IRA contributions: Am I eligible?
IRA contributions are open to anyone, but Roth IRA contributions can't exceed $5,000 or your annual income, whichever is lower (Question 6).
What’s inside? Here are the questions answered in today’s reader mailbag, boiled down to five word summaries. Click on the number to jump straight down to the question.
1. When should we refinance?
2. What is rich?
3. Is debt snowballing still valid?
4. Precious metals investing
5. Retiring rapidly
6. Roth IRA ineligibility
7. Uneven estates
8. Where would I live?
9. Is kitchen renovation needed?
10. Next president?
The Simple Dollar is a blog for those of us who need both cents and sense: people fighting debt and bad spending habits while building a financially secure future and still affording a latte or two. Our busy lives are crazy enough without having to compare five hundred mutual funds – we just want simple ways to manage our finances and save a little money.
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My desktop computer seems to finally be going through its death throes, which means that I’m spending a lot of time (a) working on my laptop (which isn’t the most optimal place for me to work), (b) looking for a replacement desktop machine or at least some parts for this one, and (c) moving data completely off the failing computer.
I’m pretty sure it’s a faulty power supply that caused some damage elsewhere within the machine, if you’re curious.
Q1: When should we refinance?
We bought our first home in August of ’09. We currently owe $120K at 5.25% interest, 30 year fixed mortgage. I’ve been seeing interest rates as low as 4.5%, and I am wondering if we should look into refinancing while the rates are so low. I don’t know if it matters, but we did get the $8,000 first-time home buyers tax credit, and if we sell in the first few years, we have to pay part of that back — is refinancing considered selling, since you are basically paying off the one mortgage and getting a new one?
The general rule of thumb for refinancing is that you need to have a 1% difference between rates to make it worthwhile. In your case, that rule might not be hard and fast, for two reasons.
First, refinancing is pretty cheap right now. The up-front costs of refinancing are incredibly low – you can likely find refinancing for $1,000 or less.
Second, you’ve just started on your mortgage, which means that the vast majority of your interest is yet to come. This swings the balances more in the direction of refinancing.
You really need to do two things. First, shop around and find the best deal you can. Next, use a refinancing calculator like this one to figure out whether or not it adds up for your specific situation.
Q2: What is rich?
I live in a country located in Eastern Europe. The minimum monthly wage is 120euro, the average wage perhaps 500euro.
I have been thinking a lot about money and personal finance – mostly because of the money trouble I was recently in. All my life I always thought we were poor, but perhaps we weren’t. Maybe we were middle-class. However, I have the impression we must have been poor probably because I constantly heard “We don’t have the money”, “Money’s tight” or “We can’t afford it”. I heard that A LOT.
I never had fancy clothes, telephones, computers or the like. We never had fancy cars or a fancy house with new furniture or equipment. I didn’t have a lot of pocket money. I lived with little money during my student years. Mom and Dad also lived with little money when they attended Unis in their late 40′s. I could never spend as much as I wanted. Mom and Dad always owned money to someone. I remember going on vacation a total of three times in my life.