Flooring

Aaaaah!  Stressful b/c the flooring is going down.  Molly is in the bathroom trying to force the bathroom door.  My living room is unusuable.  Everything smells like construction adhesive.  Will be so glad when this is finished.

On a different note — there’s this medium term progress.  Like, I can’t make myself much wealthier today.  But I can make myself much wealthier in 20 years.  But it’s the decisions I make on the 1 month – 3 month – 6 month time scale that determine if I align w/ the 20 year wealth building (e.g. refinancing, investing every paycheck during that time, etc.).  It can be hard to see that medium term.  20 years is forever, and today is impotent.  But maybe by recognizing it, formalizing it, celebrating it — then you have a chance at making it happen.

Taxation is really insidious.  Let’s say you earn $100.  Then you decide to loan it out for a year (7% interest).  Of that 7%, 3% will be gobbled up by inflation (caused by the government printing money… and acts like a tax, b/c the government gets to spend the pre-inflated dollars).  Of the remaining 4%, 2% will be taken if your tax rate is 28%.  Leaving you with a 2% benefit and the government with a 5% because you decided to forego pleasure.

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Weekend Planning

Seems like Saturday morning is prime time for me to do boring spreadsheets, which I guess is subjective.  Boring spreadsheets are spreadsheets I have to do that don’t tell me much but they make sure that I keep my head above water.  In this case, it’s looking at the amount of cash I’ll have in my accounts to make sure that I don’t have to sell any investments while I live off my savings and pay for the flooring to be put down.

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A more interesting spreadsheet would be different financial projections I did for a friend to show her the results of different financial choices.  These are really sloppy, but I think they are mostly correct.  I plan on refining over time…

“Best case” scenario:

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“Sloppy” scenario:

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Differences:

1)  Savings rate (sloppy is 40%, Best case is 55%)

2)  Retirement Account type (Sloppy is pre-tax, best case is Roth)

3)  Spending (sloppy spends $1000 more per month)

4)  Education (Sloppy delays entering the work force for another 5 years… but you get a PhD… but the PhD doesn’t give you more money)

5)  House buying (Sloppy has you on a 30 year mortgage for a house that is $250k instead of $80k).  Also has you w/ a 3.5% down payment, higher property tax, etc.

Other than those things, I think they both take a similar approach to financial cleanup, basically Dave Ramsey’s baby steps, with the exception of prioritizing 529 savings over retirement until the child enters college.  I should’ve included the impact of continuing to put money in the 529 *during* college.  That’s an optimization for later, and arguably isn’t an optimization at all.

Mortgage Interest Deduction Not That Great

Thus, the net effect is that only $600 of your mortgage interest is tax deductible, because your deductions exceed the standard deduction for your situation by only $600. If you end up in a marginal tax bracket of 25%, you’ll save about $150 in taxes for paying $10,000 in mortgage interest — not much more than a rounding error.

http://www.fool.com/investing/general/2015/01/11/why-your-mortgage-interest-isnt-actually-tax-deduc.aspx

Productivity and Staying Home

I think home is, for men, many times not a very productive place.  I think there’s a couple factors:

(1)  In American culture, men don’t historically do as much housework.  This is changing.  But historically, men have been the primary money earner outside the home, so many feel entitled to be lazy at home.  So they get used to that, to home being the place to relax.

(2)  Men (and this is somewhat controversial… as is pretty much anything a person will say about any group of people) more than women tend to have the ability to “turn their brains off.”  When I took the interpersonal dynamics class at Stanford, again and again during one of the classes I heard the women saying they were jealous that their husbands could set their stress aside.  I think this characteristic of men makes it easier for men to be lazy at home.  Because the kitchen can be dirty and they can just not give a crap.

I know I’m like this.  I have a 135 inch projector screen in my living room in a 784 sq. ft. condo, not a dance floor.

So if you’re a guy and you don’t spend a lot of time at home, you have a better chance of being productive.  This also supports not having a very big, expensive home.  The bigger the home, the more you might feel the need to spend time in it and take advantage of it.  The smaller the place, the less likely you may want to be there.  Also, the smaller the home, the less time you spend keeping it up and the more time you can spend on work or business.