Officially living together!

My boyfriend has moved in! I started writing this post back in August, at which point we had mostly decided this was happening, but kept waiting to publish it since I didn’t want to jinx it! He moved his furniture in this past week and we’ve been working on rearranging things. We have a ton of duplicates (even some triples and quadruples…): some of which we’ll keep, some we’ll donate, and some we’ll sell. It is super exciting and scary all at the same time. He’s been unofficially living at my place for months now, so we’re just making it official now and saving some money (mostly him, but me too). My fixed expenses are going from $2,000/month down to $1,600/month (only $600/month once the mortgage is paid off!).

We’ve been splitting groceries all year, so we’ve got that down pat. We have our checking accounts linked so we can transfer money to each other super easily (free and instantly from the website or app for our credit union!), without seeing the other’s balances, and we’ve also opened a joint checking account that we’re slowly figuring out what we’re going to use it for (currently: groceries and travel). We’re on the same page with savings and investment strategies and what we do with bonuses and other extra money and we know how much money the other has and makes and such.

The big question though is what to do about housing expenses. If we were renting apartments, it would be easy. We would look for a new apartment, probably a two bedroom + den, move into it together, and split everything 50/50. But we’re not renting apartments. Also, ew are those types of apartments expensive at $3,200/month! I own my condo (well 2/3 of my condo) and it is a good size for the two of us, while my boyfriend was renting an apartment.

What I’ve seen some people do is just split everything down the middle when they move in together, even though one person owns the place. I don’t want to do that because of the amount of equity I have. I also don’t want my boyfriend to pay me rent or for him to see me as a landlord. Everyone assumes he will pay me rent and are super confused when I say that he’s not. This is a serious, long-term relationship. Plus, my HOA rules don’t allow for only renting out part of my unit.

So what we’ve agreed to do is to split all of the outgoing expenses other than the mortgage 50/50. Logistically, this means taking a look at all of the expenses, adding them up, and then arranging the puzzle pieces so that we each pay for unique line items that add up to the same amount. This means me paying the property taxes, him paying the HOA dues, and then us splitting the utilities (electricity and internet) evenly. I look at it that the mortgage payment is mostly principal at this point, so it is part of my savings strategy, just like my boyfriend’s rent savings will go to his savings strategy.

It’s been pretty fun him slowly moving in over the last few months and decorating the condo together :) It’s shifting from my place to our place as we move more and more of his stuff in and rearrange the furniture and as we buy artwork and new furniture together. I look forward to years of this!

If you have any questions about how we decided to split expenses or how we’re doing it, go for it! We’re still figuring this out as we’re going and nothing is really set in stone yet.

P.S. I finally told him about my blog a couple of months ago and he seemed to think it was kind of cool! I’m trying to convince him now that he should write a post sometime ;)

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I’m Moving Again Soon…Somewhere

At this point, I’m sitting pretty financially. If you combine my car and down payment funds, as well as the money sitting in a money market fund earmarked for investments, I have $79,100 saved and that’ll keep going up in the next few months, plus cash reserves of $24,100. I estimate that I’ll put another $6,400 in there in May, $1,800 in June and $10,000 in July.

I have a pretty wide price range and am on the look out for the right place in the right neighborhood.

I have a pretty good grasp of what I want inside of a unit.

But what if I don’t find a place to buy before my current lease is up (mid-July)?

I’m not happy in my current apartment. The floorplan on my old apartment was amazing. Sure, the view sucked in that I wanted to keep the blinds closed at all times and it was a bit noisy at times, but the floorplan mostly made up for that. This current apartment was supposed to be temporary, so the requirement was that I could walk to work and I didn’t have to put any furniture into storage. But then the condo deal fell through and I’ve now been here for three months (!).  Now that things aren’t as crazy busy and I’m spending more time at home, I hate it. Well, as much as you can hate granite countertops in a gorgeous, spacious kitchen, and an incredibly spacious bathroom with an amazing showerhead… It’s a gorgeous apartment, but I hate the floorplan/layout.

So I’ve decided that I am moving in mid-July, whether I find a condo to buy and move in to or I find a new apartment. That means that I’m looking for condos now and then in mid-June, I’ll switch to looking at apartments (while still somewhat looking at condos).

Ugh, I *hate* moving. But I need to be happy in the place I’m living and I’d rather spend a couple hundred bucks more a month if that means I’ll be happier. It’s starting to feel like this condo hunt could take awhile… I did a really good job of picking my first apartment in this city a few years ago. If the condo deal that fell through hadn’t happened, I’d probably still be there, to be honest.

I’m feeling much better about the housing situation after looking for places on PadMapper.com (OMG why did I not know about this place when I was looking before?!). So I’m pretty confident that I will find a more awesome place (to me) to live in July.

I am so not looking forward to updating my addresses everywhere though and packing and moving… But the idea of moving definitely makes me happier, so I’m going to go for it.

Readers, what are your tricks to moving? If you own, did it take you awhile to find the place that you’re in?

Financial Priorities

One of the biggest learning curves after investing in understanding and working with my finances over the last several years has been trying to figure out what my life and financial priorities are and how I should keep my spending in line with those.

Some examples:

* Dinner out with coworkers when I have leftovers at home and I’ve already eaten out once or twice that week? Not really important to me.

* Going out drinking/clubbing every Friday night? So not important to me. I prefer my Friday nights to be quiet nights at home where I can unwind from the long week and eat leftovers. There, I said it – I look forward to eating leftovers on Friday night.

* Having a super fancy car, such as an Audi or a sports car that accelerates really well? Not important to me, but having a car that is reliable, is cheap on gas, and gets me from point A to point B well with a radio, comfortable seats, and bluetooth audio is important to me.

* Feeling comfortable in the space that I live in is incredibly important to me. Living by myself and in a nice apartment building offers me that comfort, though it is quite expensive.

* Playing whatever sports I so choose and picking up new ones randomly is something that frequently causes me to go over budget. I’m working on that.

* Helping my sibling out occasionally with small things and buying nice presents for my parents is really important to me since they have supported me quite well throughout the years and they still help me out when I don’t really need it on occasion.

* I could not imagine living without internet at home.

* I used to have a prepaid cell phone, but with my busy schedule, having my calendar, to do lists, and (personal) email on my phone eventually became incredibly helpful, so I bit the bullet and got a smartphone last year. I’m still not convinced that it’s worth $80+ per month, but it’s definitely worth at least $50 per month to me.

* I don’t see a point in paying someone to clean my apartment when I can do it with minimal effort since my apartment isn’t too big and one small person doesn’t create too much of a mess.

* I prefer to buy clothing from brands where I know exactly how a particular item will fit. This saves me a lot of time since I can buy some items online by buying the same brand and size, such as shoes, socks, bras, sportswear, etc. I finally found a particular brand of jeans at Nordstrom that always fits me and they do alterations in-house which makes jeans shopping so much less stressful. I pay for some of these conveniences, but it is worth it to me.

* I love traveling, even though I have barely enough vacation days to take any long, interesting trips. This is important though and can add up quite quickly.

* I eat out for lunch almost every day. I find that eating leftovers for dinner is more time and cost efficient than for lunch since I pay an average of $7/meal for lunch out, but dinner would run closer to $20/meal out and I just don’t eat enough of the portions for that to be worth it.

* My health and mental sanity is incredibly important to me. I will spend whatever it takes to work on that.

* I like having a small laptop computer that can actually be used for something beyond just going on the internet. (No, I don’t play video games.) But that adds up – the one I bought in 2011 cost about $1,500 and my previous one cost about $1,700 four years prior to that. This laptop was worth every penny of that to me.

* Investing for retirement with the power of compound interest is important to me. My goal right now is to invest 20% of my gross income for retirement by maxing out my 401(k) and my Roth IRA if I’m eligible.

So what does this financial picture look like if we try to categorize it and put it in a priority order, with my average monthly spending in 2011?

  1. Housing ($1,700) + down payment savings ($2,500)
  2. Retirement investing ($1,800)
  3. Health and Fitness ($200)
  4. A car that reliably gets me from point A to point B ($250) + car replacement savings ($250)
  5. Travel ($170)
  6. Electronics ($160)

In 2012, my travel spending is going to go up, but my electronics spending will go down. Since my housing expenses have gone up, I’m saving less money each month towards a down payment, so I doubt I will average $2,500 per month in down payment savings this year, but slightly over $1,200 per month would help me hit my new down payment savings goal.

Readers, what are your financial priorities?

New Down Payment Savings Goal

Since my condo deal fell through, I need to re-evaluate whether I still want to buy a condo, the area, etc., but this also gives me time to re-adjust my savings goal and to save more cash.

For the first condo deal, I funded my down payment with money from the following savings buckets:

  1. My down payment savings account (~$55,000)
  2. My vehicle replacement savings account (~$3,000)
  3. My taxable investments (~$5,400)
  4. My emergency reserves for the remainder

In borrowing from these savings buckets, I decided that:

  1. I was willing to let my emergency reserves go down to $10,000 to be able to buy a condo at that time.
  2. Since my car is not even 2 years old, I was willing to borrow from the vehicle replacement savings bucket.
  3. It was the right time to cash in some stocks I had and to switch from the ETF version to the index fund version, so I was willing to lend myself some of my taxable investments for the two months until a bonus came in.

So basically, I was saying that I was willing to have only $10,000 in easily accessible savings after purchasing a condo with 20% down. Thinking back, maybe I was a little crazy and overeager.

Looking forward, I am setting four requirements for being financially ready to purchase a property:

  1. My down payment savings account must have the full 20% or more down payment AND $10,000 to cover closing and moving costs, so that I still have more than adequate cash savings around if something goes sour.
  2. The proposed starting equity in the condo (purchase price minus loan amount) must work out to no more than 40% of my net worth, so that my net worth is somewhat diversified.
  3. I must continue to max out my 401(k) at $17,000 per year and invest at least $5,000 elsewhere. This means that I am allowed to use money I would have otherwise invested in a taxable account to sweeten the down payment, so long as that doesn’t mean the equity I would have would violate rule #2.
  4. The monthly housing costs must be no more than $2,000 including mortgage payment (principal and interest), HOA dues, property taxes, and proposed ongoing maintenance such as replacing appliances, ignoring any tax breaks. Ideally, the HOA dues and the property taxes would add up to less than $800 per month.

If you work backwards from rule #4, you can come up with the maximum loan amount and thus the maximum purchase price if I’m putting 20% down and the minimum down payment amount (since I could go for a higher valued property by putting more down to keep the same loan amount). If the HOA dues and the property taxes add up to less than $800, that also gives some more budge room on the maximum loan amount calculation.

With these variables, this puts the maximum mortgage payment between $1,100 and $1,200 and at a rate of 3.5% amortized over 30 years, the maximum loan amount between $244,000 and $267,200, with the minimum down payment being between $61,000 and $66,800 and at 20% down, the high end of the purchase price range is $305,000 to $334,000.

Thus, my new down payment savings goal is $66,800 plus $10,000 to cover closing and moving costs for a total of $76,800. From my February net worth update, you saw that I currently have $62,600 in my down payment savings account, which means that I need to save $14,200 more. Assuming no raises, no extra bonuses, no increases in my company’s stock price, and no further funds from my parents, it would take me until January 2013 to reach this goal. A stretch deadline on this goal would be July to August of this year. That also assumes that I don’t increase my travel budget at all, which I am also working on revising…

I’ve made a pretty specific list of my requirements for inside the condo. I’ve also done some thinking about the neighborhood that I would want to live in. Based on my research, a realistic cost estimate of what I’m looking for is between $340,000 and $450,00. Right now, the upper-bound on my range with my current savings level is $263,000. If I want to buy something on the higher end of that range, I need to save for another FOUR YEARS to be able to keep the monthly housing costs under $2,000. I would probably be able to afford the lower end of that range by early next year, which means that I will need to do another decision matrix for how long of a lease to sign when this one is up.

All things considered, I learned a lot with the condo deal falling through and I think I’m much better prepared for my next condo buying experience, whenever that may be in the future. I’m also going to be in a far better financial situation by the time I do actually decide to buy a place again.

I also think that, emotionally, I should sit tight for 4-6 months before starting to look again after the hassle and stress of the deal falling through and needing to move anyway. I’ve even turned off my Redfin emails! Also: my new landlord even replaces light bulbs! So little maintenance to do! So I’m going to keep saving money with the $76,800 goal in the back of my head, but not fret about the amount until, emotionally, I feel like buying a place is the right decision again. I have a feeling that when my current rental lease comes up for renewal, I will be re-signing a lease for some amount of time, but I will make the length decision at that point (around late May, so another 2 months from now).

Readers, do you think that my new requirements are too conservative or my original ones too lax?

Am I Being Frugal Enough with my Housing Choices?

Note: This post was originally written and meant to be posted around closing on the condo, so that should explain any references to a condo or related numbers.

My monthly HOA dues plus my property taxes per month add up to about $700. That is almost as much as some as my friends pay in rent. I know some friends who are splitting a 2 bedroom apartment for $1,000 per month TOTAL, while I was paying about $1,300 (now $1,550) for a 1 bedroom apartment. When I told them how much the HOA dues on my condo were going to be, they thought I was crazy because that was pretty much how much each of them was paying for rent.

This, my friends, is lifestyle inflation on my part. My friends make a comparable income to me, but they are each spending about 1/4 on housing in comparison to what I will be spending after I move to the condo or about 1/3 right now.

When I first moved to start this job, my original budget for a 1 bedroom apartment was around or under $1,000 per month. I didn’t really want a studio (too small) and it turned out that I didn’t want to live anywhere that I could find a 1 bedroom apartment that cheap. (I wouldn’t want to live where my friends are splitting a 2 bedroom apartment for $1,000 per month total either.)

I realized that I could afford a bit more than $1,000 per month and being happy in my home is incredibly important, so I rationalized anything past the $1,000 marker as needing to make me happier. 1 bedroom over a studio? Yes. Laundry in the apartment over in the building’s basement? Yes. A den/nook area over a plain old, rectangular 1 bedroom layout? Yes. I ended up paying about $1,300 per month and sure, it hurt a bit at first, but the place has made me happy and that’s what matters when I can afford it. I spent money on things that made me happier, which is the perfect usage of money.

I used similar logic in picking the condo I would eventually buy. Sure, I could spend only $500 per month on housing, but would that make me as happy as the 2 bedroom condo will? I can’t say for sure, but I don’t think so (at least not in the city I am in now). Sure, I could save an extra $1,300 per month if I was only spending $500 on housing, but I’m already investing $25,000+ for the year for retirement, saving for vacations, replacing my car in 2020, planning on making some mortgage pre-payments and saving for a down payment on a house. Balance is important and I think I’m doing okay at it. So long as the more expensive condo still gives me some breathing room in my monthly cash flow and it makes me happier, it’s a fine choice for me. Personal finance isn’t really full of single “right” decisions – there are many “right” decisions and you need to weigh the options and try to pick one.

Readers, how have you dealt with lifestyle inflation happening for you faster than your friends?

Normalcy in the midst of chaos

February was a pretty crazy month for me. I started the month thinking that I was going to close on my condo, have my appliances delivered, have the carpets cleaned, move in, go on vacation, come back to my condo, make my first mortgage payment and HOA dues payments on March 1st, and prepare to pay property taxes later in the year. I had plans for all of the little things that I wanted to change in the condo, like the towel racks, and the furniture that I wanted to buy, like a day bed for the second bedroom.

Pretty much none of that happened. I didn’t close on the condo. I cancelled the appliances. I did move, but to a new apartment. I did go on vacation, but I didn’t come back to the condo. I may not pay any property taxes this year. Today, I wrote another rent check, but to a different payee than last month’s check. I have plans for the little ways that I can decorate the new apartment and make it feel like home without damaging the walls at all – I do want my security deposit back when I eventually move out.

Throughout all of this chaos, I have been sleeping in my own bed with my sheets and covers, sitting on my living room furniture, and eating off of my plates.

Despite having many months of regular, monthly paychecks for a while now, I still get excited over pay day and delight that my paycheck magically appears in my bank account. This month, that direct deposit, along with my automatic 401(k) contribution, my employer’s matching contribution, and my $250 automatically transferred to each of my vacation and vehicle savings accounts represent some normalcy in the midst of this chaos. In that sense, February was exactly like January.

Multiple of my friends commented that I am incredibly fortunate that my finances very easily absorbed the costs of this adventure. My investments actually gained about $200 less in the last three months than what I lost in this adventure. So between the investment gains and the stocks that vested in January, you really couldn’t tell (overall) that I lost any money.

Without this note, you might just think from looking at Monday’s net worth update that February was a normal month. Now you are armed with some truth.

If we were at a bar, this is the point where we would raise our glasses and I would say “To March! May it be less chaotic than February. Good riddance and so long, February!” and everyone would clink glasses and say “Cheers!”

On that note, I wish you all an amazing weekend and I am sending positive thoughts to each of your months of March.

This is Why I Have Emergency Reserves

My emergency reserves situation currently looks like this:

  1. Auto insurance deductible: $1,016
  2. Health insurance deductible: ~$920
  3. Renter’s insurance deductible: $508
  4. Job loss fund/general reserves: $21,600 or 6 months expenses at $3,600 per month (expected new level), with the first $7,200 or 2 months expenses at my credit union

I’m not completely convinced that this qualifies as an emergency, but I was definitely worried that my finances were going to contract with moving to a new apartment. I ended up paying more than normal in rent for the month of February (overlapping rent between the two apartments) and I also had to pay an application fee and shell out a refundable deposit.

This is exactly why I have emergency reserves. I didn’t think I would need to use more than $5,000 out of my emergency reserves, but I actually ended up using under $2,000.

On top of that, I’m having some out-of-network insurance costs which were unexpected to begin with, but also higher than “normal” since I pay a slightly higher rate on out-of-network charges. Thankfully, I have an out-of-pocket maximum which I will hit before using up all of the reserves for my health insurance deductible.

I’m going to use my reserves for my health insurance deductible to cover all of my out-of-pocket health expenses for the rest of the year. That way, I’m not worrying about my cash flow contracting due to the additional expenses and instead, I’m taking care of my health.

I’ve been using my reserves for the health insurance deductible to cover my out-of-pocket health expenses this month and I will continue to do so for the rest of the plan year (through the end of March).

The new plan year starts soon, at which point my deductible would be fully reset, with new funds available from my employer to cover it and fresh funds in my FSA. Since my FSA and my employer’s funds cover my deductible and a little bit more, I should have a few months before I need the funds out of my health insurance deductible reserves, if at all. I’ll set aside some savings starting with my April paycheck to help refill the reserves.

I am so glad that I specifically set aside money for my health insurance deductible, in addition to 6 months of expenses at my previous level of spending ($3,000 per month). That definitely helped my sanity and financial anxiety at this point with all of the other (e.g. moving) stress going on this month.

This is actually the first time I’ve had to dip into my emergency reserves since I started my job a few years ago, which is a really good feeling. Now I’m realizing exactly why you keep them in cash and somewhat easily accessible. I’ve also been using my emergency reserves for the various moving expenses.

Readers, when is the last time that you used your emergency reserves?