Passive Income

This Guy Paid Off His Mortgage In Three Years. So, Why Does He Regret It And Why Is Everyone Angry At Him?

/ destinationscreditunion / Leave a comment


There’s not much in life that is more freeing than finally paying off a large bill. Suddenly, our checking accounts are flush, the future feels more open, and even our favorite jeans seem to fit better. When it comes to a mortgage, of course, that seems so far down the road it’s difficult to imagine, particularly for those just starting out.  If you’ve always paid rent or a mortgage, it just kind of feels like that bill is always there, the background noise of your life. 
So, when 30-year-old Canadian resident Sean Cooper paid off his mortgage in three years, he celebrated by burning his mortgage papers and found a news crew to film it.  But, here’s the twist: He isn’t happy about it, and judging from social media posts and comments on the news coverage, no one else is, either.  In fact, Cooper seems full of regret and everyone else is full of scorn or pity.  What’s going on?
Cooper sacrificed a lot to pay off his mortgage, and even he admits he focused too much on his financial goals.  He worked three jobs, including as a full-time CAD technician $75,000 (about USD $56,000) white-collar job, a customer service job at a local grocer, and writing freelance articles.  In addition, he supplemented his income by living in the basement of his home while he rented the house to others.  As many commenters note, that’s not a healthy way to live and it’s unsustainable.
Often, we lose sight of what’s around us when we focus on our financial goals.  That moment when the bill is paid seems so sweet that we don’t really think about everything it’ll take to get us there.  If you’d like to make financial headway on your mortgage without making yourself crazy, we’ve collected some tips below.  The key idea among them is finding a balance, so you’ll need to adjust them for your own personal situation.  If you’d like a more personal meeting to discuss your financial goals and finding balance, let us know.  Also, follow us on Facebook and Twitter. 
Take gigs, not jobs.  It’s easy to see why renting out one’s home and securing extra employment are so appealing.  Regular income feels safe and makes it easy to plan ahead.  But extra employment can also be confining; It’s difficult to work full-time and still find time for your hobbies, your family, or the occasional afternoon spent binge-watching Netflix (something everyone needs occasionally).  If you don’t find time for your hobbies, you’ll find that your job has become your hobby.  If you don’t spend time with your family, you just won’t have the bonds that families need.
Instead, look at gig-based jobs like Uber and Air-BNB.  While they might not offer the steady income of a regular-hours job, you can scale your work up or down depending on need and availability. Plus, if you don’t feel like working on a given day, you don’t have to.  With Air-BNB, the owners of a rental property can cancel for any reason with as little as 24 hours notice.  That’s the kind of fantastic option that’s not available if you have renters who are playing their music a little too loud above you. 
Turn your hobby into a gig.  If you want another way to generate income, one that doesn’t require you to do mindless tasks, and you want to keep enjoying your hobby, then it might be time to turn that hobby into a gig.  Do you scrapbook or make crafts?  Open a store on Etsy.  Are you an avid collector? Start investing and re-selling collectibles on eBay.  Do you build or tinker? Time for a workshop. Have a design? Put together a working prototype and take to Kickstarter.  Want to write a novel?  Fifty Shades of Grey and The Martian both started life as fan-made, self-published ebooks. It’s never been easier to find an audience or customer base.
If you’re looking to make the move from weekend warrior to someone who can make money with your passion, get some start-up capital. You’ll need workshop space, supplies or a new laptop.  We’ve got a lot of ways for you to invest in yourself.  Who knows, that investment could be the start of a new path to leaving the rat race behind. 
The goal is financial security, not paying off a single bill. There’s no prize in paying off your mortgage. It’s just one less bill to pay.  Your goal is overall financial security.  That could mean refinancing your mortgage to have cash in hand when interest rates are low, or investing significantly when interest rates are high.  So, don’t pay off your mortgage while racking up credit card debt or neglecting your student loans.  Instead, take a look at all of your debt.  Work from the highest interest rate to the lowest, paying off each in turn, so you can pay as little interest as possible every month.
One of the easiest ways to do this is with a home equity loan.  Using the equity you have built in your home will get you a lower rate than your credit cards or medical bills are charging, and it can even be a fixed rate, so you can benefit if the Federal Reserve raises interest rates.  All you need to do is secure a home equity loan then transfer your credit card balances onto the loan.  Sometimes, simply calling the credit card companies with a check from your home equity loan in hand will get them to drop the rate you’re being charged.  Fantastic! Now you can use your loan on a different card.
Whatever you do, you’ve got to be happy.  It’s difficult to find balance, particularly with debt and obligations hanging over our heads. The solution isn’t to take on more obligations and retreat from humanity. The solution needs to be understanding that money exists as a means to an end, not an end itself. 
Sources: 
http://nypost.com/2015/12/03/no-one-is-happy-for-the-man-who-paid-off-his-mortgage-in-3-years/ 

http://www.dailymail.co.uk/news/article-3345476/Frugal-man-30-pays-255-000-mortgage-THREE-years-thanks-Kraft-dinners-bike-riding-100-hour-work-weeks-no-one-admires-it.html 

http://www.theglobeandmail.com/globe-investor/personal-finance/household-finances/meet-the-mortgage-free-30-year-old-whose-frugality-riled-the-internet/article27539357/    

How Will I Ever Retire If They Keep Moving The Finish Line?

/ destinationscreditunion / Leave a comment


What happens if you’ve made it to the day you thought you’d be retiring, but you’re simply not financially ready? Perhaps you passed your “Plan B” date. Maybe even “Plan C” has come and gone. You know you’ve been making the right moves, but a temperamental stock market, kids who stayed home longer than expected or an unlucky series of events keeps pushing back your time frame.  So, in exasperation, you ask … 

Question: “How will I ever retire? When will it be safe to stop working?“ 

Answer:  Well, hopefully very soon.  We’re going to show you some ways to put luck back on your side.  It’s going to be part planning, part faith and a good deal of ingenuity, but we can get your pictured future back within sight again. 

Question:  “OK, so how do I know when I’ll have enough money?” 

Answer:  The first thing you need to do is realize that enough money is possible.  It’s scary to read headlines about Boomers running out of money because they lived so long, especially when they’re coupled with stories about how the 4% rule isn’t enough.  If you take these articles at face value, you’ve got to come up with 40 years of savings, assuming you’ll be taking out as much as 10 percent of your nest egg every year.  Because it’s difficult (if possible at all) to get to that point, it’s easy to give up. 

Instead, go back to 4%.  Or, if you’re being conservative, make it 5%. That’s a 25% raise! That’s a lot! Then, remember the lessons of your working life: Anything that happens far in the future should be weighted far less, because you never know what might happen between now and then.  You might find you don’t care for fly fishing that much or you no longer need that annual trip across the country. Your neighborhood’s home values could rebound.  Maybe you’ll stumble onto a strong investment.  There’s too much uncertainty in life to freak out about what’s going to happen far away into the future. Take 5% out, per year, until you’re 85.  That’s plenty. Anything beyond that is too much. 

Question:  “How can I make sure I’ve got enough retirement income?“ 

Answer:  One of the easiest ways to produce panic is realizing that money only flows one way once you stop working. You’ve been conditioned to treat any month in which you spend more than you earn with revulsion, shame and guilt. Now, that’s going to happen every month – for the rest of your life.

A lot of retirees feel more comfortable with money coming in on a regular basis. You can accomplish this in a variety of ways.  First, try to put off Social Security as long as possible.  The higher payout will make retirement much easier. Second, try to create passive income using investment products.  In the same way that dividend-producing stocks pay out on a regular basis, you can create passive income that can be accessed any time by moving chunks of your retirement into high yield savings products like money market accounts.  That way, you can still budget the way you used to without having to sell your stocks (while hoping you guessed the right time to sell).

You can also create passive income by using your home equity to fund a business venture.  Right now, mortgage rates are low, but a lot of Boomers are missing out because they paid off their homes in order to retire.  You use a home equity line of credit to buy a rental property (which builds equity at the same time it gives you a paycheck) or start an online business built around your hobbies.  If you love to knit, sell handcrafted items on Etsy.  Do you like to fish? Start manufacturing lures with the equity in your home.  These ideas can generate a monthly income for you and also give you something else to leave to your children.  In a pinch, you can even sell the rental property or sell shares in the business for a quick cash infusion. 

Question:  What about my health?  That can be a big cost, even with Medicare. 

Answer:  One of the best places to put some money when you retire is into various forms of insurance. You probably already have life insurance, homeowners, and insurance on your other big purchases, but you also probably only have Medicare to cover the health side of your insurance portfolio.  What happens if you need something Medicare doesn’t cover?  Is it worth it to go on Healthcare.gov and try to find a supplemental plan?

One way to keep your options open is to try a “do-it-yourself” Health Savings Account (HSA).  While traditional HSAs gain their benefits from your employer paying into them, you can get a lot of the same benefits simply from putting some spare cash into one of our high-yield money market accounts.  That way, you’ve got money put aside for a health emergency, but you’re not spending on a premium you’ll only need very rarely.  As an added benefit, you can access that money if you need it for things that aren’t health-related if some other kind of emergency comes up.

Hopefully, you’ve gotten a better idea of how to tackle retirement.  You need to have faith and protect yourself at the same time.  The best way to do that is to put your money with someone you trust and give yourself access to it, just in case.  If you need any more info, want more guidance, or just need someone to talk to about taking the leap, give Destinations Credit Union a call at 410-663-2500.