No BS Finance

CNN Money explores 6 money dilemmas and attempts to solve them. Let’s take a look and see…

1. Pay off a credit card OR fund your 401(k)

CNN Money: pay down the credit card

Me: pay down the credit card

2. Save in a Roth 401(k) OR a regular 401(k)

CNN Money: Roth 401(k)

Me: Does anybody really have this as an option? CNN says about 25% do. Until more do, I don’t have an opinion on them.

3. Lease a car OR buy a car

CNN Money: buy

Me: Want a car payment forever? Then lease. Otherwise, buying is the way to go.

4. Prepay your mortgage OR invest

CNN Money: Invest

Me: Prepay your mortgage if you have a variable-rate mortgage, but don’t dump all your money into the house. CNN Money hits the nail on the head that you need some flexibility to cover unanticipated needs and problems.

5. Buy a home OR rent a home

CNN Money: Buy

Me: Buy, if you can realistically afford it

6. Take Social Security early OR late

CNN Money: Late

Me: Late - wait as long as possible to maximize your monthly check

Overall the full answers from CNN Money are great.

For further looks, see the posts over at Free Money Finance breaking these down in more detail.

I like to believe we make our own luck, by being prepared, open, and flexible. Over at SavingAdvice they agree, but commenter #4 also gives some personal examples that show this isn’t a black/white issue.

I’ve never thought much about zippers, let alone repairing them if something breaks. Thanks to moneydummy and her dilemma, now I have.

At least for me, hearing “cash poor” is a euphemism for struggling with everyday expenses or trying to live up to a higher standard of living than you can really afford.

But, it has sunk in recently, that we are cash poor. And it’s great!

Sure I’d like to have more money (who wouldn’t), but we’re meeting our priorities. We’re saving aggressively for retirement, have college funds set up for the kids, and still make it through the year just over the breakeven point on a cashflow basis.  Throw in my annual bonus (which we budget $0 for since it isn’t guaranteed) and tax refund (grumble, grumble, I can never seem to nail it just right) and we have a little money for extra saving - or splurging like our cruise coming up next week.

The benefit of budgeting our savings so tight is that we don’t get complacent about hitting our budget. Any waste or extra spending makes us worry about making ends meet. We can’t scrimp on the savings to compensate since those are automatically transferred each month.

Cash poor is awesome when budgeted savings has you there.

2006 was a great year - 5-6 more just like it and we’ll be millionaires years ahead of schedule.

Liabilities were reduced by 4% due to extra money paid on the mortgage and retiring the auto loan we used to get a discount on the car (then paid off in 5 months).

Income was substantially higher than anticipated. My annual raise was a touch higher than normal, but the major impact was the overtime pay I received while our normal workforce was on strike. Strike pay ended up being 12% of my total compensation for the year.

Overall, our net worth increased by 28%, from the above items, plus a large run up of the stock market. With our money in index funds, we didn’t have to worry about missing out due to having money in the “wrong place” for the rally.

This made up for the poor 2002 we had, where net worth increased by a measly 6%, which seemed even worse given the absolute value. 6% of not much is also not much.