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Posted in Uncategorized on November 10, 2013
In July of 2012, sixteen months ago, I wrote a post outlining my plan to pay off my mortgage in five years, before the ARM rate resets.
On that schedule, the balances needed to look like this:
Well, the balance today is around $198,200, about $11,000 ahead of where the balance needs to be at the end of this year to stay on the original five year pay-off plan. The balance at the end of 2012 was around $259,600, which was about $4,000 ahead of that year’s required balance.
I am now amending my mortgage pay-off plan to pay it off by the end of 2015, slightly over two years from now and 3.5 years into the mortgage. The modified balance schedule is as follows:
I think that this is slightly aggressive, but it is quite possible. My current income projections put the balance at just under $180,000 at the end of this year, at around $100,000 at the end of 2014, and around $20,000 to $30,000 at the end of 2015, which means I need to come up with up to an extra $10,000 on top of my $20,000 savings account to pay the mortgage off by the end of 2015. I will re-evaluate the plan again in June/July of 2014 and then at the end of 2014.
What will I do after the mortgage is paid off? What about my idea to go to grad school? Well, in the fall of 2015, I will evaluate whether I want to go to grad school or keep working and if I want to go to grad school, then all of my savings from after the mortgage is paid off will go to online savings accounts to cover that. If I decide to not go to grad school, then I will build up a $20,000 general savings account again, then set aside 1/5th of the money to buy a new car in 2020 and stash money in taxable investment accounts since I’m already maxing out my available tax-advantaged retirement accounts.
Posted in Uncategorized on November 9, 2013
When I bought my car three years ago, its three year warranty came with roadside assistance anywhere in North America! That seemed like a pretty sweet perk at the time, being a 22 year old who knew (and knows…) very little about cars, just bought a brand-new car, and planned on driving most of her miles on long stretches of the highway to visit family. Well, guess what? That policy is expiring soon! And I’ve been debating what to do about it. The way I see it, I have several options:
1) Car insurance: Add this as an additional benefit/cost on my car insurance policy. I investigated this and it would cost $30/year.
2) AAA: Buy a AAA membership. The classic membership would cost me $56/year and would get me free towing up to 5 miles. For free towing up to 100 miles, it would cost $89/year.
3) Credit card benefit: Investigate my existing credit cards for if they have a roadside assistance benefit and if not, apply for a new credit card with no annual fee that does. None of my existing credit cards have this benefit and I don’t want to get another credit card just for this.
4) Go without: This is the catch-all, take no action option.
After much consideration over the last few months, I am opting for the last option, do nothing. Why? In the last three years, nothing has happened to my car. It also seems fairly unlikely. I have a smartphone, with which I could look up the phone number of a local towing company wherever I am and call them or if I have no data service, call a friend who has internet access to look one up and then I can call that number.
Readers, do you have a roadside assistance policy? If so, how often have you used it?
Posted in Uncategorized on November 2, 2013
|assets – debts
I thought this month was going to be net worth neutral because I finished maxing out my 401(k) with my October paycheck and the transaction hasn’t posted yet. The stock market increase made up for that though.
Expenses: I spent $3,060 in October. That puts 2013 so far at $26,630 or an average of $2,663/month. This would project forward to $31,956. I’m already past my stretch goal ($24,000), but I may be able to meet my target goal and I should almost definitely beat last year’s spending of just over $50,000.
Some of my controllable expenses broke down as follows:
- $433 Entertainment/Social ($200 average this year): 56% eating out, 9% cash withdrawals, 12% textbooks for leisure reading, 2% movie rentals/TV shows, 21% multi-day concert in the future
- $1 Eating out by myself ($29 average this year)
- $180 Groceries ($156 average this year)
- $98 Work lunches ($77 average this year, $171 average last year)
- $0 Cell phone (yay referral credits – I don’t have to pay a bill until January!)
- $31 Internet
- $32 Electricity
- $17 Household goods (kleenex and a 2014 calendar was on sale)
- Property taxes (not controllable, but a large expense)
- $427 Medical
- $20 Eyebrows
- $39 Toiletries (some over-the-counter injury related purchases + shampoo, toothpaste, and conditioner)
- $45 Facial groupon
- -$X Fitness (refund for prepaid costs)
- $0 Fuel ($32 average this year so far, $38 average last year)
- $70 Car maintenance (oil change and new windshield wipers)
- $17 Out of pocket parking at work
- $106 Taxis to/from work
- $127 Vehicle tabs renewal (annual cost)
- -$13 Travel (friend paid me back for something)
Last month, I said: I’ve increased my Entertainment budget from $150 to $250. Hah! That clearly did not help at all. Part of the problem is that I used to eat out by myself occasionally and had a budget of $35/month for that, but I pretty much no longer eat out by myself except for sometimes lunch at work – I’m either out with friends and/or my boyfriend. I’ve been categorizing meals with him in my social eating category. I’ll figure out a better system for that eventually.
My electricity bill for August/September was only $32!!! That is the lowest bill yet since moving to the condo.
I have not filled up the gas tank in over 2 months now! Not playing sports definitely helps with that, even though I have been driving to work a lot. I will probably go see my parents over Thanksgiving, so I will fill up once or twice around then. I’m estimating I will still probably end up spending less on fuel this year than in 2012. I expect the final monthly average to be about $34. Since I drive so infrequently, I only need to get the oil changed once a year!
About $700 of my extra expenses this month were related to my injury: increased social eating (not socializing by playing sports), leisure textbooks, medical bills (not done with these), over-the-counter related purchases, out of pocket parking at work, and taxis to/from work. I’m not really fully healed and I see more medical bills in next few months.
Savings: $23,900 (same)
These funds are spread across Chase
checking and savings account s (opening bonuses!), a general online savings account, a checking account that gets free ATM fees anywhere in the world, a condo furnishing sinking fund, an online savings account for tuition, and my health savings account.
This is the same because of withdrawals from the health savings account.
Investments: $121,300 (up $5,300 or +4.6%)
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.
You might question my counting my Series I Savings Bonds under Investments vs Savings. I’m counting them here mostly because of their tax-deferred until maturity nature. I also consider them part of my emergency fund, but in reality my entire monetary (i.e. non-property) net worth is my emergency fund, so that doesn’t necessitate it being part of savings.
The change here comes from:
- 401(k) contribution from my September paycheck, including employer matching
- The stock market increase
Mortgage: $201,100 (down $3,800 or -1.9%)
My mortgage is a 5/1 ARM at 2.5%. Before the refinance, it would have been paid off November 1, 2038.
The September paycheck savings went to principal with the October 1st payment.
I estimate with the extra principal payments in October that the payoff date is now at April 1, 2034. I shaved 12 months of payments off with this month’s pre-payments! (Note: my spreadsheet math seems to have gotten a bit confused.) And I’ll save about $7 in interest on the November 1st payment based on these pre-payments.
The mortgage balance is already ahead of where it needs to be by the end of 2013 to stay on track with the five year pay-off plan. In fact, I’m currently about $15,400 ahead. I’m currently planning on continuing to pay extra on the mortgage despite this though. I have now paid down over 30% of the original mortgage balance!
With my current income projections, I am becoming more and more confident that if I concentrated on the mortgage more than I am now, I could have it completely paid off in December 2015. I could also then save enough in January-August 2016 to go to grad school that fall. That might be a better plan. I also think that committing to paying off the mortgage in 2 years from now would help me concentrate on it more than I am right now since my commitment was to pay it off before the rate resets, which isn’t for another 4 years at this point. I think that the commenter was right that I need more aggressive goals. To pay off the mortgage by the end of 2015, the balances would need to look like this:
- 12/1/2013: $180,317.05
- 12/1/2014: $91,284.28
- 12/1/2015: $0.00
TOTAL: $310,400 (up $6,000 or +2.0%)
I ended 2012 with a net worth of $211,300, so I’ve seen a change of $99,100 or +46.9% so far this year. (For reference: my net worth increased by $78,800 in all of 2012.) I’ve set the y-axis on this graph to $315,000 so we can see how my net worth grows towards that throughout the year. I hit $300,000 in September and am currently projecting to hit $340,000 by the end of the year, for a total yearly increase of almost $130,000.
Lastly, to check in on the goals I made at the end of September:
- Figure out something fun to do since I can’t play sports. SUCCESS! I spent a lot of time hanging out with my boyfriend, more time reading books, and some time figuring out what to do about work.
- Follow the doctor’s orders to help my injury heal faster. UGH! I did follow the doctor’s orders, but my injury is not really healing. I think I’ll end up going back to the doctor again.
- Do some more introspection about work. SUCCESS! I spent most of October having coffees and I think I have come to a good conclusion. I’ll talk about this more once things finalize.
- Finish contributing to my 401(k) for the year (about $4,200 left to go). SUCCESS! It hasn’t posted yet, but it was taken off my paycheck.
- Don’t worry about money so much so long as I’m happy. SUCCESS! As you can see with how high some of my spending was this month…
Now for some goals for November:
- Read books!
- Go back to the doctor again.
- Finalize the work thing I was introspecting about.
- Make my Roth IRA contribution for 2013 and re-balance accordingly.
- Set aside the rest of my bonus and paycheck for my tuition fund.
- Start Christmas shopping. (Ugh, I hate buying presents.)
Posted in Uncategorized on October 31, 2013
I’ve spent a long time thinking about it and I’ve realized that I’m just not going to do an entire Master’s degree while working full-time. I can’t sustain that level of working for that long and focus on that many things at once. So, instead, I’ve decided to plan on taking a year off to get my MS (Master of Science) at a local university.
One of the things I’ve learned about myself is that I’m much more likely to do something when you take away many of the barriers, especially making it financially in reach. I wasn’t that interested in buying property until I had a ton of cash saved up that I didn’t know what to do with. Now that I’ve got the mortgage balance under $200,000, I’m going to work on saving up the entire cost of tuition for the Master’s degree and a year’s worth of bare bone living expenses, in addition to the $20,000 cash savings buffer I already have. If even with the money saved up to do this, I still don’t want to do it, then maybe I really don’t want to.
I calculated that I need to save about another $57,000 from what I have already started to set aside. In order to save this amount, I’m going to stop making extra payments on the mortgage and send all of my non-retirement account savings to this savings account. I am estimating that I will reach the goal by August to October of next year. If I change my mind and don’t end up going to grad school, I can always throw this money at the mortgage instead. Since I’m still considering this and saving money, I’m not going to consider applying for the 2014-2015 school year and will instead evaluate for the 2015-2016 school year.
What does a bare bones budget look like?
- $1,205 Mortgage payment (still paying at least the payment on the original loan) – adjust down to the required amount of $1,027. I could also recast the mortgage for a cost of $100, which would lower the required payment to about $800. (savings in cash flow: $400)
- $21.19 Cell phone – the bare minimum on Ting would be $18.21 per month (savings in cash flow: $3)
- $31 Internet – this is the bare bones as this is the slowest speed of internet that they offer
- HOA dues and property taxes – no bare bones version of this
- $52 Electricity – monthly average. I’ve cut this down quite a bit, but I think I can continue to cut it down further.
- $99/year ($8.25/month) Dropbox – paying for storage and sync’ing files between my computers. I would keep this.
- $1,626/year ($135/month) Insurance policies (includes auto and condo policies) and renewing my vehicle tabs. This rate was shopped around for. I would do that again if it helped to lower the rate. There is no way to lower the cost of renewing the vehicle tabs other than to get rid of the car.
- $163/month (average) Sports. I would eliminate all of these costs and spend time running and doing yoga at home.
- $3/month (saving to spend) to replace driver’s license and passport as they expire
- $250/month Entertainment: books, movies, food out with friends, etc. I would cut this down to $75/month since I also eliminated sports. (Savings on cash flow: $175)
- $20/month Dining out by myself. I would cut this out completely and just count it in Entertainment if I do.
- $170/month Groceries. I would increase this to $200/month to account for not eating out as much. (Savings on cash flow: $-30)
- $65/month Work lunches out. I would eliminate this.
- $42/month Presents. I would reduce this to about $17/month. (Savings on cash flow; $25)
- $30/month (average) Household goods. This covers toilet paper, light bulbs, paper towels, Kleenex, batteries, laundry detergent, dryer sheets, dish soap, dishwasher detergent, bathroom cleaner, hand soap, etc. I’m still figuring out what this number should be, but this is about the average spent in 2013.
- $20/month Eyebrows. I would cut this.
- $6/month (average) Hair cuts. I would go to a hair school instead at a cost of $14/year or an average of $1/month. (Savings on cash flow: $5)
- $20/month (average) Toiletries: hair elastics, toothpaste, feminine products, body wash, shampoo, conditioner, shaving cream, hand cream, etc.
- $8/month (average) Spa. I would eliminate this since I don’t value it all that much.
- $48/month (future spending) New electronics (cell phone, laptop, modem, purse, MP3 player). I would put off setting aside further money for these until the situation improved.
- $48/month (average) Fuel for my car.
- $5/month (average) Maintenance for my car.
- $350/month (average) Travel. I would eliminate this.
My existing budget adds up to $3,221/month. The bare bones budget version would add up to $2,130, saving about $1,250 per month in cash flow.
Other options include:
1) Selling the furniture in the second bedroom and taking on a roommate. Approximate expense reduction per month: $800, reducing overall bare bones expenses to $1,330, which isn’t bad. That’s just under $16,000/year. This would really help because over half of my expenses in my bare bones budget is housing and because I own my condo, it is trickier to move. If worst came to worst, I could probably sell the condo and pocket about $160,000 in cash, which would help to cover rent later.
2) Selling my car. I could probably sell it for around $11,000, which would eliminate several costs (car insurance, renewing my vehicle tabs, and car maintenance). Technically it would also eliminate the fuel cost, but I would say that would cost just as much as taxis and car sharing would if I had no car. Savings on cash flow: possibly $115/month, but hard to tell based on how much taxis and car sharing would cost. The real advantage here would be gaining the $11,000 from selling the car. If I was in a real bind, I could sell the car and that would provide me another 5 months or so of expenses at the bare bones level.
Posted in Uncategorized on October 13, 2013
I don’t associate my job or my income with being able to pay the bills. You hear so many people in the news complaining that if they lost their job, they couldn’t pay the bills, but that’s not the case for me. I could live off of my cash savings and taxable investments for about a year without reducing expenses. I could quite easily chop about $800/month of fluff out of my budget too and recast my mortgage to cut that payment down by $200/month, at which point, my savings/investments would last me for just over 2 years of no job. Based on how much of my income my disability policy would replace, I would even be able to set aside some cash while on disability. (I would probably just add all savings while on disability to cash savings just in case and not pay extra on the mortgage.)
This freedom means that if I’m ever worried about my job, I’m not also worried about money. Money just is.
Money comes in on the last business day of the month (and sometimes at another time when it’s a bonus month!) and money goes out at certain points of the month. My HOA dues, the automatic credit card payments, the twice-yearly property tax payments, and transfers to other accounts are now the only debits to my checking account, meaning that there are normally only ~4 debits to my checking account each month!
But at the same time, sometimes when I’m unhappy at work, I don’t feel like I need to find a way to work harder because I don’t worry about not getting paid. That feeling of waiting for the paycheck definitely seems to motivate many people, but for me, it means nothing anymore.
So it looks like I need to find ways to be motivated at work that are unrelated to the money earned, which is probably for the best anyways. It’s way better to be motivated by the projects and the people you’re working with than the money.
I’ve been trying to think back to the point where I stopped associating money appearing in my bank account with working. I would guess that it was around when I bought the condo last year and with the raise I got that gave me about $2,000/month in extra cash flow every month.
I’m thankful for this great condo I love, my boyfriend, and a career that I like most of the time, even if right now, things are a bit rocky. I’m also thankful for my general health though I wish this injury would go away because I’m definitely going stir crazy!
Readers, do you associate your job with paying the bills? If not, at which point did you stop doing so?
P.S. I apologize for not posting much lately. I am busier, but honestly, my finances have also gotten boring lately and there just isn’t as much to write about. Is there anything in particular that you would like me to talk about in future posts?