New “Low Income” in King County

By Mrs. Song Finance

New low income

There was an article published recently that $72,000 is now considered “low income” where I live (King County) for a family of four. Compare that to last year, when the low-income limit was $69,300.

Those are some surprisingly high numbers, especially when the median household income in U.S. was only $56,516 (according to 2015 data from the U.S. Census Bureau).

But median income in Seattle has been rising at a rate faster than any other major U.S. city. The current median household income in King and Snohomish counties is $96,000. Part of the reason is due to creation of a lot of high-paying new jobs by tech companies. The other not-nicer-part is low income people are being pushed out due to higher living costs.

Since the number stated is the median income, it means half of the households in King County earn higher, half earn lower. Not everyone is benefiting from the massively increased income, and people who are falling in the lower half may be finding it hard to make ends meet.

(Read More...)

2016 Taxes, Checked!

By Mrs. Song Finance

Tax return 2016

Embarrassingly, this was the first time since moving to the states 3 years ago that Mr. and Mrs. Song have filed their taxes by themselves! We’ve always thought filing taxes would be very complicated, and we were scared of messing up.

The first year we were here we hired a cross-border accountant from Vancouver to do both our Canadian and US taxes. We had the accountant help declare us as non-residents of Canada for tax purposes. We didn’t own any properties, and had already disposed of any investment accounts and TFSA accounts we held. It really helped cut down the amount of taxes we had to pay, since in Canada we’d have to pay the B.C. provincial tax, whereas Washington has no state tax.

The second and third year we hired the same accountant again. We got married and had bought a house, so our tax situation changed. Oh boy, do I wish I had learned more about finance before getting married! I would’ve probably had a way smaller wedding to cut down wedding expenses. I might’ve not signed the papers too, if I had learned about the marriage tax penalty. Did you know that depending on whether you and your spouse’s incomes are equal or disparate, you will either be taxed more or taxed less (respectively) when filing as married and jointly?

(Read More...)

4% Rule: Ticket To Early Retirement?

By Mrs. Song Finance

Retirement sign post

You see people announcing their retirement in their 30s and you wonder, how is it possible they’re retired? They’re probably going to run out of money and they’ll eventually have to go back to working at some crappy part time job! And that’s a possibility; it’s a risk associated with many of the decisions you’ll make in life. But people have figured out how to lower that risk to an acceptable minimal, and they refer to it as “the four percent rule”.

What Is 4% Rule?

In a nutshell, it’s the amount you can safely withdraw from your portfolio year over year without depleting it too fast. This is achieved by maintaining a conservative portfolio that produces enough annual returns to match inflation and depletion. It has been a popular rule of thumb for retirement planning since it was first publicized in a 1944 study by William Bengen.

(Read More...)

We Chose to Buy Instead of Rent in Seattle

By Mrs. Song Finance

Home ownership vs rent

In 2015, we left our renter life and entered home ownership. Back then we weren’t thinking too much about finances. We wanted a house because that seemed like what you would naturally do. Our parents always preached us that a property is similar to gold; its value will never depreciate, and you should always look to own a property. So we did.

But few days ago I came across “How I made $102K in Real Estate and AM Poorer For It” @ GoCurryCracker. In that article, GoCurryCracker shared his experience on home ownership in Seattle, broke down all the costs, compared it to renter life, and decided he was financially better off by renting instead of owning.

I thought to myself, SHOOT are we screwed? Did we make a wrong decision? Would we be financially better off and closer to retirement if we had stuck to renting? Their story was similar to ours in that we both arrived in Seattle for a new job and we both went and bought a house. However their location, size of the house, and timing was different from us.

I decided to do a similar analysis for our situation to find out whether we made a bad move or not.

(Read More...)