Mortgage Deduction

Tax Savings for Home Ownership Are Very Overrated (Especially Under 2018 Tax Reform)

Gen Y Finance Guy Financial Analysis 19 Comments

Do you believe that one of the primary benefits of owning a home in the USA is the tax savings from itemized deductions like mortgage interest, and property taxes? Weeeellll…I have some bad news for you. Despite the fact that this idea is so ingrained in most of us that we don’t even question it, any of that savings is a lot less than you – and I – might have been led to believe. Personally, I have to be the first to admit that I have overvalued these primary residence “tax savings.” And this was before the 2018 tax reform, which has only made things worse. For most of the homeowners in the USA this tax benefit has now been eliminated due …

Rule of 72

The Rule of 72 – The Shortcut to Double Your Money

Gen Y Finance Guy Financial Analysis 7 Comments

How long will it take to double your money? Can you do the math of compound interest in your head? Do you want to extrapolate how long it will take your money to quadruple, octuple, or to hit an even bigger Big Hairy Audacious target, Freedom Fighter? Do you wish there were a shortcut to all these answers? Well, I have good news for you! There is a simple formula you can use to get a decent approximate answer – all without any fancy or complex math. It’s the “Rule of 72.” This simple shortcut will give you an approximate time – in years – that it will take to double your money (investment, net worth, etc). All you have to …

How much a car cost

Cars Are Expensive – Really F*cking Expensive – They Destroy Wealth

Gen Y Finance Guy Financial Analysis 28 Comments

A few months ago I shared a post about helping my brother get a new car after he totaled his previous one. It really got me thinking about how much it was costing the GYFG household to have two cars. Unfortunately, we bought our cars before we had solidified our financial philosophies. My wife and I both bought new cars within a 12-month period of each other. I bought my Hyundai Sonata in April of 2011 for $32,000 and we bought my wife’s Hyundai Tuscon in April of 2012 for $32,000. Back then we were only earning around $170,000 combined.  Yes, we spent 38% of our annual income on cars! It makes me throw up a little in my mouth when …

Top 5% Income Earner

Income Across the USA – What Does It Take To Be In The Top 5%? Top 1%?

Gen Y Finance Guy Financial Analysis

As the income of the GYFG household has continued to grow, being the data-obsessed fellow that I am, I started to wonder where we ranked against other earners across the United States. Most people benchmark their investment returns, so why not benchmark our income? Lucky for us, the NY Times has made this extremely easy with the interactive tool they created (based on data from 2012, a little dated, but should be close enough). (Sidebar: I continue to believe that we live in the best time in history for making money. It has never been easier. THE INTERNET HAS CHANGED EVERYTHING!!! Although I recognize that inequalities still exist, the entry barrier to earning big has never been so low, nor has the …

Simple Wealth Building

Wealth Building Made Simple: Make Sure You Get A Little Richer Every day

Gen Y Finance Guy Financial Analysis, Financial Freedom 10 Comments

Note: Just to clear up any confusion, although I say “get a little richer every day,” I don’t mean this in the literal sense. The idea is to get a little richer every day on average. Personally I calculate this by taking my total savings for the year dividing by 365 days. I have known since I was a little kid that I wanted to be rich. It wasn’t until I got to college that I knew I was going to be rich. As you can imagine, I started reading all the books, filled with all sorts of strategies to accumulate wealth. It was very stimulating to fill my head with all these clever ideas on building wealth. Every day …

Options or Equity

The Details Behind Our $105,000 Investment

Gen Y Finance Guy Financial Analysis 52 Comments

One of the perks of joining the executive team at the company I work for is either being granted options or the opportunity to get equity (i.e stock) in the company. Not everyone gets a choice, but I am fortunate to be in a position where I get to choose. There are pros and cons to each, which I plan to walk through in this post. My hope is that by the end of this post I will have made a decision. As you can imagine there is a risk/reward trade off between the two options. For those not familiar with options, an option is a derivative of stock, meaning the option derives it’s value from the underlying asset (i.e …

Mortgage Like a Bond

Paid Off Mortgage is Equivalent to a…Perpetuity?…Bond?…Dividend Paying Stock?

Gen Y Finance Guy Financial Analysis, Mortgage Snowball 29 Comments

Having a fully paid mortgage sure does get a bad wrap around personal finance circles. I constantly see arguments about money being super cheap and that paying off the mortgage will lead to a loss of the interest tax deduction. I won’t argue that rates are historically cheap and that eliminating your mortgage will lead to eliminating the tax deduction. First, remember that with the tax deduction you get 30 cents on the dollar. So, although this is a step up from renting (in my opinion, and situation dependent), if you don’t have to pay interest, why do it? Why doesn’t anyone talk about a fully paid mortgage as a bond substitute? Or compare it to that of a dividend …

Financial Independence Lens

Looking at Savings Rate through the Financial Independence Lens

Gen Y Finance Guy Financial Analysis, Financial Freedom 21 Comments

In previous posts I have talked about how we currently strive to save 50% of our after tax income and how important your savings rate is in building wealth rapidly. But after listening to the Radical Personal Finance Podcast, it made me realize that this may have not been enough to sway you. What I mean, is that this may need to be translated. It is very easy to conceptualize and visualize what a 50% savings rate means to in terms of dollars. But what does it mean in terms of Time Freedom? What may not be as intuitive is what it means for your ability to reach financial independence. I had already previously internalized the fact that a 50% …

Cash In Refinance

Cash-in Refinance – 16.5% Cash on Cash Return

Gen Y Finance Guy Financial Analysis, Real Estate 29 Comments

Most of the time when you hear about refinancing it is usually along the lines of locking in a lower rate and/or cashing out during the refinance. You don’t read or hear much about a cash-in refinance and how the returns could really be worth consideration. My wife and I currently find ourselves about 10 years into the 5/1 ARM on our investment condo. It didn’t start out as an investment. Actually, it is an interesting story on how we even became the owners of the condo. My wife’s parents had bought it back in 2005 before the market went off a cliff during the depths of the financial crisis. They paid $257,500 for it and put about $50,000 down. …

2015 Annual Expense Review

2015 Annual Expense Review [We Spent $137,542]

Gen Y Finance Guy Financial Analysis 10 Comments

It has been written on this site many times before, but is probably worth reminding everyone. We don’t put that much focus and energy into the expense side of the equation as we prefer operating within the 50/50 law and spending our energy increasing income.  For those of you that are new to this blog, the 50/50 law allows us to approach our finances with a very balanced approach, whereby we spend 50% of our after tax income (guilt free) and save the other 50%. We particularly like focusing on increasing our income due to the fact that the upside is unlimited. There is a floor as to how much you can cut your expenses. Compared to others in the …