Money Monday: Retiring in the San Francisco Bay Area

My friend Affinity chided me for looking outside of the Bay Area and away from family, when I can very well retire here at home. She was totally right. She wrote a guest blog post on retiring early here. It was one of my most highly-trafficked posts.

I spent some time on Zillow and found the following places. There are some serious deals to be had.

$250,000 – 3 bedroom, 2 bath home in Vallejo, CA – 30 minutes to wine country,  40 minutes to SF by car

It’s like a cheap version of Falcon Crest or Dallas, right? Clearly a little dated, but definitely has character. A retired couple like me and Dean have no need for 3 bedrooms, but just wanted to showcase the breadth of what’s available.

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$169,000 – 2 bedroom, 2 bath condo in Hayward, CA – 1 hour to wine country,  30 minutes to SF by car

This is perfect! 1 bathroom for me, 1 bathroom for Dean. 1 bedroom for me, 1 bedroom for Dean. Haha! This place is a score at the price. I might have to buy it now. Rent this place out and have it completely paid for by the time we retire. Who I am kidding? We can write a check for the list price, forego the mortgage, save 4% on interest, and rent to college students since Cal State Hayward is across the street! I’m seriously going to ponder this investment.

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$155,000 – 2 bedroom, 1.5 bath home in Concord, CA – 45 minutes to wine country,  35 minutes to SF by car

This price is a steal. I am tasting retirement! 55 here we come.

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10 Things of Thankful

TenThingsBannerI’ve been reading other bloggers post their 10 Things of Thankful which made me so happy to read. I am thankful for all the typical things you are thankful for: health, my husband, my family and friends, my job, and freedom. Here are different things that I’m grateful for.

Money

I remember being sick right after college when I had a full-time job. The job paid little so when I went to the drug store to buy medicine, I distinctly remember having to buy the generic cold medication because I could not afford the premium brands. I felt very defeated at that moment, having worked my ass off and knowing that I deserved better. And I vowed never to be in that position again. It took me some time to get here, but I want for nothing because I fought and continue to fight to be compensated for my true worth. Takeaway: Don’t ever settle!

Potato Head

I’m thankful I never owned a TV nor am I a couch potato because watching TV is mindless, when you could be educating yourself or being productive. I grew up in libraries. Books were my best friend when I felt alone. Books were my ice-cream when I felt depressed. Books inform and educate, and will make you better. Takeaway: Ditch the TVs!

No or Low Technology

I am glad I grew up in an age where we didn’t have cell phones. I reminisce on the days when we were beholden to our word and meeting up at a certain time meant meeting up at that time! No texting that we were running 15 minutes late. It makes me sad that we can no longer enjoy each others’ company, that iPhones and iPads are so prevalent, that it’s now more important to capture the moment than to experience it fully. Takeaway: Live for the moment, not for the picture!

UC Berkeley

I used to think I had a great college experience, but that was because I didn’t have anything to compare it to. In retrospect, going to Cal was brutal. Organic Chemistry, Physics, Physiology. And don’t think it was just the hard sciences. My English courses (#1 English Department in the country) were just as challenging. Oh how I cried! My college experience taught me a lot about competition and persistence. After I graduated I felt like I could do anything I set my mind to. And I wear the scars with pride. Takeaway: Subject yourself to challenge and competition. It makes you stronger.

700 square feet

I feel very liberated living in a cheap (comparatively for San Francisco) 1-bedroom apartment with my husband. We don’t have a lot of stuff, nor are we emotionally tied to any of it. I’m actually very grateful that we currently don’t have mortgage payments. It’s very freeing to know that you can just pick up and go, and not have to worry about material things or finances. Takeaway: Stop buying more shit. Reduce, reuse, recycle.

Money Monday: Real Estate Bubble

Hey people, if you haven’t noticed, we are experiencing a housing bubble: skyrocketing rents, zero inventory, and astronomical offers in terms of both volume and price. This is not the time to buy. Back away, people. Back away! I’m completely flabbergasted at how many people have decided that THIS is the time to buy. Very odd. Don’t get me wrong, I’m in the hunt myself, but I’m not paying up for a shack. I’d rather stick to our 1-bedroom, thank you very much. I have zero pressure to buy.

A coworker said that NOW is the time to buy into a new condo development because the price just keeps going up and up. And I’m like, dude, that is not sustainable. Use your brain! I asked him what the monthly HOAs are and he said $450. What a joke. Seriously, these people deserve to go into foreclosure for making such dumb mistakes.

Let’s do the math with an example.

37 years old – because that’s how old I am

$700,000 purchase price for a nice 2-bedroom condo in San Francisco

25% down – because these days that’s how much you have to put down to compete

30 year loan at a 3.5% interest rate – which is generous for rates right now

Mortgage + 1.14% property taxes + $450 HOAs = $3,425 housing expense per month – that doesn’t even include electricity, water, garbage, cable

Imagine still paying $3,425 at 65 years old? Because I’d still have another 2 more years to go. I don’t want to be coughing up that much money in my twilight years. I want to be on the beach in Central America drinking raw coconut water and eating shrimp.

I have this ongoing debate with my mom because she is a firm believer in owning a home. She’s one of those old school types. I questioned why should we be shackled to such a high mortgage 30 years from now when we can easily rent a 2-bedroom in a podunk suburb for peanuts. She countered that once your home’s paid off, the only expenses left are utilities and property taxes (which I should add are insane if you live in San Francisco). I don’t know. I’m still not sold on this home ownership dream. But since my parents are, it’s good to know we can always move in with mom and dad!

Money Monday: Cash Out Refinance

I’m having a major freak out because I’m in the early stages of getting my place ready to sell. The tenants have been given notice. I sold one of my beautiful velvet couches last weekend. Stagers and painters will be submitting bids soon. I was mentally prepared to make this the focus of my life.

Now the curve ball.

The reason I moved forward with selling my place is because I couldn’t refinance it. The last appraisal came in at an abominable $400,000 even though I paid $455,000 for it. I tried again last October with a different broker who guaranteed no fees and no appraisal cost. After the appraisal, I never heard back from the guy. I called, I emailed, nada. I figured the appraisal must have sucked again.

But miraculously, the company called me yesterday asking for a status since the broker I had been working with left the company. That’s why I hadn’t ever heard back. Looks like my appraisal came in at $500,000. It dawned on me (after clearing my mind and meditating for 10 minutes last night) that I should go for a cash-out refinance which will pretty much solve all my problems.

1. I won’t have to sell.

2. I can extract some of the equity in my home and use that for my next down payment.

3. I can reduce the rate and shorten the term to 20 years.

4. In 20 years, this is going to finance our retirement!

Money Monday: We Retired Early

My friend and fellow Burner, Amazing Affinity, has recently retired and gosh, am I envious. Despite her “life of leisure,” she is a fervent supporter of the arts and has been a rockstar volunteer for the Black Rock Arts Foundation and the Burning Man Project. She is such an asset to our community that she was recently bestowed the honor of having an award named after her: the Affinity Award. The Burning Man Project vision hopes to lift the human spirit, address social problems and inspire a sense of culture, community and cultural engagement. Affinity is this vision in human form. She never ceases to amaze me! I admire her so much, I asked if she would inspire us with her advice on how to retire early just like her! Here is her well thought-out post.

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My friend Catherine asked me to write a post for Money Monday because my husband and I each retired at 63, and she thought you might like to know how we did it.

When I met my husband I was 45 and about $45,000 in debt including a $5,000 student loan from law school that had blossomed thru the years to about $17,000. The first thing he encouraged me to do was make a debt plan and start making double payments. I was only making $57,000 at the time so we went on a “paying the debt off binge”. It took me about 3 years to get out of debt. And the only debt I have had since is a mortgage; I use credit cards for purchases but pay them off every month .

The second year of our relationship, 1994, an apartment became available in our neighborhood. We lived on Russian Hill so it had never occurred to me that I might be able to buy there. It was a walk up (70 stairs) and a tenants in common building so they required 25% down on the price of $150,000, so we each had to come up with $20,000, and I was in debt still and he did not have any savings. We each borrowed the money from our friends and family for the down payment, and paid them back over time, and sold the apartment in 2006 for $550,000. Let’s be clear that was luck, we bought at the bottom of the market and sold at the top of the market, everyone would love to do that.

But what was not luck was our being satisfied with our one bedroom apartment for 12 years. The first time my best friend came to visit she said, “This is nice, but it is a starter apartment, you will want a larger apartment or house soon.” We replied, “No, we intend to live here as long as we can, and love it, we want to retire early.” “We do not want to overbuy a home, then if the market plunges we will not be in over our heads.” I also suggest you pay the mortgage off if you can. Then you have the option of living in it or selling it to move where you might retire, and use the money to buy elsewhere.

And I think the best thing we did was take full advantage of our 401(k)s. When I was paying off my debt I only made a deferral to the extent of the matching contribution my company was making. But after my debt was paid I maxed out my 401(k) every year. If you can afford to put it into the Roth portion of your 401(k) then do that. If you make a Roth contribution you will not receive a tax deferral for your contribution but all of the gains you earned will come out tax free. There are two kinds of “free money” out there; the matching contribution to your 401(k) plan and the Roth gains that are never taxed. Take the most advantage possible of these features.

I know you already know all of this, but let me tell you what a joy it is to be retired, and traveling and not worrying about work while on vacation. Good luck.

So my early retirement tips are:

1. No debt except your mortgage.
2. Don’t overbuy your home,
3. Pay into your 401(k) as much as possible, especially in your early years, but always at least to the extent of any matching contribution.
4. My final suggestion is that you see any financial windfalls (bonuses, etc.) as ways to get ahead rather than splurge. Take 75% of the windfall and save it, or if it is from your job you may be able to put it in your 401(k) if you had not maxed it out that year. And then take the 25% and splurge.

It has been fun talking about money, feel free to contact me if you have questions: affinitymingle@gmail.com

I also have a plus size fashion blog and I would love for you to stop by and check it out if you have an interest or know someone who might enjoy it. It is more of a D.I.Y., how to make it work and a resource blog than a true fashion blog. http://affatshionista.com/

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