26 November 2011

Random bullets of November

I'm feeling unimaginative lately, which is why I haven't posted anything. I'm not even desperately busy; indeed, if I were, I'd probably have more heretical ideas about teaching, or more updating about writing projects, or whines about committee meetings. But we're just chugging along here. Nonetheless, just to prove I'm still alive in the blogosphere:

  • The Grammarian is a very strange sort of picky eater. He meows piteously for food. I put down a plate with his usual food on it. He stares at it in horrified disbelief and informs me that I am trying to poison him, he can't eat this slop, he has been miserably betrayed by someone he had trusted to have his best interests at heart, etc. etc. I run my finger through the food, force his mouth open and smear it on his tongue, whereupon he says, "OMG cat fud!!! Why u not SAY so?" and sets to.
  • Why is it so hard to find a financial-advice book that will just answer some simple questions (or at least run through a list of things to think about when considering various situations) without a lot of touchy-feely claptrap? With all due respect to the Grumpy Pair (and that's quite a lot of respect) and their enjoyment of Your Money or Your Life, I'm quite clear on my values and my risk tolerance, I am very well aware of the costs of my commute, and I don't want to live in jeans and thrifted clothing making my own bean soup like some damned hippie (grumble grumble), except on maybe one weekend a month, because I do, after all, hail from hippieville and the apple doesn't fall that far from the tree. Suze Ormond, a recommendation from someone else, also has a lot of "spiritual" blah-blah. I just want to know, hypothetically, how to balance the tax advantages of having a mortgage plus a larger lump sum in the bank against not having a mortgage and having a smaller lump in the bank. Sure, it's a nice hypothetical problem to have. How do I approach it?
  • In these days of miracle and wonder, the long-distance call and e-mail, it is a complete delight to get a hand-written letter from an old friend. Such a sense of intimacy and connection! It's enough to make me contemplate sending a few Christmas Solstice cards.
  • One more week of classes. Just three days of actually meeting students. But OMG that means I have to invent a final exam right quick.
  • I am never going to get involved in conference-organizing again. Be it resolved.
  • Writing update: I have now drafted two chapters of the Unexpected Book. Both need work, especially with source material, but the basic argument is in place. I think I am going to use the winter break to try to finish an article (the MMP) that should have been finished a year ago; my library now has a reference work I need, so that should help a bit, except that the library will be closed for a couple of weeks (where are the foreign/broke graduate students supposed to go???). I will need to cannibalize that chapter for a conference paper this spring (and I think I should get at least some of the source material worked into that paper), and I have another conference paper to write, so making this decision makes me a little nervous: I'd rather like to do those things first. OTOH, conference papers don't have to be as complete or as polished as full articles, and I do have the chapter as a base for the one; so I think I can do those things while teaching, whereas the MMP needs some undiluted thinking time. And it would be so great to get that particular monkey off my back.
  • Now that I mention it, getting the MMP out ASAP is a great idea because if I can get an R&R within six months, I can work on it in the summer while I will have access to the relevant manuscripts. Be it resolved.

6 comments:

nicoleandmaggie said...

Your Money or Your Life isn't about finances, really, it's about Life and Jobs and Career. (And no, you don't have to be like the author! We at grumpy rumblings enjoy the finer things of life and will never give up our gazingus book pins.)

If you want a straight up Finance book that doesn't just take one path and discusses pros and cons of different styles, Your Money The Missing Manual by JD Roth is a great primer. It doesn't go deep into investing-- if you want investing I'd recommend The Bogleheads Guide to Investment. (No touchy-feeliness there.) The CNN/Money primers are also useful as are the Motley Fool basic pages (before they decided to start shilling individual stocks).

From what you're saying, you may be a good fit for The Smart X Finish Rich guy, David Bach. Any one of his books.

As to why there's so much touchy-feely stuff... well a lot of people who get into money problems need the touchy-feely stuff. They need the tough love you can do it approach of Dave Ramsey, or the exploring the family emotions from Suze Orman.

You can also ask us on our blog and we'll devote an Ask the Grumpies post if you've got specific questions. Though it may take a while if the question is harder to answer than, "Do you want an octopus?"

As to your particular question about pre-paying the mortgage vs. keeping money in the bank, we actually have a post or two on that already and GRS has several posts on how to approach that question. I'll dig them up in a bit. Personally I found the GRS mortgage prepayment spreadsheet to be incredibly helpful in that respect because it allows you to run through a bunch of different scenarios.

There used to be a good calculator on the internet that will calculate your effective mortgage rate based on your tax rate, but the link has been broken for some time. There may be another by this point.

Dame Eleanor Hull said...

Thanks for the GRS suggestion---I've found some useful posts there already (& how come I'd never been there before? you guys must have linked).

nicoleandmaggie said...

Here's where you can get the amortization spreadsheet:
http://www.getrichslowly.org/blog/2007/10/01/accelerated-mortgage-payments-and-the-grs-amortization-calculator/

It looks like this will give you your effective interest rate once tax deductions are taken out: http://www.bankrate.com/calculators/mortgages/loan-tax-deduction-calculator.aspx

In terms of interest rates: How likely are you to need to borrow money at a higher rate than your effective rate in the future? If you're unlikely, then there's less reason to keep your mortgage. (It's better to keep the mortgage and pay cash for the next car, for example.) If you have a higher risk tolerance, you may want to keep a historically low mortgage on your house to free up that money to invest in the stock market. Only do this if you're sure your income stream will keep up your fixed payments even if you lose everything extra on stocks.

If you're worried about an earning member of the family losing a job, then that could do two things to your decision about paying off the mortgage. Here you would want to calculate how much lower your fixed expenses are each month without the mortgage (remembering you still have to pay escrow). If it's a big chunk, can you handle one earner not bringing in money with the new lower expenses? If so, then it's less risky to pay off. If, on the other hand, the mortgage (minus escrow) is only a small portion of the monthly budget, then having that money as cash in an emergency fund is less risky because it will provide a buffer while the person tries to find another job and you try to cut expenses.

So there's some thoughts on how to approach the problem.

nicoleandmaggie said...

Forgot one other factor: If you're thinking about moving. Mortgages are less attractive if you're planning on staying put for the long haul. If you're positive you're going to move there are some skeevy things you can do with ARMs that may be better than paying off the mortgage (assuming you can find a buyer for the house when you're planning on moving).

Narya said...

The NY Times also has a very straightforward calculator that compares buying and renting . . .

profacero said...

Never forget maintenance and repair. And the question of what you want to live in.

I bought the house because it was really cheaper than renting, especially given what you could rent (not much). Otherwise I think there are a lot of advantages to renting over owning, even with the tax advantage of a mortgage - esp. in a state with noticeable property taxes (I am not in one such). Buying/prepaying is good if you're staying, less so if you are not.