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Bingo! Loan modification scored

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Under construction

After much hassle and bureaucratic hoop-jumping, the credit union finally let us know on Friday that we got the desired loan modification on the downtown house M’hijito and I are copurchasing.

That will help a great deal. It drops the mortgage payments from something over $1400 to about $1,085 a month. This comes as M’hijito’s roommate is talking about leaving (an on-again, off-again proposition). Roommate’s rent payments have been modest, but he’s also been paying all the utility bills, which, because the house is a sieve and because Roommate is home during the day, can be very high in the summertime.

It means that if and when Roommate leaves, M’hijito should have no trouble continuing to pay his half of the mortgage. Meanwhile, as long as the rent continues to come in, we can either stash the extra $300 savings to cover repairs and upkeep on the house (which is what M’hijito is already doing with the rent income) or we can use it to pay down principal.

My part of the mortgage payments comes out of a nontaxable fund of cash retrieved from an ancient whole life policy. If we do nothing at all, it means we now have enough to cover almost 18 months’ worth of bills instead of only a year’s worth. If we manage the money intelligently, we may be able to engineer something better.

What we really needed—and what I asked for, in the nothing-ventured-nothing-gained department—was a cut in the principal on that loan. We need to have the principal reduced to something closer to the house’s actual value. If you believe the ever-reliable Zillow, the place is now worth about $52,500 less than we owe on it.

In about 11 years, the loan will spawn a balloon payment: at that time, we will have to pay off the balance, refinance, or sell.

I will be very surprised if the house is worth what we’re paying for it 11 years from now. Under the original 30/15 terms (interest is figured on a 30-year basis, but the loan comes due in 15 years), by the end of the 15-year period the principal would have dropped to about what Zillow says the place is worth today. This mortgage modification will change that: to engineer the drop in payments, the credit union not only is dropping the interest rate to 4 percent, it also is prorating the loan over 40 years. Thus in 15 years we probably will owe more than we originally calculated (because principal and interest payments are both lower), unless we use the $300 a month savings to knock down principal now.

But we’ll have to cross that bridge when we come to it.

February Budget: On target

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Well, so far, so good: We’re two months into Bumhood, all this month’s bills are paid, and the budget is still running in the black!

That’s in spite of a plumber’s bill!

This month’s regular recurring bills were quite low. One was zero: having prepaid the February COBRA premium in January, I owed nothing this month. The power bill (SRP) also was very low, because the weather has been warm enough that I haven’t had to run the central heating.

What we can see here, though, is that even if I had paid COBRA in February, I still could have afforded to pay a modest repair bill: $252 less the COBRA premium of $185 would have left $67 in this part of the monthly budget. That happened only because the plumber’s bill came in the middle of the winter. In the summertime, power and water bills run about $200 higher than the winter bills, and so those costs would have eaten up most of the budget, leaving too little to cover a household repair.

However, last month $112 remained from the budgeted amount, despite my having paid $313 to COBRA. When the January balance is added to this month’s $252 remainder, some $364 is sitting there, waiting to take up the slack in the summer.

To cover the May, June, July, and August utility bills, I’ll need at least $800 more than I’m having to pay now. The amounts budgeted, as a matter of fact, are based on the summer 2009 utility bills, and so even with the coming rate hikes, there probably will be enough to pay the highest 2010 power and water bills.

Moving on, this month’s “discretionary” spending—the cost of everything other than monthly recurring bills—also stayed under control:

With $73.91 left over at the end of the credit-card billing cycle, I’m doing better than last month, when only $43 remained of the budgeted $800. This is in spite of making a run on the very dangerous Baker’s Nursery and in spite of buying $61.97 worth of cosmetics. Too, gasoline ran significantly higher than the $60 allotment: in February I ended up spending $95 on gas!

But here again: with $74 left from this month and $43 from last month, a small, de facto cushion is slowly piling up in the “discretionary” category, too.

Now that cash is finally flowing in from Social Security and from the community colleges, there seems to be plenty of money to cover budgeted costs. Projecting all income and outflow through the end of March:

February was a little precarious, I will say… But it looks like after this things will be better, at least until the end of August, when (assuming no major emergency expenses come up) the month-end balance will drop dizzyingly: to $22. In September it starts to climb again, and by the end of November it’s back up to around $1,800.

So, in a strange way, “money happens.”

Shopping in the Commissary: Would it save anything?

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A day or so ago, SDXB clued me that Luke Air Force Base has changed its rule about bringing guests into the commissary: your sidekick no longer has to be a certifiable family member. As we were discussing the coming tax on food, which, when it goes into effect on March 1, will hike my grocery costs by 2 percent, he suggested I drive out there with him to do my major shopping trips.

Sounds like a good deal, eh? Not only would I evade the regressive food tax, I’d also weasel out of the much higher 8.3 percent gouge charged on all other purchases made inside the Phoenix city limits. On the other hand, I’d have to drive all the way out to Sun City to meet SDXB. He would drive us to the base (since his car has the AF parking sticker), so that would save some gas…but still, according to Mapquest, SDXB lives 15.91 miles from my house.

Let’s think about that.

In a recent shopping trip to Costco, purveyor of the lion’s share of my food stockpile and household goods, I spent $38.26 on groceries and $109 on household goods, dog supplies, clothing, and the like.

Tax on the $109 came to $9.05. The proposed 2 percent tax on the groceries would add 77 cents to that, for a total tax bite of $9.82.

On a good day when prices are low, gasoline costs about $2.50 a gallon around here. My car makes about 18 miles per gallon. Thus a round trip to SDXB’s house will cost, optimistically, $4.45.

So, my net savings on the tax will be $9.82 – $4.45: a grandiose $5.37.

For that munificent amount, I will have spent at least half the day driving out to Sun City, riding from there to the base, waiting around while he enjoys himself shopping in the BX, the commissary, the Class 6, store, and getting a haircut. Somewhere along the line we’ll get hungry, and so will eat either at his house or at the relatively clean Burger King on the base. This will morph a 90-minute shopping trip (during which I would normally hit Target as well as Costco and Costco’s gas pumps) into a five-hour trek.

In other words, I would “earn” about $1.07 an hour in savings on the tax bill.

LOL! Well, shopping on the base might be worth it if you lived close enough that you didn’t have to burn much gas to get there. But unless you enjoy the serenade of F-16 afterburners (amazingly, some people do!), that’s not a very practical proposition.

Pour moi, it doesn’t look like it’s worth the effort.

Early Retirement: The health insurance hurdle

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In a comment on yesterday’s grouse about the GOP’s stubborn resistance to a viable national healthcare program, Bucksome Boomer remarks that the main thing blocking her way to early retirement is the difficulty of obtaining health insurance.

There are a few ways around this.

One is to go back to college.

Yes. Tuition at most state and community colleges is far lower than private health insurance, and many colleges provide group policies for students. Arizona’s Maricopa County Community College District, for example, offers quite a nice policy for anyone who is enrolled in even one credit! Pre-existing conditions are covered if your prior policy covered you for 12 months without a break before you enroll (rules vary somewhat by state). Californians have access to student health insurance through the Community College League of California. In Texas, Houston Community College is among many that offer health insurance for students—here, you have to be signed up for three credits, but it can be an online course. A list of Texas universities that offer student health plans appears here.

If you’re yearning for early retirement and you live in a state where the colleges do not provide decent student health insurance, it might be worth considering a move to a state where such programs are offered. Google community college student health insurance to bring up a list of leads. Be sure the program does not exempt pre-existing conditions or, if it does, whether having been covered for 12 months by your current employer’s plan will trump that rule.

Another option is to join a trade group that offers group health insurance. These are not so easy to find; you pretty much have to figure out what groups you might, by any stretch of the imagination, be eligible to join and then find out if they have health plans. This list from California might be a good jumping-off point. Here’s a list of writer’s groups with various plans. Different writer’s groups have different requirements for membership—some expect a serious publishing track record; others will admit wannabes. As a blogger, you are a writer, especially if you’re earning any money at all from your site. Look at all groups associated in any way with your trade, business, or outside interests. The American Library Association and the Modern Language Association, for example, offer group health insurance for members—and anyone can join these organizations.

A third possibility is a high-deductible HSA. In these schemes, you take out a high-deductible policy and combine it with a medical savings account. The savings account functions like a hybrid between an IRA and a flexible spending account. The money set aside is used to cover your health-care costs during your deductible period and any other expenses. If you’re within a few years of Medicare age and you don’t have an expensive chronic condition, this strategy could carry you over until you can get less risky coverage. Any amount that’s left in the HSA rolls over to you when you reach Medicare age, at which time you can use the money any way you please. Shop around for these. At one point I had an HSA that covered 100 percent of my costs at any doctor and any medical facility, once the $1500 deductible was exhausted.

And finally, you might take a 50% FTE job with a public college or government agency—if you can find one in the current economy. Half-time jobs are usually considered benefits-eligible. This means you can get the health insurance without having to hang around the salt mine all day long. It’s not as good as being fully free from the day job, of course, but it’s a lot better than a 40- or 60-hour work week. Some government employers offer health insurance that is significantly cheaper than Medicare; when I go on Medicare, for example, I will pay about 10 times as much as I was paying for the State of Arizona’s EPO plan, and more than I’m now paying for COBRA.

None of these strategies is perfect. But then, no health insurance plan is perfect, at least not any I’ve ever heard of.

This post is part of a series on achieving financial freedom.
Our story so far:

• An Overview
• Education
• Work
• Debt
• The health insurance hurdle
The roof over your head

Good-bye to all that…

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Here’s another volley in the endless blitz of retrograde comments from Republican congressional representatives, reported by The Wall Street Journal:

“When it comes to some health-care summit that’s nothing more than a photo op designed to pave the way for Obamacare 2.0, the answer is no,” Rep. Mike Pence (R., Ind.) said Friday at the Conservative Political Action Conference. Still, they plan to attend and highlight public opposition to the bills and to spotlight their own ideas. “If the president is sincere about moving forward in a bipartisan fashion, he must take the reconciliation process—which will be used [to] jam through legislation that a majority of Americans do not want—off the table,” House GOP Whip Eric Cantor (R., Va.) said Friday.

“Obamacare.” How that term rings of partisan nastiness and intransigence! What on earth is the matter with the Republican party—one I once belonged to and was proud to serve? When did the Grand Old Party come to represent downright backwardness? I’m afraid that’s the word that comes to my mind (well—one of the words) as I watch members of my former party dig their heels in the sand and do every cussed thing they can think of to derail any positive action of any kind that might make life better for Americans…for no other apparent reason than stubborn hatred.

Not for one moment do I believe the GOP is even faintly interested in “the reconciliation process.” Actions speak ever so much louder than words. The actions we have seen have revealed extreme right-wing dogma and loyalty not to America but to well-heeled corporate supporters and their accomplished, amoral lobbyists.

The issue has little to do with universal health care coverage. As Megan McArdle writes for The Atlantic, we don’t even know for sure whether access to health insurance really does save lives—whether it has any long-term effect on mortality at all. No one has seriously asked that question during the fruitless “debate” (one might call it “impasse”) that we have watched over the past year or so. No. The issue is that the American political system is grinding to a halt, hung up by a kudzu-like bloom of stubbornness, dogmatic hostility, flowering greed, and grotesque thinking that the Founding Fathers could never have anticipated would take hold in America.

Politicians used to be self-serving now and again, but at least most could manage to get past their short-sightedness to function in their country’s interest. As we have seen, that is no longer true, particularly of the GOP. When Congress ceases to function—which is exactly what is happening—then America ceases to function as a free republic.

What a sorry spectacle!

Property tax statement arrives

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The county has dropped its estimate of my house’s 2011 value by $19,500. That’s down $62,300 from the 2009 valuation.

In theory, this should provide some tax relief. In reality, though, it won’t: Maricopa County is going broke, like all the other municipalities in the state, and so the county supervisors intend to raise property taxes by a walloping 10 percent. They also intend to take away the 50 percent tax break on historic homes that has led to the vibrant restoration of the cultural district and urban neighborhoods flanking Central Avenue as it passes through the once-decrepit downtown area.

Out of work, Mr. Taxpayer? Broke? Living out of a cardboard box? Lie still there on the ground so we can aim another sharp kick to your kidneys.

The county offers a tax freeze for people who are over 65 and have a gross income of around $32,000 or less. I realized I could qualify for that…until I saw the form you have to fill out. What the county deems to be your 2010 income bears no relation with how much you have in 2010. It’s based on your 2009, 2008, and 2007 gross income figures. Thus after you lose your job on December 31, 2009, as one of us has, your penurious 2010 income is irrelevant.

Let us give you another swift kick, Ms. Taxpayer!

So, chances are my time in the present abode is limited. Last year’s taxes were a stretch, and that was when I was employed and self-escrowing $325 a month to cover the various annual homeowning charges. If taxes rise now that I have no credible income, I won’t be able to stay in my home without drawing a lot more down out of my retirement savings. And that may be contraindicated.