Category Archives: Affinity Mingle Financial Advice

A Plus Size Approach to Splurge vs. Save

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Recently my husband and I retired and we had to take a new approach to money. Money feels different when you have a limited income and we took it as an opportunity to live more modestly. When I met my husband, over 20 years ago, I was about $35,000 in credit card debt, and he helped me get on a budget and pay off my credit cards, and live in a cash world. So, what does that look like when you are a plus size clothing blogger. It means you find a way to buy clothes on sale, do some thrift shopping, or to take a “do it yourself” point of view, and I do all three.

modcloth sweaterI found this sweater at Modcloth that I loved and thought would be very becoming, but since I had recently splurged on a Moto Jacket that I had been waiting to go on sale, I knew I was going to have to find a bargain.

I decided thrifting was the way to go, but because I am even a little larger than a regular plus size, which is usually a size 3X/24, and I am a size 4X/26, I suspected that my local Goodwill or a regular thrift store was probably not going to work. So I knew my best option was to try on line. I recently wrote about shopping for vintage/pre-owned clothing in my size. I started with ebay, because they have such a wide selection of clothing, but I did not have any luck, so I moved on to FatToo Grand for Size 28+, a group on Facebook where women can share clothing that is no longer working for them (it is a private group, you have to request entrance). The FatToo groups are not intended to make money for the creators of the group or the sellers, it is not a commercial venture.

sweater collageAnd guess what, I found this fun sweater, for $5 plus shipping. It is perfect for spring and that was an especially good price, and similar in style to what I was looking for. So it was a great savings, and it feels really good to get a good bargain.

When I am thinking about making a purchase, I like to think in terms of what it would take to earn that amount, or what percentage of my income it will be. Will I love the clothes as much as it feels good to have savings and live within my budget?

I was invited to participate in the “Splurge vs. Save” Campaign by writing this post, through Credit Card Insider. I loved their goals:  “We are advocates of the responsible use of credit, building and managing your credit history, and making informed decisions when selecting a credit card.” Because it is work we all need to do in our lives.

What do you think, do you love to get a great deal, and save some money for the future?

I would love to hear more about your hunt for a bargain.

Peace…affinity

 

 

The Rigors of Getting a Mortgage in this Economy

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mortgageAs some of you know I have a financial background.  I worked in the financial world while going to law school and then became an attorney and I worked with corporate retirement plans.  Occasionally I guest blog for Dear Vixen on these subjects and for posterity I like to post here also.  My prior financial post on getting ready for retirement is HERE.

The Rigors of Getting a Mortgage in this Economy

My husband and I had owned two units in a tenants-in-common building in San Francisco, where we had purchased the building with a group loan and then later converted to individual loans on each unit, so we were not newbies to the mortgage acquisition process, but it is much more difficult than it used to be.

The mortgage process is somewhat new, and not for the better.  We have a credit rating of over 800 and savings appropriate to a couple retiring in their mid-60s, so we thought the process would not be difficult. Here are my suggestions for making it as painless as possible:

1.  Do not overbuy. Buying a house that is a little less than you might like may not appeal to you, but it will make it easier to qualify for a loan.  Lenders are much stricter about your proving you can service the loan than they were prior to the foreclosure crisis of the last few years. In order for us to do that we had to move to Oakland from San Francisco.

2. Most lenders now require a 20% down payment unless you qualify for a special program of some sort.  We put down 25% to improve our interest rate. So have your cash in order before you start.

3. During the loan approval process do not buy a car, run up any credit cards, or make withdrawals from your savings, except to move the loan process forward.

4.  Have your taxes done and filed.  We purchased in February 2013, and our lender wanted us to provide a 2012 return, which we had not filed yet since it was not due, and then they contacted the IRS directly to verify that it matched the IRS return we had given to the lender.

5.  Since our condo had been purchased by the seller in the last 12 months and was then being resold to us (flipped) our lender required two appraisals, that then stretched over the next six weeks.  So that means you have to be patient.

6. They want every financial document; bank statements, brokerage statements, your W-2, etc. for the preceding 2 or 3 months, and if the loan approval process stretches over longer than a month, then they want you to provide fresh statements.

We had problems with self-employment and seasonal W-2 income.  The lender wanted a statement from our accountant that we have a legitimate business.  Since we do not have an accountant, they did not want to use the self-employment or seasonal income as part of our ability to pay the loan.  This seemed a little odd since we were not only paying state and federal taxes on the self-employment income, but social security (F.I.C.A.) as well.  We had had the same seasonal income for over 10 years and it was even W-2 wages so this was an unpleasant surprise.

7. Check your credit. Contact Experian, TransUnion or Equifax for one free credit report a year. You should have a credit score of 720 or higher. Check for errors or small bills that might not have gotten paid. Credit Card debt should not exceed 50% of your credit limit (although in general I recommend you pay your cards off every month). If your balance is above 50% you may be able to get your credit card company to increase your limit.

8. Apply for the loan before any transitions or retirement.  We had just retired, and the lender did not want to rely on our W-2 wages since we no longer had jobs, and we had not yet taken any interest or dividend income since we had finished out 2012 living on our savings rather than taking money from our savings accounts, so we had a problem proving we had the investment income to service the loan.

If you are retiring and you have assets, but not much visible income, both Fannie Mae and Freddie Mac allow your lender to “annuitize” your assets by making a conservative estimate of what your savings/IRAs/assets would generate as income if spread over the life of your loan. In addition, if your are eligible for Social Security but have not chosen start receiving it, you can generate an estimate to show your lender what is available to you.

9. This is going out on a limb, and you know I could be wrong, but prices are rising, at least in the San Francisco Bay Area.   If the tech boom continues, prices may continue to rise, so if you are thinking of buying a home this might be a good time, for some stats on prices rising click HERE.  But then, this bubble may end soon, we will have to wait and see.

Why are things so much more difficult?  The many foreclosures and short sales over the past few years have made everyone more cautious about lending money. Not only was there malfeasance on the part of the big banks, there was a lot of fraud on the part of borrowers. Many lenders sell your loan to the F.H.A. and they have to prove a much higher level the borrowers ability to pay back the loan since the financial crisis of 2007-2008.  Good luck, we survived the process and are very glad we did. We now live in the Adams Point neighborhood in Oakland.

Peace…affinity

We Retired Early

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retirement_intro__1329422884_6856I know this is a plus size fatshion blog, but I used to work as an attorney in the financial industry so I am interested in how money works and how we can love our lives and use money to our do that.  This is a guest blog that my friend Catherine Gacad asked me to write for her blog, Dear Vixen, and I thought you might like to read it too.

My friend and fellow Burner, Amazing Affinity, has recently retired and gosh, am I envious. Despite her “life of leisure,” she has been 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:

“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 17 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/“

Update: My husband and I just bought a small two bedroom condominium in a working class neighborhood in Oakland, CA.  We were not happy to leave San Francisco but felt like it was the financially responsible thing to do since the rent on our one bedroom apartment had just gone up to $2,800.  We are clear there will be sacrifices, like not getting to see the light show at the Exploratorium on their Opening Day since it was not just a cab ride away, or missing the 30 minute birthday celebration for my colleague at the Burning Man office. But we are settling in and hope to learn to love Oakland, although it is a little too sunny for me over here.

Catherine and I are going to collaborate on a post about buying a condo in this market since we have both done so lately, so I hope that will interest you.

Peace…affinity