Personal Debt: Have We Forgotten 2008?

A recent Federal Reserve report contains some disturbing news about personal debt trends in the U.S.  First, total consumer debt is at its highest level since 2011. ($11.5 trillion if you like to read large numbers!) Even worse, the level of consumer debt (mortgages, car loans, student loans and credit card debt) increased by 2.1% during the last quarter of 2013.  That’s the fastest rate of increase since the third quarter of 2007. Do you remember what happened  shortly after that? I sure do, which is why I am so reluctant to trust the equity markets with my retirement money.

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My Simplified Pre-Retirement Budgeting Strategy

I don’t like using detailed budgets because of the time involved in monitoring and entering expenses in multiple categories. Using a detailed budget also conflicts with my continuing goal to simplify my life. On the other hand, I like to know and confirm that my pre-retirement outgo is less than my income. That brings a peace of mind that is important to my “big picture” goal of  increasing my net worth while I am still in the accumulation phase of retirement planning.

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Another Mortgage Refinance

We are re-financing our mortgage again.  In 2010 we refinanced to an adjustable rate mortgage at 3.875% for 7 years with a 30 year amortization. Recently I began investigating improving this because market rates continued to fall. This investigation has paid off so we are now going through another refinancing.

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You Have Alternatives to Big Banks and their Fees

After more than two decades as customers, Mrs. P and I dropped Bank of America completely – including mortgages – in 2010. Even if we hadn’t changed then, BOA’s announcement that it will begin charging a monthly fee for using a debit card would have caused me to dump them now. Citi is moving in the same direction with more fees and all of the other big banks are sure to follow.

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Boomers Trapped by Mortgages

The news continues to be bad about folks who are close to retirement age and their debts. It seems that some boomers are just slow to understand that the more they borrow now, the longer they will have to work to pay it off, if they can keep working. I don’t get it. Maybe some of you can explain it to me, after considering the recent statistics.

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Reverse Mortgage Risks and Benefits in a Nutshell

Much continues to be written about the use of reverse mortgages as a source of retirement income. Also, reverse mortgage products are aggressively promoted by the companies that offer them. That by itself should raise a red flag for those considering them. With so much invested in marketing these products, you have to suspect that a reverse mortgage is a much better deal for the lender than for the homeowner-retiree. That means, of course, that they are a very expensive way to generate retirement income.

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Beware of Tougher Mortgage Lending Requirements for Condos

Condominiums have a lot of appeal to some retirees and baby boomers looking to downsize. We are brand new condo owners ourselves. I’m not going to review in this post all of the potential benefits and drawbacks of condominium living, because we are still learning. So far, so good for us. However, other potential condo buyers out there need to be aware of new mortgage lending standards being applied.

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