Leigh

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Milestone Achieved: Over $100,000 of Mortgage Paid

Today is an exciting day in my project to pay off my mortgage. I have now paid off over $100,000 of the original mortgage balance. ($102,000 to be precise.) The balance is now sitting at $184,000. It feels pretty awesome! It took me 19 months to pay off the first $100,000 of the mortgage, which averages out to just over $5,000/month.

I also finally figured out how to make extra principal payments from my paycheck in the same month! I’m almost more excited about that. I get paid on the very last business day of the month, so I don’t want to initiate the extra principal payment that day or it will debit my checking account in the following month. What I did this month was once I saw my pay statement yesterday morning (the 30th), I initiated the extra principal payment. It then credited the mortgage overnight on the 30th and debited my checking account on the morning of the 31st. Granted, it came out before my paycheck went in which might be a problem for some people, but I have a pretty good buffer in there so it worked out great! This plan will only work for the months where the last business day is not a Monday, but in that case, I can make an underestimated extra principal payment (just like I did this month since I didn’t have my spreadsheet on hand when I realized I could do this) and even it out with the regular payment mid-month. Yay!

The above might sound slightly complicated, but to me, there’s a lot more reward in sending $X to savings/investments/mortgage when I see the money appear there in the same month my paycheck does. I don’t like February’s mortgage paydown being from January’s paycheck, etc. So I’m super excited that I finally figured out a way to do that!

Happy Friday everyone!

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It’s my favorite time of year!

No, not super bowl. Or winter. Or the new year. Or Christmas or Valentine’s Day or summer. It’s time to file my income tax return! And also to pick my health insurance options for the next year. I am pretty glad though that tax return filing and open enrollment happen when it’s not summer out and I want fun outdoor activities!

I’m still waiting on one last form to come in and then I’ll be done with my income tax return :) Last year, I fidgeted with FreeFileFillableForms.com and finally gave up on that in early March and tried TaxAct.com. It was magical. It didn’t cost ~$60 like TurboTax did – it was free. So this year I just rolled on over to TaxAct.com since I have most of my tax documents and it was pretty easy. Within an hour or two, I was pretty close to done. Despite the fact that I had two W-2s, three 1099-INTs, one 1099-DIV, one 1099-B, a 1098, property taxes, charitable donations, and the state sales/income tax deduction.

Oh, don’t you worry. I totally did my return on paper 4 weeks ago, before TaxAct.com was available. I will never stop doing my return on paper, even if I don’t paper file because e-file is magical. I underestimated a couple of deductions, but was otherwise pretty close to the TaxAct.com result. I had estimated I was going to get about a $200 refund and with TaxAct.com’s help, it’ll be just under $400, which will go directly to the mortgage.

What about 2014? I’m still unsure exactly what I’ll do for taxes in 2014. It all depends on what my bonuses end up looking like. I’ve set my W-4 allowances to 0. I’ll either make some estimated tax payments to offset the difference or increase my W-4 withholdings. I’m putting that decision off until at least when I get my first bonus though since I really won’t have a precise estimate of how much it will be until the day of. Making an estimated tax payment might be the easiest way to deal with this. What do other people with large bonuses do?

My employer made our insurance premiums marginally more expensive for the next year, but that’s okay. The premiums are still incredibly low. The deductible and out of pocket maximum are staying the same. I’m debating how much money to add to my HSA (Health Savings Account). Some of you might think this is dumb of me, but I see it somewhat as a glorified FSA (Flexible Spending Account) that I can roll over from year to year and employer to employer and that my employer puts some money into. Last year, I put the maximum in, which worked out to just over $200/month on my part. My goal is to have a full year’s deductible and out of pocket maximum in it at most, so I may only put $90/month into it this year. My employer will let me change that at any point in the year, so I’m not stuck with “only” a $90/month contribution. Plus, this will help in my quest to pay off the mortgage ASAP.

Happy tax fun everyone!

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2013 In Review

I have to say that this is one of my favorite posts for the year! It’s really motivating to take a look back and see how far you’ve come in a year since it’s a long enough period of time that you can accomplish a ton!

  1. My gross W-2 income was just under $200,000 for the year. (Just four years ago, it was just under $100,000, so this is an amazing improvement!)
  2. I have some cashback credit cards with useable limits (i.e. > $1,000). I earned over $200 in cashback, which is more than double last year’s $105 number.
  3. I paid the mortgage down from $259,600 to $187,552.40, a difference of just over $72,000. That is about 25% of the original mortgage balance, giving me about 48% in equity, assuming the purchase price.
  4. Increased my net worth by almost $30,000 in one month.
  5. Increased my net worth by $134,400 over the course of the year to $345,070.
  6. Decreased my expenses by almost $6,000 from 2012.
  7. My net income exceeded my expenses by over $100,000 this year. Now that is financial freedom!
  8. I saved about $113,000 this year, for an overall savings rate of about 75% and about 60% of my regular income.
  9. I now have over $100,000 in my retirement accounts (401(k) and Roth IRA), with that split to about $75,000 in the 401(k) and $25,000 in the Roth IRA.
  10. My investments were up about $17,000 for the year, which is a pretty sizeable increase considering that you can only put $17,500 into a 401(k) in a year.

About 65% of my savings in 2013 went to paying down the mortgage. In 2014, I’m expecting that number to be closer to 80%.

2013 Savings Distribution

My net worth took off by leaps and bounds again!

December 2013 Net Worth Graph

I made some really awesome progress with the mortgage. I’ve now paid down about 1/3 of the original balance. The balance is most definitely under $200,000 and I don’t feel nearly as worried about it as I did last year. That could also be because my total monetary assets is now just over $12,000 from the mortgage balance.

2013 Mortgage Paydown

I also contributed a fair amount to my investments in 2013. You can see the compounding growth starting to take off with the slowly increasing separation between the “Contributions” and “Total Value” lines. My investments returned approximately 15% this year, in addition to me and my employer contributing just over $43,000.

2013 Investments Growth

Last, but not least, I reduced my expenses by almost $6,000 from 2012. That’s a pretty good chunk! I spent $44,807.75 when all was said and done. That number still seems high to me, but I don’t see nearly as much room for improvement with it as I did with last year’s number. I do think that I would feel better about my spending if I got it under $40,000 for the year, including the mortgage or about $28,000 excluding the mortgage, which would require a reduction of about $5-6,000 in spending next year.

2013 Spending Pie Chart

Some of the primary differences from last year:

  • I spent $5,555.23 less on housing.
  • I spent $1,369.02 less on clothing.
  • I spent $649.45 more on entertainment.
  • I did my own income tax return, for a savings of $435.85.
  • I spent $302.85 less on eating out by myself and $1,109.15 less on work lunches. (Under $1,000 for the year on work lunches!)
  • I spent $700 more on health.
  • I spent $1,578.33 less on recreation. This is mostly because I paid for an annual gym membership in October 2012 after I’d already paid for monthly memberships throughout most of the year and in 2013, I didn’t pay for sport #1 because of my injury.
  • I spent $2,737.64 more on shopping.
  • I spent $630.35 less on transportation.

What do I expect to change in 2014?

  1. My boyfriend and I are working on a system to split some expenses more so than randomly because we’re working on incurring more shared expenses than we had this year. For now, the plan is to make it easy to transfer money between each other’s accounts since we use the same credit union for our primary checking accounts.
  2. I plan to contribute more to charity in 2014 than I did in 2013. The plan involves getting my donations up to 1% of my gross income, including my bonuses. I have a few annual contributions set up and will continue to donate to the random causes that my friends participate in. When my bonuses post, I will transfer 1% of the gross amount to my checking account, add that amount to the donations budget and then figure out where to go from there.
  3. Overall insurance costs should be about $1,000 cheaper in 2014 because I had been paying monthly through July 2013 and then paid for a full year in August.
  4. I think that I will spend less on electricity. I spent about $700 in 2013. I’m hopeful that I can get that figure down to around $440 for the year, but we will see how things play out!
  5. HOA dues went up a small amount for 2014. I have been budgeting for property taxes to go up about 3% per year, but it looks like my property value went up by much more than that for 2014 and so I’m guessing that they will go up by closer to 20%, putting those two items at about an increase of $800 in 2014. I don’t have much control over those items without moving though.
  6. I think that I will spend less on my household goods and toiletries items because there were a lot of cleaning products and different items that I stocked up on that should last for a long time – I shouldn’t have to re-buy very many of those items.
  7. I will spend around $400 more on recreation in 2014.
  8. I will probably spend around $1,500 less on shopping in 2014- fewer condo projects.
  9. I will spend a lot less on taxis and nothing on tolls.
  10. I will increase my overall savings rate to 85%.

My current forecast is about $38,500 in spending in 2014, which would be about a $7,000 reduction from 2013.

Readers, how was your 2013? What are you looking to change in 2014?

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21 Comments

Reflections on Home Ownership: 18 Months In

As we speak, I am coordinating the installation of improving the closet storage space in my master bedroom. Hello home ownership! I’m so excited for this improvement as I’m utilizing very little of the existing closet space, which has been frustrating me lately. You’ll see the cost of that update in the December/January net worth updates and the 2 Year home ownership check-in.

If I sold my condo today for the exact same amount I bought it for 1.5 years ago, I would have spent about $13,301.33 more than I would have renting over the same time period. If the market has truly gone up by as much as it looks like it has by the sale prices around me, buying would be cheaper than renting today by $32,808.67. Buying should be cheaper than renting at my purchase price by the end of 2014.

The mortgage balance at the end of December sat at $187,552.40. It was at $229,752.70 at the end of June, so I have paid down $42,200.30 in the last six months, for a total of $98,447.60 in the 18 months that I have owned my condo, while still maxing out my 401(k), Health Savings Account, Roth IRA, maintaining my $20,000 emergency fund, and occasionally adding to my taxable investments. I now have 47.5% in equity and have paid off 34.4% of the original mortgage balance. The mortgage is currently projected to be paid off by June 1st, 2016 with no intervention from my savings account.

Now let’s compare the charts to where the mortgage was six months ago!

With my December 1st payment, I paid barely over $400 in interest and will pay about $390 with the January 1st payment. I paid $480 in interest with my June 1st payment.

Mortgage Payment Interest Versus Principal Mortgage Payment Interest Versus Principal Dec 2013

 

I’ve paid so much of the mortgage down that I’m now tracking towards a 3.5 year payoff rather than the original 5 year plan. I’m about $26,000 ahead of the 5 year payoff target for the end of 2013, and about $7,000 behind the 3.5 year payoff target.

Mortgage Paydown Versus Five Year Track Mortgage Paydown Versus 3.5 Year Track Dec 2013

 

I’m projecting that with my next update at the end of June, the mortgage balance will be sitting at around $145,284.12 or another $42,268.28 gone!

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December 2013 net worth update (+1.7%)

31-Dec-2012 30-Nov-2013 31-Dec-2013 MoM YTD
cash $12,100 $14,000 $13,500 -$500 +$1,400
savings $26,800 $27,600 $27,400 -$200 +$600
+2.2%
investments $74,000 $132,700 $134,600 +$1,900
+1.4%
+$60,600
+81.9%
mortgage $259,600 $192,100 $187,600 +$4,500
+2.3%
+$72,000
+27.7%
net worth $211,300 $340,200 $345,900 +$5,700
+1.7%
+$134,600
+63.7%
assets – debts
(gap)
$146,700 $17,800 $12,100 +$5,700
+32.0%
+$134,600
+91.8%

So, um, this turned into a pretty spendy month. Yeah… I only saved about $1,500 total between my Health Savings Account, the 1/1 mortgage payment principal, and my mortgage pre-payment. Wow. That feels pretty sad, especially considering that my direct deposit in January should be over $2,000 less than my December one. There were a lot of negative budget items in my spreadsheet and I used my December paycheck to zero those out and start the year out fresh and I decided to do a project in my condo this month that used up most of the extra cash flow.

One of my credit cards has a due date of the 1st and when that is a weekend/holiday, the payment credits at the end of the prior month and debits early in the actual month. I’m strongly considering asking them to move the due date a few days further into the month so that this doesn’t happen – I don’t like what it does to my accounting!

Expenses: I spent $4,620 in December (before the mortgage). That puts 2013 so far at $33,650 or an average of $2,804/month. I am way past my stretch ($24,000) goal and just over one month’s spending past the target ($30,000) goal.

Some of my controllable expenses broke down as follows:

  • $409 Clothing: one pair winter running tights, two pairs fleece-lined leggings, return of some of the online shopping from November, pyjamas ($6 – super on sale!), a few pairs of underwear, fixing a pair of boots, some online shoe shopping to replace the other pair that can’t be fixed (most will be returned in January)
  • $99 Dropbox subscription
  • $438 Entertainment/Social ($224 average this year): 12% stocking up on journals, 1% books, 79% eating out with my boyfriend / shows, 21% eating out with friends (-13% re-categorizing cash spending)
  • $18 Eating out by myself ($25 average this year)
  • $118 Groceries ($152 average this year)
  • $103 Work lunches ($77 average this year, $171 average last year) – since this was my last few weeks in my group, I gave myself a pass and ate out a lot more
  • Quite a few charitable donations! I feel much better about how much I donated this year now. There is still room for improvement, but it’s getting better.
  • $247 Presents
  • $31 Internet
  • $96 Electricity (October/November bill)
  • $10 Household goods (bought some paper towels only to realize there was still a roll I bought in March in the cupboard, so I think I won’t be buying any more for a few years…)
  • $532 Medical (waiting on about $350 of bills)
  • $20 Eyebrows
  • $38 Toiletries (cold medicine, moisturizer)
  • $76 Facial (my once per year budgeted for treat)
  • $585 Sport #2 (annual cost, ish)
  • $13 a new sling bag for when I want a bit more than my purse and a bit less than my backpack
  • $19 new charger for my laptop, but this still didn’t fix the problem, so I’m going to need to do something else to fix it more. Hopefully it does NOT involve buying a new laptop. If it does, I am seriously considering just buying a Chromebook.
  • $913 Furnishings (solar-powered Christmas lights for the balcony, silicone baking cups, deposit for closet system install)
  • $14 Car maintenance (the battery in my car key was apparently dying, so I stocked up and shouldn’t have to buy any more for 9 years with the length of time the first one lasted)
  • $39 Fuel ($34 average this year so far, $38 average last year)
  • $8 Parking meters
  • $18 Taxis
  • $30 Tolls (I finally set up an account so I stop paying the super high rates and this was the minimum initial amount. At my usage, it should last me for 1-3 years.)
  • $5 Travel

This basically turned into an expensive month everywhere. It was actually my most expensive month for the year, second to the month where I paid for most of my September trip and the month where I paid for the first half of the property taxes.

The returning of the boots I don’t like from the online shopping should even out this month’s clothing spending next month – just annoying that it’s in a different year.

I ended up spending a bit more on Christmas than I had intended, but that’s okay.

I’m pretty much done with physical therapy (still getting medical bills though) and I’m walking/bussing to work again! So awesome. That did save a lot of money in those categories this month…

The real big expensive thing this month was the fact that I finally decided to upgrade the closets in the master bedroom. I paid a deposit on the install this month and will pay the remainder next month, as well as the painters. I’m pretty excited for the upgraded closets though!

Savings: $27,400 (down $200)

These funds are spread across a Chase savings account (opening bonus!), a general online savings account, a checking account that gets free ATM fees anywhere in the world, a condo furnishing sinking fund, and my health savings account.

The change here comes from:

  1. Spending down the rest of the condo furnishing sinking fund
  2. Paycheck contributions to my health savings account (November and December) and spending down some of it to pay the medical bills

Investments: $134,600 (up $1,900 or +1.4%)

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. Q4 dividends
  2. Modest market increases
  3. No contributions from me

Mortgage: $187,600 (down $4,500 or -2.3%)

My mortgage is a 5/1 ARM at 2.5%. Before the refinance, it would have been paid off November 1, 2038.

I only made one payment in December and that the savings from my November paycheck.

I estimate with the extra principal payments in December that the payoff date is now at February 1, 2033. I shaved 7 months of payments off with this month’s pre-payments! And I’ll save about $8 in interest on the January 1st payment based on these pre-payments.

The mortgage balance is so far ahead of where it needs to be by the end of 2013 to stay on track with the five year pay-off plan that I’ve adjusted the plan to pay it off by the end of 2015 or two more years. I’m currently about $7,200 behind where I need to have it at the end of 2013 to stay on the two more year payoff plan. I have now paid down 34.4% of the original mortgage balance and am getting so close to 50% in equity! (I have $8,800 more in mortgage principal payments to go before I have 50% in equity.)

TOTAL: $345,900 (up $5,700 or +1.7%)

I ended 2012 with a net worth of $211,300, so I saw a change of $134,600 or +63.7% in 2013. (For reference: my net worth increased by $78,800 in all of 2012.) I surpassed the original y-axis on this graph of $315,000 in November, so I increased it to $350,000.

December 2013 Net Worth Graph

Lastly, to check in on the goals I made at the end of November:

  1. Finalize the work thing 110%. SUCCESS! I am moving to a new group in early January.
  2. Read 3 books. PASS! I possibly read three books. I know I read at least one and have read parts of three others?
  3. Follow the directions of the physical therapist. PASS! I am pretty much done with this. It feels awesome to get back to normal again :)
  4. Make a plan for my time off at Christmas – I possibly only have 15 working days in December :) SUCCESS! This time off has been so awesome and it’s not quite done yet! I spent some time with family, with my boyfriend, as well as some time tidying and cleaning my condo and working on personal projects.
  5. Set goals for 2014! DONE!

Now for some goals for January:

  1. Make my 2014 Roth IRA contribution through the backdoor entirely on my smartphone. (This means a) transferring the money from savings to checking with Ally, b) making the $5,500 contribution to my Traditional IRA with Vanguard, and c) exchanging the $5,500 from the Traditional IRA to the Total Stock Market index fund in my Roth IRA.) – I’ve already done a) and b) – just need to wait for the transaction to post tomorrow or Friday so I can do c).
  2. Plan some trips with my boyfriend.
  3. Have fun with my new job!
  4. Return the shoes I don’t like from the online shopping.

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