Guest Post: 8 Ideas for saving money to kill your debt monster

Debts are like monsters. They can gobble up your financial and emotional peace. You feel stressed out, dejected and can’t find what to do to get rescued. But there are ways to get rid of debt monster. One of the most efficient weapons to kill your debt monster is saving money. The more money you can save, the extra you can pay towards your debts. Building financial cushion can boost your confidence to pay off the debts easily. Continue reading

Average American Debt by Age and Type of Debt

Using data from the NY Fed’s Graying of American Debt, here is average total debt by age and type of debt for 2015. The number in the inner circle is the age of the debt holder, and the donut slices are scaled to represent the amount of debt in dollars. Hover over the slices to see the average debt amount in dollars.

Debt by Age Aster Charts

On a high level, overall debt:

  • Age 25: $19,700
  • Age 35: $57,600
  • Age 45: $73,700
  • Age 55: $61,500
  • Age 65: $48,300
  • Age 74: $29,300 (last available data is for age 74)

Find past home prices if Redfin doesn’t show it

Recently I’ve been on the house hunt, and Redfin and Zillow have been great resources at trending home values and seeing how prices have changed as homes are sold over the years–the before and after pictures are my favorite.  Sometimes though, if a home hasn’t changed hands in the last 15+ years, Redfin and Zillow might have incomplete transaction history.

My SO and I live in Chicago in Cook County, Illinois, and we can search the County’s Recorder of Deeds website for past transaction history.  Unfortunately, Cook County’s search doesn’t search by address, so I’m going to share a few quick instructions to using it. Depending on your county, you may have an easier time finding transaction history.  All of this information is 100% public, just not always easily accessible.

Find the Property’s Redfin Profile Page

This home only shows the current listing price on Redfin's property history.

This home only shows the current listing price on Redfin’s property history.

Here’s an example of missing data.  This home was built in the late 90s, and was last sold in the early 2000s.  For whatever reason, Redfin only shows the most recent listing in the property history.   Sometimes Zillow will have more information, but in this case Zillow also showed nothing except for the listing.

Look for the Parcel Identification Number under the Property Details

Look for the Parcel Identification Number under the Property Details

Cook County’s Recorder of Deeds uses a Property Identification Number (PIN) to search for transactions related to properties and deeds.  If you don’t live in Chicago/Cook County, you may still need the PIN or you might be able to search by address.  The PIN is found under the Property Details with in subsection Property / Lot Details.

Find out who Keeps records of deeds

So this is going to be the most confusing part.  Depending on which state you live in, you’re going to need to find the local government office that handles deeds.  This could be the Register of Deeds, Recorder of Deeds, County Auditor, County Clerk, etc.  Usually it is on the county level.

For me, it’s the Cook County Recorder of Deeds.

Go to your county's Recorder of Deeds or equivalent office.

Go to your county’s Recorder of Deeds or equivalent office.

Once you find out where to go.  Search for the property using the PIN from Redfin or address depending on the system.

My county’s page will pull up a ton of different real estate related transcations.  Your county might show more, less, or have a different format.

Find the warranty deed transactions.

Find the warranty deed transactions.

In my county, the Warranty Deeds are the important ones.  The amounts listed on these deeds match up with the past sales on Redfin and Zillow.

We found it!

We found it!

Ta da!  Success! This property was last sold for $345,000 14.5 years ago.  I really like adjusting past sale prices with inflation to see how the home’s price has changed compared to inflation. Usually, I like to use the Bureau of Labor Statistics CPI calculator.  Adjusting for inflation, that home last sold for $467,165 2017 dollars, so the current listed price just barely outgrew inflation.

Share in the comments if you had to change some of the steps for your local area!

How little could I work and still retire?

So I started thinking, I already have a lot of money saved up.  I’d like to keep working until I’m in my 60s to at least have something to do. But how much do I actually have to earn?  Right now, I’m right around the cusp of breaking six figures (depending on the bonus), but I only spend a relatively small fraction of that.

how much do I need to earn?

At work I have a lot of visibility to senior management, and the worst part of my job is being stuck in between the arguments of leadership of different divisions. On Monday we had a 15 minute meeting first thing, my Director announced that she was leaving the company. I relied a lot on my Director to deflect some of the politics and without her, I felt naked. After reflecting a little bit more on my work, I don’t think that I want to keep advancing up this path, because at this point that higher I’d advance the deeper I’d dive into the wonderful world of corporate politics.

I made another calculator

I whipped up the minimum work calculator to help me figure this out. Here are the settings that I plugged into it:

The settings I put into the calculator
I reduced the wage growth a little bit just for a little security.

After a handful of CPU cycles, it spit out  $22,400 per year post-tax or something like $24,640 to $26,880 pre-tax. Whoa, it’s lower than my spending, how does that make sense?

Well, the model is making the assumption that my $200,000 in starting investments will grow the first year by $14,501 (principle * e ^(rate * time)) with no withdrawals. The calculator looks at this and says, I could use part of that growth to live off of and still have enough left over to fund my retirement. This is what it ended up doing for year 1 (hover over the result graph to see the numbers).

At the end of year 1 (Age 29):
Spending: $28,700
Post-Tax Income: $22,967
Starting Investments: $200,000
Ending Investments: $207,659
By living off of my investments, I would have needed $5,733 to cover the gap between my income and spending. So in order to fund that income gap, my investment growth was reduced $6,842 to cover the $5,733, plus taxes, and plus loss of investment growth. Now, I would actually never want my spending to exceed my income before retirement, but at least it’s nice to know that I’d have a little leeway.

Here’s the chart that it spit out:
The chart from the calculator

With the results, I feel at least a little better that I would probably be okay if I left my job for whatever reason and found a less stressful one with lower compensation. This minimum amount would be my low bar, so anything over it would mean that I would be able to preserve my standard of living and still retire with more leeway.

Right now, my plan A is to hang on to my current role for as long as possible. If anything happens, Plan B doesn’t look so bad.