2. I walked back to the hotel and spent the majority of the evening relaxing poolside and called my parents to fill them in on my trip so far.

Day 5, after checking out of the hotel and grabbing the breakfast buffet (should have been a $4 upcharge from the complimentary continental breakfast I receive for my Gold status at Hilton properties, but the waiter was gracious to upgrade me for free), I drove back to Buena Park and went golfing with my cousin’s husband. We played “Dad Miller Golf CLub” which is where Tiger Woods played when he was in high school. Apparently the guy named Dad Miller was a 93 year-old golfer who hit a hole-in-one on the 11th hole, and they named the course after him! I hadn’t really planned on golfing during this trip, so I didn’t have my normal golf clothes, shoes, hat, glove, golfballs, or golf clubs(!) so I played in a too-heavy shirt, tennis shoes, no hat, and with borrowed clubs, on a club I’d never heard of before that morning, so I was fairly pleased with my 93 I carded that day. My playing partner shot 108 and he’s a member, so I felt decent about the round, given all of those limiting factors.31028404_240783569991601_4917978647614193664_n

That evening, I went to a school carnival at my little cousins’ elementary school. They are finishing up 1st and 6th grades, so they were excited to show off their school projects from the whole year to their parents and their unexpected-visitor/cousin from Florida 🙂

Day 6 happened to be Cinco de Mayo, and being in Southern California, I knew there’d be a party! This time, my other cousin hosted a bunch of us at her (very nice) house with a pool in the backyard. All of my little cousins were jumping onto and playing with their “Cous-uncle Josh” because I’m the age of their uncles, but I’m officially their cousin (2nd cousin, once removed?). I got way too much sun, and had way too much fun. Ate way too much chips & salsa and had a few adult beverages to wash it all down.30957250_548424358891774_3502835478187474944_n

Day 7, before heading to Union Station, my golf buddy (cousin’s hubby) took me to see Huntington Beach, where the AVP was hosting the annual Huntington Beach Open beach volleyball tournament. Action had not yet started for the day, but it was cool to see it up-close, since I’ve seen it on TV several times in the past. Upon arriving downtown at Union Station, I checked in to get my seat assignment and grabbed a handful of snacks for the train. I found my train platform and fairly quickly found my seat (and the empty one next to me, which I definitely will not complain about!). I booked this train trip (LA–>Seattle) on the Amtrak website for $122 cash out of pocket. I went with a regular coach seat, knowing that there is ample legroom and wider-than-airline seats, 120v outlets, and it’s possible to get up and explore the train (dining car, observation car with floor-to-ceiling windows, and a café lounge car that operates like a mini 7-Eleven onboard the train). We got delayed by more than an hour in the Oakland area, and have been gradually losing more time between stops. But this caused us to be near Mt. Shasta as the sun was rising, and I got to see some cool sights that would normally have been passed by during the dark.

Around 9pm on Day 8, I arrived in Seattle, and checked in at the Grand Hyatt Seattle for two nights, with a list price of $548/night. I paid 15,000 Hyatt points per night instead, which I earned from the 40,000 point sign-up bonus on the Chase Hyatt credit card (plus a 5,000 point bonus for adding an Authorized User when I opened the card). I can’t believe I got nearly $1,100 in value out of that Hyatt card signup bonus, with another 15,000 points remaining that I used for Day 11 in Boston.

On Day 9, I purchased the CityPass for $89, which includes admission to 5 top destinations, including the Space Needle, Chihuly Museum & Gardens, Museum of Pop culture, Seattle Aquarium, and the Argosy Harbor Cruise (the 5 options I chose; you can opt for a different museum in place of Chihuly and #MoPop), and these are valued at over $160. I woke up to a perfect weather day, sunny and in the upper 50s. Working through the list of suggestions from friends and locals I had tapped via Twitter (Shoutouts to @CeceMcKiernan, my friend Kelli @FloodGeek101, Angela from @TreadLightly_RE, and Ty Roberts from @CampFIREfinance, along with some Twitterless peeps), I started out in search of breakfast at Biscuit Bitch. These Bitches are very popular, and there was a line out the door for people to get their hands on some scrumptious fixin’s and coffee. I Tweeted to the OG Bitches (@bitchesgetrich) that I found their Mothership!

Moving on from there, I walked 2 blocks to Pike Place Market, which was full of merchants getting set up for the day. I walked around for a bit and checked out the GumWall, which might be cool to some people, but I’ve seen more gum on one wall at a loose-meat sandwich shoppe in Greenville, Ohio (Shoutout to Maid-Rites). From there, I walked through Belltown to check out the Space Needle in Seattle Center. The Space Needle is undergoing a “Spacelift” (facelift) right now, so my views were partially obstructed by construction workers and ongoing construction, but it was such an amazing view. Mt. Rainier stands so much higher than, and closer to, Seattle than I expected! With the morning’s marine mist still showing up, the peak of Mt. Rainier looked like a perfectly-painted mountain from a Bob Ross painting, sticking its head above the clouds.

After Space Needle, I checked out the Chihuly Museum and Gardens, which were impressive, but I had already seen a large collection of Chihuly works at the Morean Museum in St. Petersburg, Florida. I also went to the Museum of Pop Culture, but felt underwhelmed by it :/ Last on the agenda for sight-seeing was a one-hour harbor cruise around the Elliott Bay, which was full of opportunity to take more pictures of the Seattle skyline and enjoy the nice sunny day. The onboard bar didn’t hurt, either!

As cool as those sights were, the highlight of my day came later, around Happy Hour, when I met up with a fellow Personal Finance blogger for the first time. Ty Roberts had a meeting downtown, and met me for a beer at Yard House. Honestly, this was the first time I’ve ever been able to talk to someone In Real Life about FI, FIRE, blogging, and this PF community that I honest-to-goodness LOVE. Ty was so easy to talk to, encouraging, and I just had the most amazing chat with him. I can’t wait to experience more of that at FinCon in Orlando this September!31413927_377655086063470_2628653116253274112_n

Day 10, I wanted to check out more sights that were recommended to me, so I walked to Pier 51 to catch the Ferry to Bainbridge Island for $8.35 (round-trip).

The ride over & back were the most enjoyable part for me, because I arrived so early in the morning that most, if not all, of the local shops had not opened for the day (around 10-10:30AM). In fact, I hopped back on the return ferry by 10:25 and made it back to Seattle by 11. After that, I used up the last ticket in my CityPass to check out the Seattle Aquarium just a few piers away. In the early afternoon, I went back to the hotel to shower up and pack my bag so I could check out of the hotel room by 2pm (late checkout granted for my World of Hyatt Discoverist status). I left my bag with the front desk, and took the Link over to the University of Washington campus to check it out.

After walking around campus for about an hour, I went back to the hotel, grabbed my bag, and took the Link to the Seattle-Tacoma International Airport. Arriving at the airport 7 hours before my flight was not ideal, but I was able to once again use my Priority Pass Select to gain entry to an airport lounge with free snacks and beverages. The Priority Pass app shows 5 lounges that we are supposedly able to access, but the Alaska Airlines lounges had signs at the entrance that said they were not accepting Priority Pass holders that day. So I walked up and down every terminal (C, D, B and then A) except N & S, and counted at least 10 airport lounges in that airport. I finally gained access to The CLUB at SEA where I spent a couple hours charging my devices, listening to a podcast, called my grandma (awww) and took advantage of somde free snacks.img_20180509_201456

At the end of Day 10, at one minute until midnight(!) I flew on a JetBlue flight in Mint class (first class with a lay-flat seat) to Boston. I booked the flight using JetBlue TrueBlue points, only 33,700 points, when that class was listed on other flights the same day for 70,000-110,000 points). I figured for my first-ever Red-Eye flight, it was a good idea to trade-up for some comfort, and I really wanted to check out Mint, anyway.

Arriving in Boston on Day 11, I will use some additional Hyatt points (15,000/night) at the Hyatt Regency Boston in downtown. Unfortunately I was about 1900 points shy of having the 15,000 needed for my second night, so I transferred 2,000 Chase Ultimate Rewards Points at a 1:1 transfer ratio to Hyatt from my accumulated Chase points (reminder: I have Chase Sapphire Reserve, Freedom and Freedom Unlimited, and I transfer all of my rewards to my Sapphire Reserve points balance to allow the points transfers to Chase’s travel partners). I was pretty exhausted from the overnight travel, but I did manage to walk 2+ miles to Fenway Park to take the tour of a sports and cultural icon, with some amazing views of the city.

 

Day 12, having caught up on sleep, I set out for a day of exploring. I had previously visited Boston in 2003, on a family trip before I turned 21, so I knew I had to stop at Cheers and have an adult beverage. I checked out the Freedom Trail and walked over to Bunker Hill and the USS Constitution. I also killed at least an hour watching various street performers in the Quincy Market area. I explored Chinatown a little bit and grabbed a local hard cider to go along with my dinner.

Day 13, I took the Silver Line MBTA bus to Boston-Logan International airport for $2.75 instead of the $23 and change that I paid a (terrible) Uber drive on Day 11 morning when I arrived in Boston. For my return flight to Southwest Florida (RSW airport), I used 8,600 TrueBlue points from JetBlue. I had these points plus the Day 10 red-eye flight points from the Barclays JetBlue Plus card, which came with a 40,000 point bonus for spending only $1,000 in 90 days. I forgot that the card also gives me a 10% refund on award redemptions, so I ended up getting  over 4,000 TrueBlue points back into my account (over $80 worth at 2c a piece).

So I share this whole story to say that I went overboard on a 13 day trip to celebrate the end of my previous job. I worked in a position that was effectively a full-time temp for almost 3.5 years. Due to this work status, I did not have any paid holidays or vacation time in that time, so I had this pent-up urge to hit the road, skies and rails to see more of this magnificent country. I could probably do without the overwhelming scent of weed/pot in the various cities/states I visited, but that only minimally reduced my enjoyment of these fine places. I’m excited to be moving into a position where I will be earning a standard 2 weeks of vacation and 11 paid holidays to help me get back on the road moving forward. I’m glad I had the opportunity to bank all of these various points so I could use them in this blowout trip around the US. Many in the travel-hacking community chirp the mantra of “earn and burn” or “churn and burn,” because there are constant devaluations occurring in the many points & miles programs. But for someone like me, there were zero opportunities to use the points/miles over the past 3 years (except for a few quick trips “home” to Indiana for the holidays) so the points were worthless to me until I could actually use them. And it was SOOO worth it once I could actually use them on a trip that will be in my memory bank until the day I die.

Mid-year 2018 update!!

By Josh  June 30, 2018

Can you believe that 2018 is already half over? It’s been a really busy year for me so far (details below), so time has just been flying by! I started this blog on January 5th 2018 with a post about writing down goals so you can track them, and I figured 6 months later it was time to follow up on my progress. So here they are again, with individual updates below:

  1. lose weight, obv
  2. achieve 1/4m NW
  3. draw down my travel miles/points through actual travel, not point expiration
  4. give up unhealthy/unproductive habits (especially driving for Uber)
  5. actively meet new & interesting people (Hello #FinCon18)
  6. begin a creative pursuit

1. I do not have good progress to report on this one. I actually have no idea what my starting point was for 2018 (bonehead move, Josh). But I recently started a new job that provided an opportunity for a Health Reimbursement Account (up to $500/yr in tax-free money to spend on health-related costs), but I had to go through a health assessment and have blood work done to set a baseline. I weighed in at a whopping 365.8 lbs. That’s 40 pounds more than Vince Wilfork and 30 pounds more than William “Refrigerator” Perry. So obviously this has sparked a renewed vigor in my daily actions to try and move the needle downward and make my weight loss goals to achieve that free $500. Wish me luck!

2. I have made progress this year on my net worth goal of $250,000, but in the past month it seems to be disappearing. I reached $245k in late May, but sit around $235k right now. Main culprit appears to be that Zillow has dropped my house value by $11k in the past 2 months. I also missed a few weeks of getting paid while I was between jobs.chart

3. Speaking of being between jobs; I was able to draw-down some of my travel points balances on a 13-day trip around the US from April 30-May 12. I had to turn in my work vehicle and computer equipment to headquarters in Tallahassee, so I decided to start my “Freedom trip” and used various points/miles from Delta, IHG, Hilton Honors, Hyatt, and JetBlue. I spent less than $217 out of pocket for a trip to Tallahassee, Atlanta, Los Angeles, Seattle (by train), Boston, and back home to Fort Myers, FL. Across those 5 programs, I spent a total of 206,940 points/miles, keeping in mind that not all points and miles are valued the same. I estimated a total cost savings of $3,596 by using points & miles. And I still maintain almost 700,000 across various programs for future travel!

4. After writing a 3-part series on the ups and downs of driving Uber as a side hustle, I picked up the habit again. I did it, in part, because Spring Break is the busiest time of year here in Southwest Florida, and also because I knew I had the job change coming up and needed to stash some extra cash to help ease that transition. I’m happy to say I’m now done with Uber (caveat: I turn on the app during my ~1 hour commute, each way, which earns me enough to cover my fuel expenses).

5. I’m still super stoked for #FinCon18 but I have been trying to meet new people in other settings, as well. I recently had the opportunity to attend a national conference of the Association of State Floodplain Managers (yes, I’m a total geek), and I gave a presentation on a one-of-a-kind project I worked on for the past 3.5 years. Having that platform, while slightly terrifying, provided an opening for me to share how much I love being an expert in my field and that I relish in the opportunity to help others. I had people from all over the country come up to me throughout the rest of the conference and try to pick my brain or otherwise engage in conversations about their own programs. It was such a great week, even though it was Phoenix, in June!! I’m also getting ready to attend the annual ESRI User Conference in San Diego on July 9-13. I have never been to this conference before, so it will be eye-opening and another opportunity to meet complete strangers.

6. Creative pursuit!! As you can now see, I have migrated this simple WordPress-hosted blog onto my own domain! www.joshovermyer.com belongs to me for the next 10 years, and I just paid to migrate it to a business page on WordPress for the next 2 years, so I am going to have to put some more effort in over here now. I should have the extra time, now that I’m done with Uber (again, for emphasis). I also still have some amazing creative ideas for items to bring to FinCon, so I will need to explore ways to make those ideas in my head become a reality. If anyone wants to help me make my sparks of creativity become actual things, I would love to talk to you about them.

Roth or Traditional IRA?

By Josh Originally drafted July 11, 2016. Posted March 10, 2018

Congratulations! You’ve decided to put your retirement future in your own hands and open an Individual Retirement Arrangement (IRA). But which should you choose, a Traditional IRA or a Roth IRA?

A Traditional IRA allows an individual to invest money pre-tax. That is the one true time when you can “Pay Yourself First”, even before Uncle Sam gets his hands on part of your paycheck. Investments grow tax-deferred, and you pay ordinary income taxes when you withdraw the money in retirement.

A Roth IRA is an account whereby the individual invests money after tax has already been paid. The same contribution limit of $5,500 still applies (in 2018), so why invest after-tax dollars? Upon the age of 59.5, all of the money in a Roth IRA can be withdrawn tax-free, because taxes were already paid in the current year, none are due on the investment dollars, nor the growth on those dollars.

So how do you decide which is right for you? It depends on your outlook.

If you expect tax rates to go up in the future, or you will have more income that puts you into a higher tax bracket, it might make sense to pay the income taxes today and invest in a Roth IRA for tax-free retirement dollars later.

If you have a high salary today and plan to live on less income in the future, a Traditional IRA is the way to go, to lower your taxable income in the present and pay taxes in a lower tax bracket in the future.

If you aren’t sure what to think, it is possible to split your $5,500/year investment into both. This year I already maxed out my IRA contributions, with $3,000 going into Traditional IRA (to lower my current taxes) and $2,500 into my Roth IRA (to give me tax-free withdrawals in retirement).

Another consideration is what types of investments you will be making with each account. Some investments such as stocks or REITs pay dividends, which may be treated as taxable income. Consult a tax professional to see what is right for your preferred investment choices.

Some people prefer the Traditional IRA because $5,500 of your annual income can go straight to the account and you’ve met your annual maximum contribution and will reduce your taxable income by $5,500. On the other hand, one must earn $6,160 before taxes (assuming 12% for this example) to earn $5,500 after taxes for the maximum Roth IRA contribution, and there are no tax benefits in the current year.

There are income limitations for Roth IRA contributions, which vary depending on marital status. Some people have figured out a back-door Roth conversion from Traditional IRA contributions, but taxes must be paid in the year of the conversion.

A final word on the Traditional vs. Roth IRA battle royale is that there is no wrong decision. In fact, it may be useful to employ any of the different combinations explained above, including contributing to a Traditional IRA during your working years, and then using a Roth IRA conversion ladder as your income shrinks in retirement. Many Early Retirees use this strategy to combine the tax benefits during their working years with the tax-free income benefits during early retirement.