The Wheel of Interest

As Cara and I were talking the other night, and I was rambling on and on about 401ks and inflation, she threatened to create a ‘wheel of interest’. Only this time there’d be a new category. Financial freedom. You see, ever since I discovered this website back in July, I’ve been on a planning, investing and savings kick.

We’re all told it’s important to save for our future, invest in company retirement plans, especially if there’s an employer match, and to work hard so you’ll (maybe one day) be able to retire. And that’s really about it. Then we’re thrust into the workplace and find ourselves as “adults”. Car payments, mortgage payments on McMansions, and crazy spending seems to be the norm these days. The problem is, the time to get serious about retirement is really years before you plan to retire, when you're just getting a handle on 'life' in general.

I figured I was ahead of the game in many ways- in college I worked as a lab tech making a few bucks on the side to cover my projects. I spent summers and part time my senior year at a company I then joined upon graduating, all the while investing in their 401k program to get the match. Used cars were the order of the day. No credit card spending or debt. And in the meantime, I was saving money up to buy a parcel of farm land that would provide a place to indulge in my eccentric construction projects but also provide farm rent to cover things like property taxes and insurance. This ended up being 50 acres just north of town despite my original intent being only 10.

Sounds good, right? Well, here are some things to ponder….

In today’s market, money sitting in a savings account will lose its value faster than inflation. Hmm, this is where I've always kept my cash.

The average inflation rate is around 3%/yr. That means you are better off locking in a loan on a (slightly used*) car, or mortgaging a house at a rate of 4% or less than you would be paying cash or renting. In fact, you will actually be money ahead in the mortgage at the end of the term even if property values did worse than inflation. Plus the interest paid is deductible. Meanwhile, invest the cash you were going to use and put it in an index fund. Just don’t let it sit in savings.

For several years I ‘trusted’ the default settings on my 401k, and although I occasionally logged in to see if I could create a better mix, I was really shooting in the dark. The fact is, few people take the time to really investigate the investment mixes. As it turns out, these providers are not offering their services out of the kindness of their hearts. You’ll find the option mixes you’re assigned typically have very high expense ratios by default and lots of other little hidden fees. Of course you don’t notice, because over the course of years you don’t notice what’s happening behind the scenes. This is death by a 1000 paper cuts. Do some research, and reallocate your investments so it benefits YOU. If the investment options your provider offers are especially bad, consider contributing only the minimum to get the company match and put the rest in an IRA. Remember, this is compounding money. The more you have, the more it generates, so a few bucks sapped off in fees now potentially equals a lofty sum lost 20 years from now.

And you know what happens with you put a dollar into your 401k or traditional IRA? 1. It’s all pre-tax money so $1 invested really does have $1 earning power. 2. If you contribute enough (and this could involve multiple accts or maxing accts), you can lower your tax bracket which means you put several grand in your pocket in reduced taxes at the end of the year without giving anything away. And 3, as if that wasn’t enough, when it comes time to withdraw that money, it’s taxed at your retirement rate, which could be 15%...down to 0%. It’s a triple win. None of these things are secrets, but it took having them spread out in front of me like so many playing cards to see the obvious. “I’ve been leaving money on the table without realizing it, and spending summer afternoons in a beige cubicle just trying to make up for it.”

Okay, that sounds well and good. Now, about that financial freedom thing. At age 33, how could I even begin to think about retirement? Well, for one, retirement doesn’t mean doing nothing for the rest of your life, it means doing what you want to do before you’re too old to enjoy it. If you want to work on your own terms, fine. If you want to travel, so be it. Bottom line? It means freedom. But here’s the deal… I’m already behind the 8-ball and didn’t know it. So, I’m throwing down the gauntlet; time to put a long term plan into action. I’ll post a follow-up in a few months to see what’s working and what’s not. Time to get serious.

*let someone else take the depreciation hit while still enjoying a competitive APR from the local bank/credit union on an “almost new” vehicle; rates increase with age.

A Mid-Summer's Check-In – Part 1

I may have mentioned last year that 2015 was going to be a catch-up/maintenance year out at the compound, and so far, things are shaping up according to plan. 

Last fall, as you might remember, the pole building went up before the snow started flying. Between Ben and I we got the cars stashed and tarps up over the doorways and this held all-winter. Fast-forward to this summer and all the doors are in, the cement floor is poured, the aprons are finished and three dump trucks full of gravel were brought in and spread over 2500 sq ft of geotextile fabric to help with drainage, minimize gravel loss and block weeds. The gutters and downspouts are now on, front and rear. And this week I foam-sealed the corrugations along the bottom blocking dirt and bugs from entering. I think I can officially say that building is finished.

The Garage Pre-Cement

As soon as spring broke I could be found in the cherry picker staining the east side of the lodge. Thankfully I had enough drive from spring fever to do the job because I doubt I'd have the initiative to paint the entire side of the lodge by myself when the days are 90F. Since the other three sides and trim were done in the fall, that should hold things for a few years.

CS3 work on those last-winter days

Another interesting maintenance project was pulling up the dining room floor and packing in more sand around the drain swale. This involved removing each floor plank, piece by piece, and then trying to pack in sand that was "level enough" but not over-proud, then trying to reassemble the entire affair. (Update: As of 24 hrs ago the water softener flooded the dining rm while we were at work and swelled all the plank seams. Great.)

Spring in Iowa immobilizes the 2WD Scottsdale

A real bear, but something that had to be done, was to fix the fascia situation on the lodge. You see, when I finished the roof those years ago, the fascia trim was custom bent locally out of aluminum, so each section had a max length of 8 feet. These created a see-saw effect with lots of overlaps and they were just a touch short width wise. The bigger problem was that airflow could get up under those fascias and blow into the lodge. On extremely windy days, the crepe paper light fixture over the stairs would move around and you could hear the airflow screaming past. 99% of the time it wasn’t a problem, but the 1% let you know you had air coming in. The front fascias were also starting to darken from water running off the front roof and _under_! the fascia trim. Not good, as how much of it was running behind the fascia boards and soaking the soffits? So, all the trim (120'+) came off and was scrapped. The fascia boards were scrubbed and painted (all nice and solid) and bituthene tape was used to seal the top of the boards to the roof deck, which meant getting up underneath the shingles all the way around. Invariably, nails had to be pulled, the surface cleaned so the tape would stick and holes sealed. A grand time. In advance, I took roof profiles and had Menards custom trim service make up lengths of fascia trim (up to 12' for fewer seams) with just a little more projection to protect the tops of the boards. I'm just glad that job is done.

Painted Fascias with New Trim

At roughly the same time, I had some brown trim made up for The Annex and this was slipped underneath the metal roof on the rear of the structure, although I had to pop each roof panel off and back out screws to get it into place. While it was the rainy season, at least it could be done in a day.

Of course the Pumphouse was starting to show it's age, or at least the paint was, so a Saturday was spent scrubbing the siding and repainting the works in oil solid stain. And shortly before that, it was discovered the rubber roof had pulled away from the metal edges and had allowed water to start to rot out the rear fascia board. Luckily it was caught in time and the roof deck was just fine (this is why plywood is nice for smaller projects). Another day spent peeling back the rubber, scrubbing, and gluing the works down with a paint roller seems to have fixed matters. I also used window sealing tape along the rear edge to divert water over the trim should the rubber come loose in the future.

But it hasn't been all work, there's also been lots of travel. In February, when it was still cold and snowy in Iowa, we broke away to Disney World in Orlando and even dropped in on the parents for a day. The sun and warmth did us some good, though 24 months between visits might be a little too frequent for Disney. A month later Ben and I found ourselves pointing the Suburban for Boston to rescue a one-of, well, one, 1963 Radarange. While there are other ‘Marks’ out there, I can't imagine many turquoise paneled ones were built, let alone, survived. The fact that there’s no data plate and no serial number makes me wonder if this was pre-production.

Cruising out East

The trip was a blast, staying with a friend out there for a mini-wash-in of sorts. Then just a couple weeks later, with Suburban now empty, I headed for Dayton, Ohio to give the Hamvention flea market a spin. While I came up mostly empty handed, I did score a couple of goodies that paid for a teletype collection I picked up in Toledo the following day. And I was able to visit world-famous Mendelson’s. If you need it, they’ve got it. Staying in vintage roadside motels actually made the trip a worthwhile experience.

Mendelson's of Dayton