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Homepage: http://leightpf.wordpress.com

Re-thinking the mortgage payoff plan

Sometimes, I don’t feel like making big payments to the mortgage and I would rather throw the money into investments. I mean, my interest rate is only 2.5% and the balance is a lot less scary now that it is down in the $150,000 range from the $280,000 range when I bought two years ago. For now, I am going to continue with the plan of paying off the mortgage. There’s no rhyme or reason to my wanting to throw money in investments instead of at the mortgage, so it’s probably just fatigue from working on a medium-term goal. Or maybe it’s a desire to see my investments go up faster instead of seeing the mortgage go down faster. I think I’m more motivated by seeing numbers go up than numbers go down! (Hmmm, if that’s the case, perhaps I should track my equity instead of tracking the mortgage balance. Well, I do both in my own spreadsheets.)

Every once in a while, I calculate how much extra I would need to pay on the mortgage each month in order to pay it off exactly before the rate resets. As of today, that number is around $2,700 and I’m only throwing $1,800 each month at the mortgage. By the end of this year, the required number should turn into only $2,200, which might be possible. And by the time of my bonus at this time next year, it should be down to around $1,600 and the mortgage balance around $80,000. So the question at that point becomes “Would I rather take a year to pay off the mortgage and put nothing into investments in that time OR pay off the mortgage exactly before the rate resets and put everything else into investments in that time?”

I’m not going to let myself re-evaluate how much I’m throwing at the mortgage until I have reached a point where I am throwing more at the mortgage each month from my paychecks than I need to to pay off the mortgage before the rate resets, since I don’t want to rely on my bonuses. After all, my original goal WAS to pay off the mortgage before the rate resets. It just turned out to possibly be possible to pay it off months/years before that happened.


My relationship with my electricity bill

Ever since I moved into my condo (almost two years ago!), I have had a love/hate relationship with my electricity bill. My July and September 2012 bills don’t really contribute much data-wise and I should probably just throw out the 2012 data points from my spreadsheet completely. The electricity usage was truly mine starting with the January 2013 bill. As you can see below, I used about 5 kWh/day less this year than I did in 2013 on the January and March bills. I also basically cut my usage in half from March to May, May to July, and July to September.

May 2014 Electricity kWh Per Day Graph

I still think I can improve my electricity usage, so I’m going to take a look at all of the items that use electricity in my home.

TiVo – my boyfriend has a different system for watching TV that uses a lot less electricity, so I’ve unplugged the TiVo. That should save about 0.7 kWh/day from what I’ve seen online.

Heating - this is the killer of my winter electricity bills. I can’t really do anything about the fact that I have electric heating, but I can make that a bit more efficient. I figured out in March that my programmable thermostats were from the 80s, so I decided to replace them. That cost about $100 for the two of them, but it has been so worth it for the annoyance factor with the old ones. They also seem to interpret the temperature better, so maybe it will save a small amount on heating. I won’t really see much difference until next November/January on this though.

Hot water heater - my hot water heater is incredibly inefficient according to the label on it. Its about 8 years old, so it’ll probably be replaced in the next five years. It says that it uses 4,881 kWh/year. If that’s true, that would account for about 55% of my electricity usage in 2013.

Lights - there are a TON of lights in my place. I have fifteen 65 watt incandescents (8 in the kitchen, 4 in the hallway, 1 in the second bedroom, and 2 in the master bedroom/bathroom), a 72 watt incandescent on the balcony, and twelve 60 watt incandescents throughout the apartment. I do have about 5 CFLs as well. That’s over 30 lights throughout the condo. The kitchen lights probably spend the most amount of time on, so once I run through my current supply of the flood lights (four spares left), I’m going to look at CFLs and LEDs.

I found a 10.5 watt LED light for $20 on Amazon and a 15 watt CFL for $6. They’re actually about the same overall cost since the LED one lasts 3x as long. I doubt I will still be living in my condo in 20 years though! The LED one would cost me $0.54 less per year in electricity per light bulb over the CFL, assuming 3 hours per day and 11 cents per kWh. The CFL would save me $6/year per light bulb and it would be cost effective within a year ($6 in electricity savings and $6 cost per CFL light bulb). If I replaced all 15 of the indoor flood lights with CFLs, it would save $90 in electricity per year or an average of $15 per bill, though it would take until after the first year to see any level of savings. That’s a pretty decent chunk of change. My estimate is that I will use up the remaining four flood lights in the next 6-12 months and then I’ll buy a LED and a CFL and give them a try.

Fridge – my fridge is about 18 years old. It would probably cost less in electricity to run a newer one, but that’s not worth buying a new fridge for. I am sure that once I do replace it (which will probably be in the next five years), I will save a bit on the electricity bill from it.

I’ve made pretty minor improvements on my electricity bill in the last two years, but I’ve been happy with the progress and it’s kind of interesting to see. I just wish I had more data on this!

Sometimes it makes me feel like analyzing costs like this doesn’t mean much or isn’t particularly worthwhile when my employer’s stock price can drop enough that my bonus is several thousand dollars smaller than expected and that has a far bigger impact on my finances than saving $6 per lightbulb per year on my electricity bill.

Hope you all have a wonderful long weekend!


2014 vs 2011 – finances three years into blogging

WordPress tells me that I have been blogging for three years as of today! I thought it would be fun to take a look at where my finances then :) At the end of April 2011, my net worth was $72,871.59 and I was 22 years old. Here’s how that broke down:

  • Checking accounts and foreign cash: $13,808.19 (now $7,964.73)
  • General savings: $17,170.19 (this is what other people would call an emergency fund, but I’ve always called it general savings) (now $20,949.23 since my expenses are a bit higher)
  • Down payment savings: $10,379.65 (cleared out – I now own a condo!)
  • Car savings: $6,213.45 (cleared out – I bought my car! I can’t believe I have had it for almost 4 years. It’s still practically new.)
  • Car loan: $5,902.60 (my parents advised me to take out a car loan and auto-pay it out of a savings account to build up credit. I took out a 12 month loan that had had almost $900/month payments, which my parents thought was crazy, but I didn’t see any reason to pay on the loan for much longer than I needed to. I will just pay cash for any future cars now that I have credit history.) (paid off after 12 months exactly)
  • Traditional 401(k): $5,524.06 (now just over $77,000 – higher than my entire net worth three years ago!)
  • Roth 401(k): $2,048.32 (now around $5,500)
  • Roth IRA: $10,620.79 (now just over $30,000!)
  • Other retirement: $7,361.38 (now just over $8,000)
  • Taxable investments: $5,648.16 (this was about ~$3,000 in a bond fund at Vanguard and the rest was my first batch of RSUs from my employer that I kept)
  • Total: $72,871.59

Isn’t that cute? I hadn’t gotten into the habit of contributing the maximum to my 401(k) yet (2011 was the first year that I did and I decided to do that a few months into the year). I first contributed to a Roth IRA in 2010 and I started contributing monthly in 2011 before getting a bonus a few months into the year and finishing off the full contribution.

My overall net worth is about 4x higher three years later! I now own about 50% of a condo and my investments are up from $31,202.71 to $148,000, up almost 5x.

My expenses are pretty comparable to where they were in 2011. My expenses in 2013 versus 2011 was a difference of about $440/month, about $200/month of which is from increased housing expenses.

I know what I’m doing with my finances a lot more now than I did in 2011, which was part of why I started my blog. I feel like I have a plan with my finances and no longer wonder what I’ll do month-to-month with my savings since I’m just following my plan. It makes things pretty simple. It probably helps too that my life situation has been reasonably stable over the last couple of years, since I bought my condo in June 2012. I think that the next three years will bring new and exciting changes to my finances as I get closer to 30.

I think that in April 2017, my net worth will have doubled from April 2014, as will have my investments and my condo will be paid off. Maybe I will be trying to figure out joint finances at some point in the next three years with my boyfriend. Maybe I would sell my condo and we would buy a place together. A lot will probably happen in the next few years! Maybe between the two of us, we could be millionaires in the next three years :)

Readers, how have your finances improved over the last three years? How do you see them changing in the next three years?


April 2014 net worth update (+1.2%)

31-Dec-2013 31-Mar-2014 30-Apr-2014 MoM YTD
cash $13,500 $8,800 $8,000 -$800 -$5,500
savings $27,400 $22,100 $22,300 +$200 -$5,100
investments $134,600 $145,600 $148,000 +$2,300
mortgage $187,600 $177,000 $174,500 +$2,500
net worth $345,900 $357,500 $361,800 +$4,200
assets – debts
$12,100 $500 $3,800 +$4,200
liquid assets – debts $49,000 $39,900 $36,700 $3,200

April was pretty much exactly the same increase as March in terms of savings, investments, and mortgage. My total monetary assets are now worth more than my mortgage! That’s pretty exciting. I’m now tracking the difference between my liquid assets and my mortgage, which should become a positive number sometime this summer.

I saved 59% of my net income in April! I’ve been a bit disappointed with that after the last half of 2013 where I was spending far over $2,000 extra to the mortgage each month. But, my net discretionary income is down a bit this year due to a variety of factors and unless I want to reduce some spending, that is the number that I’m going to have to live with for now.

Expenses: I spent $4,330 in April after the mortgage or $3,300 without it. So far, my total spending for 2014 is $17,020, which is $51,060 annualized. To hit my $38,500 spending goal for the year, I need to spend no more than an average of $2,685/month over the remaining 8 months this year.

Some of my controllable expenses broke down as follows:

  • $100 Athletic wear – a new pair of yoga crops and a new tank top
  • ($232) Jeans – returned two from last month
  • $33 Skirts – a black maxi skirt
  • $131 Summer pants – four pairs via online shopping. I’ll pick two of the colors and return the other two.
  • $56 Bras
  • $37 Socks - turned out that almost all of mine had holes in them, so I threw out a ton and bought some more.
  • $201 Tops – 4 v-neck t-shirts, two long-sleeved v-necks, two white camisoles (mine needed replacing), two button-down shirts, and a grey cardigan (mine needed replacing). I’m still not fully decided on the button-downs, but I still have some time to return them.
  • $16 Underwear – stocking up some more.
  • (Yes, that was $342 on just clothing/shoes this month.)
  • $158 Entertainment/Social – And we’re back to a more normal month for this year. [average this year: $223, last year: $224] This was about half eating out with friends / half date nights.
  • $16 Eating out by myself [average this year: $12, last year: $25]
  • $48 Groceries – this was mostly chocolate, some of my online grocery purchases, and random items [average this year: $225, last year: $152] I’ll pay next month for two.
  • $179 Work lunches [average this year: $155, last year: $77] – That isn’t too bad of an increase from last year given that I’ve been eating out every day.
  • $60 Internet – Accidentally overpaid by $7.
  • $170 Electricity – this is for February/March
  • $0 Household goods [average this year: $14, last year: $29]
  • Property taxes – first half
  • $51 Medical bills
  • $40 Eyebrows
  • $33 Toiletries [average this year: $14, last year: $31]
  • $134 Recreation (one barre class and one month at a new yoga studio that I’m liking so far)
  • $57 Furnishings: upgrading the other thermostat

I foresee myself buying another sports bra ($60), a new pair of running shoes ($100), another skirt ($70), and two more workout tank tops ($40-100), for a total of $270-330 of further clothing spending this year. We’ll see how that actually plays out. As of November, none of my jeans, pants, or skirts fit anymore. I have some that are up to 8 years old and they don’t fit. I’m trying to only buy two items of my new size in each type, but it still does add up a bit. I’m counting the first two items as a need and anything further as a want. (A new pair of running shoes per year is also a need based on how much I use them – I probably walk about 2,000 miles per year.)

Savings: $22,300 (up $200)

These funds are spread across a Chase savings account, a general online savings account, a checking account that gets free ATM fees anywhere in the world, and my health savings account.

The change here comes from:

  1. Paycheck contributions to my health savings account (March)

I’ve decided to keep the Chase savings account open even though I could now close it with no penalty as it has come in handy a few times, for example to get a deposit rather than a statement credit for credit card rewards and then immediately send them to the mortgage. Plus, it is only the opportunity cost on $300, which at the Ally online savings account rates loses me $2.55/year.

Investments: $148,000 (up $2,300 or +1.6%)

This includes my Roth and Traditional 401(k), my 401(k) employer matching (fully vested!), my Roth IRA, my taxable investments including stock index funds and Series I Savings Bonds.

The change here comes from:

  1. ~$600 in stock market gains and interest
  2. March paycheck 401(k) contribution and employer matching

Mortgage: $174,500 (down $2,500 or -1.4%)

Some statistics here:

  • 2.5%: the interest rate on my 5/1 ARM
  • February 2018: when the interest rate on my mortgage is set to reset, possibly to 7.5%
  • 3: months of payments eliminated with this month’s pre-payments
  • $1,800.00: extra payments made on the mortgage this month
  • $3.75: interest this month’s extra payments will save me on the next regular payment
  • 35.6%: portion of my regular payment went to interest (originally was 59%)
  • 51.2%: amount of equity in my condo, assuming purchase price
  • 39.0%: amount of the mortgage I’ve paid down

Just plugging along here this month.

TOTAL: $361,800 (up $4,200 or +1.2%)

I ended 2013 with a net worth of $345,900, so I’ve seen a change of +$15,900 or +4.6% so far this year. I’ve set the y-axis on this graph to $465,000 so we can see how my net worth grows towards that throughout the year.

April 2014 Net Worth Graph

And let’s take a look at how I did on April’s goals:

  1. Only use the Chase Sapphire Preferred visa for spending until I’ve spent the remaining $868.33. (Once I’ve hit that amount, put my Amazon.com purchases back on auto-pay to the Amazon.com visa, use the Chase Freedom for the 5% restaurants, and use the Barclaycard for everything else. Move any auto-pays from the Chase Sapphire Preferred to the Barclaycard.) SUCCESS! All done with the churning. I think I’ve had enough of that for a bit!
  2. Try biking to work on the nice days. This should cut my commute about in half. FAIL! I did this once and then started going to yoga after work and this didn’t happen again.
  3. Send $1,800 to the mortgage on pay day. SUCCESS! I sent exactly $1,800 to the mortgage on pay day.
  4. Be more realistic about my productivity possibilities at work if I have a lot of meetings on a particular day. SUCCESS! I definitely think I got better at this.
  5. Work on Operation Penguin* with my boyfriend. (*code name has nothing to do with what it actually is) SUCCESS! I’m still not revealing what it is, but it is done.

Now for some new goals for May:

  1. Find and buy a second skirt. (I’m currently eyeing eShakti.)
  2. Use my debit card for the small transactions – under $6 restaurants, under $15 2% cashback, and under $30 1% cashback.
  3. Decide what to do about the new yoga studio. Do I want to buy a yoga towel or a better yoga mat? A better bag to make carrying my yoga mat to work and then to yoga easier? What I have now (an $8 yoga mat, no towel) is definitely not going to work if I want to keep going to hot yoga.
  4. Enjoy spring!
  5. Trust my gut instincts more at work. I’m no longer a newbie and I do know more than I think I do.
  6. Send $1,800 to the mortgage on pay day.
  7. Add X% of the gross of my bonus to my donations budget and send the rest of it to the mortgage. I am super excited about how my finances will look at the end of May!
  8. Clean the balcony.
  9. Call my parents four times. (I’ve been lacking on this lately.)

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I don’t like churning credit cards.

In general, I don’t like like doing things right up until a deadline. I like finishing things as early in advance as possible.

I’m also not a keep things super simple person. I tend to make things more complicated than other people might, but I like that game. So the game of finding the best rewards credit cards for my level of spending is pretty fun. So is researching new credit cards that could be cool. But actually implementing that? Apparently I don’t like that very much. I don’t like watching the numbers to see if I’ve finally spent enough to get the sign-up bonus for a new credit card or waiting a long time to be able to actually redeem new rewards.

Churning the Barclaycard World Arrival card was pretty easy because I used it to pay for a trip and that one expense was over the $1,000 minimum spend. Similar story with the Chase Freedom card except it took two purchases (some medical bills and the painters).

But the Chase Sapphire Preferred? As much as the card is pretty cool looking and the Ultimate Rewards are kind of cool, the whole thing is way too complicated for me to really enjoy implementing. It was/is a $3,000 minimum spend in 3 months and that’s cutting it pretty tight with my normal spending. I think I should be done with it by the end of this month. I finally made myself a spreadsheet to project when I would have hit the $3,000 minimum spend and it should happen in the next 3 weeks.

I don’t really mind having 1-3 credit cards in my wallet and thinking about which one to use, especially since it’s not that complicated to figure out which one to use in a particular case, but the wondering when I’ll hit the minimum spend on a card is way too much for me. The fun part is in finding the cards and doing the math on them, not actually going through the daily spending with them. That’s just life.

So here’s what my plan looks like now:

  1. Finish up the $3,000 spend on the Chase Sapphire Preferred card.
  2. Don’t churn any more credit cards in the future unless I can project with certainty that I can very easily meet the minimum spend for a card in 1-1.5 months.
  3. Go back to using the Amazon.com visa for those purchases (doesn’t need to go in my wallet – just auto-pay) and the Chase Sapphire Preferred card for online shopping through the Ultimate Rewards mall. Use the Chase Freedom visa for restaurants this quarter. Use the Barclaycard Arrival card for all purchases until I can redeem the miles I have left against a travel purchase ($253 more in spending).
  4. Once I’ve redeemed all the miles I have left on my Barclaycard account, use my Fidelity American Express for everything again, except where they don’t take American Express, use one of my other cards, doesn’t really matter which. I’ll set my electricity bill to auto-pay on my credit union visa though to keep that active.
  5. Downgrade the Barclaycard before the annual fee hits to keep the free FICO score feature. Close the Chase Sapphire Preferred card once I redeem the 60k+ points for a flight this year.

Sometimes I make plans and then don’t do a very good job of sticking to them because there are way too many possible plans that seem way more exciting than the ‘boring’ plan I had. This has been one of those times. I’m honestly surprised that I have stuck with the mortgage pay-off for so long and not switched to investing instead. (Well I did try that a couple months and then went back to the mortgage.)



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