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Archive for October, 2013

Today, I had to renew the license tabs on my car.

Like every year, I left it until the last day (literally true this year). I asked myself “Why doesn’t the DMV send me reminders!” It turns out they do – they send it to my old PO Box address which I still have but only check once per month.

Anyhow, renewing my tabs is easy. Because I live in Washington state, I have to get my car exhaust checked every two years to make sure they pass the emissions standards before I can renew my car registration. Today, the process was easy:

  1. I went down to the emissions testing where there was nobody else in line. It took five minutes and cost $15.00. After they finished, they uploaded my information to the central database indicating that I had completed my emissions test.

  2. I then went down to the licensing bureau, stood in line for five minutes and was then served, whereupon I paid $82 for my car registration for 2014. Total time here: 10 minutes.

This was a very simple process. I could have even renewed online if I wanted, but I still would have had to first pass the emissions test.

Why can’t the health care system be this easy? I barely even had to do anything and I can get email reminders if I so desire (I didn’t sign up for it because I couldn’t renew online).

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If you’ve been following the news recently, you’ll know that the US federal government recently rolled out its healthcare.gov website. This is the site that people are supposed to visit to enroll in “Obamacare.” However, the site has been crashing and people cannot sign up, and they are panicking a bit because there are penalties for the year 2013 on your 2014 taxes if you don’t have a health care plan.

The big story has been the website crashing.

I know a bit about technology, and while I don’t know the specifics, my guess is that the web servers were overwhelmed by the amount of initial traffic on the first day. Web services are built to handle certain amounts of traffic and when it gets overwhelmed, web sites crash.

My guess is that whoever built the site didn’t foresee a huge initial upswing in traffic and designed it for an average projected load instead of this peak load.

A lot of people in the US are freaking out about Obamacare. I’m still not entirely sure what the law is but from what I understand, almost everyone has to have health insurance and if you don’t, you pay a tax penalty. This tax penalty may or may not be less than the cost of health insurance premiums. But if you have a plan already (most people get it through their employers), then you don’t have to do anything.

There are criticisms that this is socialized medicine. Not really; in Canada, the federal government pays for health care and private medical services are prohibited from providing any procedures that the government already pays for.

In the US, the federal government does not pay for any services this way. You still have to get private health insurance. If you cannot afford it, you can qualify for credits and I think the government will pay for that. But the government is not running health services the way that Canada Health runs Canadian health care. The powers of the US Secretary of Health Kathleen Sebelius are not nearly as expansive as the Canadian Minister of Health Rona Ambrose.

 

I get my health care from work and it qualifies as a “cadillac health care plan”, that is, it has very good benefits (even though I don’t use them very much at the moment). In 2017 or 2018, companies will have to pay a tax on these plans since they are considered a form of compensation. Whether or not companies pass these charges on to employees remains to be seen. My guess is that my deductible will go up, or my co-insurance will go up, or the amount my company contributes to my Health Savings Account will go down. As far as I can tell, this the only direct cost to me of Obamacare.

The government will get the web site sorted out (I visited it just now and it worked fine). In the meantime, let’s not get too upset about “government run health care” in the United States, because it really isn’t.

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This past week, I took a major step towards paying off my condo – I paid down an additional $1000. This is $2000 less than the wife wanted me to do, but $1000 more than I was planning to do a couple of months ago.

I have now been paying for my condo for 60 months (five years). So far, I have paid off 9%.

Yuck.

Even worse, most of that has been because I pay a little extra each month already. Most of my payments have been for naught.

Double yuck.

Logically, I fully understand that’s how the math works. But it’s not the logical part of my brain that reacts so strongly against this.

If I am going to pay this mortgage off early, I have to trick myself into doing it. How, you ask? Well, I’ll tell you – by rewarding myself every time I reach a mile stone.

One idea I have been playing around with is every $10,000 I pay off, I have a mini-celebration. For example, I don’t eat very much meat so maybe every threshold of $10,000 I cross I buy myself a fancy steak dinner (the wife can come but will be relegated to the salad bar, so may this isn’t the best idea). Or, maybe I can buy myself a new magic trick. Or, maybe I can get some sort of weird doodad.

Theoretically, the idea of paying off debt should be its own reward. But in real life, it isn’t. I have to motivate myself into keeping at it so I don’t fall off the wagon.

Because this wagon is one bumpy ride.

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Time zone differences

This past week, I went to the conference in Montreal and took the wife with me. Since we live on the west coast of the United States and Montreal is in eastern Canada, that is a time zone difference of three hours further ahead.

I’ve done a couple of time zone jumps this year:

  • Late last year and coming back this past January, we returned from Argentina which was five hours ahead of Seattle.

  • We went to central Europe this year and it is nine hours ahead of Seattle.

Like anyone, when we got to either of these places, we suffered from jetlag. I don’t have any tricks to getting over it. Some people say drink plenty of water, or don’t go to sleep when you get there, or something else. I don’t do anything special, I just accept that I am going to feel tired and wait until my body catches up. It wasn’t too bad in central Europe; we felt sleepy around 9 pm but that was the extent of it. When getting home, my time shift was about 3 hours again and it took a few days to get over it.

Sure, we felt like zombies after getting there, and back, but we survived.

For this recent trip to Montreal, it’s “only” a 3-hour gap. Yet, for some reason, it was very difficult to get up in the morning. The wife announced that she was going to get up by 6:30 am or 7 am to get going by 8. That was to get a jump on things and see the city.

Well, the first day after we got there (Sunday) we got up at 9:30. Indeed, for the first three days it was tough every single day.

What’s going on?

I expect time zone drags when I make a jump that big, but I didn’t think it would take as long to adjust as it did. It was as difficult as going overseas. Indeed, I’m not sure the wife ever got over it.

It’s a week later and I’m over it now (almost). But jetlag sure is something I’d like to avoid as much as I can.

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A few weeks ago, I wrote that the wife paid off the mortgage on her property. That left my place as the only remaining debt we have. We have no student loans, no car loans, and only one mortgage.

Recently the wife has resumed reading books by Dave Ramsey and also a few other financial blogs. She is now consumed by having us pay off any and all debt as soon as possible – meaning my mortgage – in five years. I already pay extra every month, but she wants me to pay much, much extra each month.

I believe this is a noble goal.

But I have a hard time committing to it.

Why?

Because I currently owe $50,000 more on it than I could get for selling it (assuming I get the full selling price, which I wouldn’t after taxes and commissions). That means that putting more money towards the mortgage just pays off the debt faster.

That’s it.

Why is that a big deal, you ask? I’m glad you are wondering.

  • First, at least I get a tax deduction thanks to my mortgage interest. It’s true that every year that deduction is smaller and smaller. However, it phases out over the life time of the 30 year mortgage. That means that the impact is smaller each year.

    However, to pay it off in five years, I would be committing an extra $35,000 per year towards that sucker and my tax deduction would be much, much smaller. So, I am putting in a much larger amount and getting a much smaller tax deduction, making me more grumpy at tax time. It’s a big sticker shock to have to shell out that much money when I’ve been at least getting a smaller “reward” for it at tax time.

  • Second, all I get for the first two years is less debt.

    What do I mean?

    My property value collapsed through the floor during the financial crisis and has yet to recover. Some of it has, but most of it hasn’t. Condos go up slowly. If I were paying off debt on something that was going up in value, I could feel good about myself.

    However, every additional payment I put into the place just goes towards putting the mortgage closer to what I could get for it. In other words, if I sold it after putting $60,000 towards the mortgage, I wouldn’t get anything “for” that $60,000. My place is not going up in value because I am paying it off quicker.

    Literally, the only benefit is the debt gets paid off faster. But while I am paying it off, I have less money to spend on frivolous things.

    That is also psychologically painful.

  • Third, I don’t know what to do with my money.

    By committing so much capital to paying down the mortgage, I don’t know the full opportunity cost.

    Should I be throwing it all into retirement accounts? Or most of it? Or… what? If I divert it into my condo (with its limited returns) and then start investing it afterwards, will I ever be able to catch up on five years of missed returns?

    I don’t know!

    I waste so much money right now. I want to stop! But is paying it down so quickly the best use of funds?

So you see, paying down debt is a commendable goal. On paper it makes sense. But I have several psychological barriers preventing me from committing to it.

But I have a plan. That’s the topic for a future post.

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