My Love Affair with Savings Bonds

Today my 5-year T-Bill that I had forgotten about matured. As I do every payday, I checked my bank account to make sure my paycheck made it to where it's supposed to go (yeah, ok, so I don't trust anyone, including the big no-name corporation I work for who is trying to outsource my job to India every time I'm not looking).

I was very puzzled over the extra money for a few seconds until I remembered the day, 5 years ago, to celebrate finally paying off my $20k of debt that I had accumulated, I splurged and bought myself a T-Bill with the portion of my paycheck that I had been throwing at my credit cards.

It reminded me of a MySpace blog I wrote in 2006 on a slow day at work. Here it is.....

It's a Beautiful Thing

Category: Jobs, Work, Careers

Since I don't want the top blog on my blog list to be such clear evidence that I have a tendency to freak out once in a while, I wanted to post a blog - any blog - to bump that last one out of the spotlight. And since it's rainy and sucky out, I can't write about sunshine and daisies, so the next best topic I can come up with is something helpful.

So here's my something helpful. I hope it helps....

(Try and stay awake. I know you think this is going to be boring, but try anyway).

The Beauty of Savings Bonds

Savings bonds are a beautiful thing. Really. Poor savings bonds have held the title of mind-numbingly dull baby-gifts for as long as I can remember, but what most people don't realize is that they're baby-gifts for a reason. Sure, they're cheap, they take a looong time to mature, and they fit very nicely in the junk drawer, ready to be forgotten until you're packing up your house to move somewhere else. But what makes them so boring also makes them handy.

The great thing about savings bonds is they're not liquid so you have to let them mature (for the most part), they tend to pile up, so before you know it you're sitting on a pretty pile-o-cash (eventually), and...yeah, well, they're cheap.

They make ideal gifts. Check it out:

What's the best wedding gift you can give? Something that says "I have faith in your marriage. I truly believe that you will be together for at least the next 30 years." Voila! Savings bond! You buy one with both people's name on it and you are declaring your faith in the couple's marriage - they'll have to stay together for at least 30 years if they want to share the full value of the bond. Of course, it has a nice little loophole too: To get two people's names on a savings bond, you have to have an owner and a beneficiary. So the person that you're actually close to in the wedding is the owner. If there's a break-up, the beneficiary can be legally shit outta luck (hehe).

Heading to your 5th baby shower of the year? Had enough of spending your hard earned money to outfit someone else's nursery? Savings bond! You hand over a savings bond that has $50 printed real big right on the front....but you only paid $25! Woohoo!

Ok, so savings bonds make great gifts, but guess what - they are great for your own retirement too. On http://www.treasurydirect.gov/ you can have as little as $25 periodically taken right out of your bank account to buy one of these handy little puppies. AND, having those $25 automatically coming out of your account each month (hint, hint - have it taken out ON PAYDAY), you actually forget you ever had it. Look:

If you put away $25 per month, every month for the next 30 years, you will have saved $9000. Eh....not much. But if you had those $25 going toward a savings bond each month, each of those bonds will double its value after 30 years. Assuming you're about 30 years old when you start, that means that between the ages of 60 and 90, you'll have a continuous (albeit small) cash flow amounting to $18,000.

Yeah, ok, that's essentially nothing ($1.67 a day). But when you're retired and your entire social security check (if you even get one) is going towards the rent, then your savings bonds will at least buy you a cup of coffee and a donut every day between 60 and 90 years of age. And really - do you want to retire without enough funds for a cup of coffee every day? If you had simply stuffed those $25 per month in your mattress, you'd only have $0.83 a day every day for 30 years.

HINT: You don't actually have to cash the bond in after 30 years. You're allowed to hang onto them for up to 60 years, allowing them to quadruple in value. But that's no fun...

Sure, it's not much. But with social security dwindling and corporations throwing pension plans out the window, every little bit counts. After all, you don't have to only buy $25 bonds per month. You could conceivably buy $100 bonds per month. Or more. It's all up to you and how much you expect to accumulate in your 401k....if you have one.

The biggest shining beauty of savings bonds? TAXES!!!!!

First of all, you don't pay taxes at all until you cash in your savings bonds. That means that the interest that is accumulating in your bond (which is what makes the bond double its value over 30 years) does not get taxed until you cash out the bond. Is this good because you're just delaying paying those taxes? Well, yes, but it also saves you money. If you were paying taxes on the interest as it accumulates, it would take longer than 30 years for the bond to double its value. Why? Because the more money accumulated in the bond, the more interest you get paid. If you're paying taxes as you go, then there is less money to pay interest on - hence it would take longer to double the value of the bond.

Secondly, savings bonds are exempt from state and local income taxes. That means that even when you do redeem your bond, the state and local government CANNOT tax you on that income (federal only taxes you on the interest accrued).

--By the way, if you use savings bonds to save for your child's education, NONE OF IT IS TAXABLE - NOT EVEN FROM THE FEDERAL GOVERNMENT!

--If you use bonds to supplement your retirement, since you'll be redeeming them at retirement age, you'll most likely be taxed at your lower retirement age income tax rate.

--You can transfer your partially matured bonds to your child's name. If you cash them out under your child's name before your child becomes an adult, the interest will be taxed under the child's LOWER tax rate.

So, you see, savings bonds are a beautiful thing. I love them - they are a foundation in my repertoire of gifts, and I currently am sitting on several thousand dollar's worth of bonds just waiting for me to retire. I absolutely have money automatically taken out of my bank account just to buy some of these beauties every month.

PS - Can anyone tell it was a sloooow day at work today?

No Mortgage No Rent

I fucked up.

I fucked up real bad.

Just out of school, I chose the path of greed: I accepted the job that would allow me to move out of my mother's house instead of the job that I liked. And now I'm paying for it in stomachaches, stress, grey hairs, and boredom.

I hate my job and I want to quit. Desperately.

The way I see it, I have 2 options:
Option 1: Get rich. (Yeah, right.)
Option 2: Wean off the paycheck.

I choose to wean off the paycheck.

To my surprise, there is a ton of reading material out there on how to do exactly that. Basically, I need to reduce my need for money so that instead of having a lot of money, I have just enough to cover what I need.....so I need to reduce my need.

I talked it over with my husband. My husband usually just humors me because he knows that most of the time all he has to do is wait it out and my latest obsession will fade before I complete it, and this time is no different. He agreed that if I can get us to a place where we have no mortgage and no rent, then he will agree to me setting us up to live on as little as possible. Here is our list of requirements:
1. No mortgage
2. No rent
3. Internet access
4. Electricity
5. At least 3 rooms (and a bathroom)
6. Running water

The Plan:

1. First thing's first: that condo in Brooklyn that's like a ball & chain around my neck. Selling it is definitely part of the plan, but selling it now is not. Selling it now is like buying high & selling low, so we're going to have to hang onto it for a few years. I need it to be self sufficient with a large cushion so that I can pay the mortgage for a full year even if there are no tenants in it (just in case). Then sell it after this recession is over.

2. Pay off the car completely. Even if this obsession does last long enough to get us to no mortgage no rent, my husband doesn't want to stop working, so we'll either need to keep the car, or I'll have to figure something else out (horse & buggy? bikes? hehe).

3. Save up enough to buy a piece of land outright. In cash. And figure out how to get 3 rooms (plus a bathroom) onto it. Oh. And learn how to farm since that's how we'll be getting our food.

Now I just need to figure out how to accomplish this. Wish me luck. Ideas are welcome.

Little Apartment in the City

Since my job moved to Dubuque in June, I've been thinking about what the next step is for me & my husband. My initial reaction was to start saving for a house immediately. I had a pocket full of glee at the fact that finally -FINALLY- I would be living somewhere that is cheap enough that would allow me to have a house.

I've spent the majority of my 37 years running towards the goal of house house HOUSE! I went to college so that I could have a house with a yard and a garden and a finished basement, finished attic, a garage stuffed with junk that I forgot I had, 2 or more bathrooms, guest room, dining room, living room, den, chef's kitchen, walk-in closets for clothes that no longer fit along with clothes that do. I spent my 20s waiting for my 30s, when I would be making enough money to pay off my towering and suffocating debt so that I could turn around and throw all of that extra money at a mortgage. I spent my 30s (so far) watching most of my peers moving into houses, having babies, driving cars, and me paying the same amount they were but for an apartment. A condo apartment, yes, but an apartment all the same.

And then I moved to Dubuque.

I got tenants for the condo back in Brooklyn, bought a Jeep, slapped my hands together, rubbed them, licked my lips and started a spreadsheet. How long would it take me to save up a 10% down payment for the houses that I very suddenly could afford? How about 5%, are the banks so clamped down that I can't start with 5%? What about that CD my mom bought me for Christmas years ago - should I cash that in? Maybe I should sell the condo in NY and use that money toward a down payment on a House.

And then I stopped.

I looked around the 16th apartment I've lived in over my 37 years (not counting dorm rooms) and saw that I had arranged my same old furniture in the same way I had in the last 2 apartments. As I moved from room to room (to room...and that's it, the rest is the kitchen and the bathroom), I felt pieces inside me starting to shift.

I thought about the condo back in NY. One of the reasons I moved to Dubuque in the first place is because I wasn't sure I was going to be able to hang onto the place if I stayed. My husband was recently laid off, and I was about to get laid off too. As it was, we were living paycheck to paycheck. If I got laid off too, the outlook for one or both of us getting a job soon enough and that paid enough to cover the hefty mortgage on the condo was looking pretty grim; it looked like the Great Recession was going to stay around for a while. So I rented it out and hightailed it outta there rather than face the looming probability that I would become so unoriginal as to be foreclosed upon.

I thought about the fact that here in Dubuque my rent is literally 23% of what I was paying for that condo (actually, it's 22.717885171416769929781082197439%). I thought about the fact that my husband & I are planning an overnight trip to Chicago for Christmas. I thought about the fact that we're planning on getting season tickets for the local ski slope. I wondered: if I got laid off while I'm here, what would I really lose? Overnight trips to Chicago and season ski slope passes? I can handle that.

This has been brewing for a while, but I think I'm ready to admit something out loud. I already freely announce that the thought of being a "mommy" makes me shudder. I'm pretty open about the fact that I feel not only forced into having a car, but I also feel seriously inconvenienced by it. I'm pretty sure I spent my ambition in my 20s and early 30s; I don't feel the desire to be promoted or even recognized (actually, I think what I and my colleagues do are pretty pointless in the big scheme of the world, but that's a different blog). I think I'm finally ready to say this:

I'm not sure I want a house.



PS. The photo is of my apartment in Brooklyn :)