GI Jane Finances

August 21, 2010

Revelations and Epiphanies

Good news! I will finally find out the promotion results on 26 Aug.  I am also planning on visiting Chicago, North Carolina and Toronto in Sept.  Chicago for my godson’s confirmation ceremony.  My friend bought a house in North Carolina.   Also, my very good friend of 19 years lives in Toronto.  I have never met his sons.  He works for the United Nations in Toronto and travels a lot.  He did visit me in San Antonio and Louisiana.  I visited him once in Ohio when he was head of the college dormitory housing.  I have a dear uncle, aunt and cousins who live in Toronto.  The last time I was there was in the early 90’s.  I remember being very bored, but was impressed on how clean and safe everything was.

Enjoyed the past two Suze Orman podcasts.  She really has changed and adapted with the current climate.  I was delighted to find out that she has a “use cash” program.  Suze is challenging people to not use debit and credit cards.  I thought she became a shill for credit cards and sold her soul to myfico!  I only use my credit card for grocery shopping and any purchases on online mainly for the points.  I pay off the balances as soon as it is posted.  My new AMEX gold card will not let me pay quickly for some strange reason (I’m sure they are hoping that I forget). But I use cash to pay my rent, utilities and any local shopping I do.  If you use a credit card on the local economy, there is an extra charge.  

Her opening guest did the cash only challenge for two months and saved $800.  She did fall off the wagon and had to move in with her parents.  I think she is on the right path at age 26 and trying different strategies to win with money.  I started trying new things at 27.  Next, I learned good stuff on long-term care health insurance.  It is helpful since my parents are discussing how they are going to retire without having a pension.  Genworth has a policy for $6000 a year. Suze said to buy LTCH insurance by age 59.  I’m sure it will be double in the 19 years when I will need to buy one. 

In the two “How am I doing segments” she had one couple who had about $1.3M who retired early but had their money in money market accounts in their 50’s.  Money Market?!?! I thought I was conservative.  The wife needed to return to work for the health insurance.  Suze admonished them because their plan would cause them to tap into the principal since their investments only currently generate 1% in interest.  They just needed their plan to be tweaked and rearranged. 

The second segment had a single 45 years old  retired but working Army veteran.  I always like it when she features someone in the military.  I was very impressed with the amount of cash retirement and emergency fund savings: $239,986.  Suze thought she had a low amount saved for retirement considering her age.  I kind of agree with her.  However, it is unfair to compare a servicemembers retirement savings to what a civilian would have at the same age.  The military does not match in the Thrift Savings Plan.  The military TSP did not begin until 2001.  So, she must have invested in something like a Roth, Traditional IRA or some other vehicle for around a decade.  Therefore, kudos to her for retirement saving since only about 20% of servicemembers end up with a pension.  She may have saved the other $100,000 from her deployments.  Plus, she still young enough to start another career with a $2,100 pension that is worth at least $1M. 

Now, the bad news…she is overleveraged in real estate.  Her primary mortgage is underwater by $36,000.  She has a rental with some equity.   Mortgage debt is $267,636 and home equity is $182,364 equals -85,272.  If that isn’t bad enough, she cosigned for an $189,000 mortgage note for her daughter.  That brings her mortgage debt to $274,272 (without knowing if her daughter property has equity).  I was in her same spot with two houses–without accounting for the rental equity but without the $100,000 in liquid cash and about 8 years younger.  So, she can turn it around and may have to chip away from her cash like I did.  The big wild card is if her daughter will be able to refinance the mortgage in her name…which I doubt especially in this time in age.  Unless, she ponies up $37,800 to help her with a 20% down payment.

Interesting segments.  I think I learned a lot.  Suze is my hero again…for the moment.

GI Jane

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