Dipping my Toes into the Points Game

I don’t make a secret about how much I love to travel, what I have to admit is that I haven’t played the credit card rewards points game yet (at least not to its full advantage).  Today, that has changed.  I applied (and was approved) for a Citi HHonors Reserve card (not an affiliate link).  Why did I choose that card?  I really enjoy Hilton properties (mostly the Hilton Gardon Inn, Hampton Inn and Homewood Suites), and that’s my hotel chain of choice.  The reserve card automatically gives me Gold status (free wifi) as long as I hold the card.  I also get two free weekend night certificates (and one each year after) for Dad and I to enjoy a weekend away – or take Daughter Person – I plan on using these first ones to take her to Hershey Park this summer (free hotel!).

The most important items to me are: the EMV (Chip-and-PIN) and the no foreign transaction fees.  Those alone are worth the $95 annual fee.  EMV/Chip and PIN is a technology that is used all over Europe and protects your credit card from a very common type of fraud: Your card never leaves your sight – waiters cannot take it to the back room and swipe it making a copy of the magnetic strip (the strip is active however, and *can* be used – especially since merchants in the states don’t take EMV).   Many ticket machines and gas stations in Europe also take chip and pin only (usually those that are unattended at night).

I’d been getting by by having a Travelex chip and pin card pre-loaded with Euros, but I have to remember to reload it before a trip, and it’s a $4 fee/yr I keep it active.

We’re also thinking about when we want to take her to Disney World, and the spring she’s 5 is the likely target (18 months away) – so we’re going to follow Brad’s advice at RichmondSavers and get there almost free!

Other statuses I already have:

  • United Gold (from actually flying that much – and likely to hit it again this year. This one I actively try to keep for Star Alliance Gold status)
  • Marriott Gold (status match with United).
  • I randomly get to Hilton Gold some years, but most often Silver – I just don’t stay that many nights when I travel.

Rediscovering the Public Library

I grew up going to the public library in our town – I was (and still am) a voracious reader.  I’m pretty sure my parents were thrilled when I could drive myself there (it wasn’t exactly close or convenient).  I had read through all the interesting scifi/fantasy books available at the library, and just sort of stopped going – preferring to get books from B&N and then Amazon.  I can count on one finger the number of times I went to the school library in college.

When I got my Kindle (the 2nd generation edition), I couldn’t go to the library to get Kindle books, so I didn’t bother.  Just in the last year or so, as we’re trying to save money have I been going back to the library.  Daughter Person made her first trip there late last year – she loves picking out new books to read before bed.

Our public library system has over 20 locations, with two pretty close to us.  The closest one to us also houses the library operations center, and it’s one of the larger libraries in the system, so it has a good selection.  I can also request a hold online, and if the book isn’t at my library, I can have it sent to my local library for no charge.  They also support inter-library loan should I wish to take advantage of it. I also have access to the public libraries (and their online resources) in the greater DC Metro region – all of which are excellent library systems.

In addition to books, the library has DVDs, music CDs and books on tape/CD to lend patrons.  I haven’t gotten to spend much time browsing the main library section lately as I’ve had Daughter Person with me, and adult books are just as interesting to her as the picture books in the children’s section.

Our library offers an amazing array of online resources.  I can checkout Kindle books, Audible books, PDFs, ePub books (among others).  It gives me access to research databases (EBSCO) as well, which I use on occasion.

I just learned this week that our library offers Mango Languages as well – for free!.  If the language you want to learn isn’t available through Duolingo, I suggest seeing if your library subscribes to Mango Languages – there seem to be hundreds of languages available.

Now, instead of going straight to Amazon, I check the library’s web page first, and if the book is available, I’ll put it on hold.  I get an e-mail telling me when the book is ready, and I go download it from Amazon.  Unfortunately, it can be a long wait for popular books.  If the library doesn’t have it on Kindle or I need to read it quickly, only then will I purchase it.  I’ll even sometimes check out a printed book for myself.

Do you frequent your public library?

Detailed Financial Picture – April 2014

March’s Numbers

As of April 7 , 2014, we are $442,816.67 in debt (that includes the mortgage).  Without the mortgage, we’re at $26,316.63 in debt.  This includes student loans and an auto loan.  We currently have $1,032,580.20 in assets (including our house).  Our retirement accounts are at $365,835.09.  Our Net Worth is $589,763.53 (includes house and mortgage), up from $589,707.81 last month – barely (0.51% increase).

This  month was relatively flat in the investment area.  We went up by about our contributions, and that’s it.  Our assets went down – mostly our estimated house value (through Zillow).  I updated our vehicle values, and they seem to keep increasing (just by a little, but huh?).  I suspect that they will eventually decrease, but they’re Toyota and Honda, both manufacturers which tend to hold their value pretty well.  I’m not sure Dad’s 14 year old Accord will change value much at all anymore.

Dad’s new paycheck deduction is leading to us contributing just over $3200/mth to our investments.  Later this year, we’ll be increasing my contribution higher, so I suspect that we’ll beat our estimated contributions for 2014 rather handily.  Fingers crossed!

I earned some money selling on craigslist this month – $350 for three things – and finally got my old Cobalt Flux dance pads out of the house.  Next on the list is some furniture in the TV room.

Technically, our mortgage payment is decreasing next month as well (less escrow), and since I send a fixed rounded amount to the bank, we’ll end up paying about $15 more on the mortgage principal every month.  Next year, I should get a handy “rebate” from our escrow analysis since I lowered our insurance payment and that new estimate was not included in the analysis.

I’m getting very excited to pay off the larger (higher interest) of the two student loans remaining.  When I come across “extra”, I’ve been trying to put it towards the loans.

Debt (in the order we’re paying it down):

  • Line of credit (8.75%): $0.00
  • Chase (4.99% for life): $ 0.00 
  • Student loans (aggregated 5.32%):  $8,226.63 (-1,068.13)
  • Car loan (0%): $18,090 (-490.00)
  • Mortgage (4.125%): $ 416,500.04 (-680.74)

Total paid off in March: $2,238.87

March 2014 Early Retirement Progress

March was good on the contributions front, but not so much on the investment increases. We only gained $1,114.75 through investment increases. But, we contributed $3,298.7 to our accounts. That includes our employer matches.

The markets were relatively flat this month, which is better than January’s decrease.  This is the first month where we contributed the maximum to Dad’s account, and I’m likely to increase my contributions before the end of the year.

If we continue to contribute at this rate, we’ll add almost $40,000 to our accounts in contributions alone – more than the planned $35,000.  And that’s without me increasing my contribution rate to the maximum.  I’m going to wait until June to actually do it, but I suspect that I will be updating our overall plan to be slightly more aggressive – at least for our contributions for 2014.

2014 Totals

So far, for 2014, we’ve contributed $9,874.20 (28.21% of our planned total), and we’ve gained $7,169.64 in investment gains (35.39% of our planned total).

Spending Changes as You Age

NPR had an interesting story on how spending changes as you age.  In the obvious department, you drink less starting about retirement age (50-ish), and you spend significantly less on non-durables as you age from there (just like Bernicke’s retirement spending model).

In the interesting department, utilities seem to continually creep up.  I’m guessing that this is accounted for by larger homes, more people living in those homes, and the tendency for older folks (at least in my family) to keep the heat up or the AC on high.

The study was from a general population, but I wonder how it would differ if it were restricted to early retirees or those who claimed to be on that path.  Definitely difficult to get data, but it would be interesting.

How do you think the graph would change among early retirees or those that are planning for early retirement?

Spring Cleaning

Now that spring is nominally here, I’ve put aside all of the “winter” clothes that I didn’t wear this winter.  They’ll go to Goodwill (or the Lupus Foundation) as soon as I get around to it.  I’ve not gone through Daughter Person’s clothes from this winter yet as she’s still wearing most of them.  We’re expecting another snow storm this week, and then I hope spring is coming and I can go through her stuff and put it in the donation bin. I’ve already put aside things that she’s obviously grown out of, but haven’t taken them to donate yet.  Once those things are out of the house, then they’ll get added to the count for this year.

I’ve taken pictures of a few of our living room furniture pieces to list on craigslist, but I haven’t gotten them listed yet.  I’m also retiring an ancient Mac Pro (1,1) in favor of a Plex server on a slightly newer system.  I’m not sure that anyone will buy it from me as it’s an 8 year old system (and can only sort of run Mavericks – the 10.9.2 update broke it :( ).  But someone might want it for parts, it’s some pretty beefy hardware.



Housing Choices

Our mortgage is the single biggest monthly expense we have at about $2700/mth (P&I and escrow). Dad and I were discussing some of our options for lowering our housing costs on the drive home from Grammy’s this weekend.

We both think our house is a bit big for us, but we almost love it, so we’re in no hurry to make changes. Our biggest complaint is that we would like a larger kitchen, but smaller “rest of the house”. We bought the house planning on having two kids, but that’s not going to happen, so we have 2 virtually unused rooms in the house: the guest room and the basement. The layout is nice, but when we were looking, we hadn’t been successful in finding a smaller house with all of the key features we wanted: single-family, 2-car garage, largish kitchen, and more than spitting distance to our neighbors.

The two options that really came to mind were buying land and custom building and buying a smaller house that needs some remodeling to meet our needs. We discussed a few others, but none we thought would be feasible given the location we want to remain in (for now) and what we really want out of a house. They’re not completely off the table, but not something we’re going to spend much time on investigating.

We’ve looked at buying land in our area, and it’s pretty pricy unless we move a bit further out. I need to do some more research on the costs of building our own house to see if that’s possible. We’d have to work with a custom builder, which may increase the price significantly. We do *not* want to end up in a “planned” community, which around here means high HOA fees and extremely restrictive rules. Most of the local land and homebuilders fall into this category. I’ve looked at a few of the house plans offered nearby, and none of them would fit our needs either – we’d truly need a custom house. Most of them are bigger than our current house and we’d just be moving further out and not getting what we really want. Kitchens don’t seem to be that popular around here… We also want to make sure that the house doesn’t “feel” small, which requires a slightly different architecture than is common around here.

We also considered buying an older house (maybe a foreclosure) in an established neighborhood, and remodeling it. For example, adding space for a larger kitchen to a much smaller home. Or adding a garage. We’d be able to buy a much smaller house and use the savings to remodel to what we actually want. We’d have to be diligent in looking for homes that *could* be remodeled – as in getting permits and dealing with any HOA approvals. I know people who have done it locally, so I can pick their brains on what we need to be asking and looking for.

We’re looking for something that could save us ~$1000/mth on our mortgage payments. Anything less isn’t worth the mental and physical hassle for us really. I ran some numbers, and based on a 4.5% interest rate for 30 years, we could borrow close to $300k. We have $150k equity in our current house, giving us a little more than $400k to play with after sales costs. We could do a significant amount of remodeling on a $250-300k house with that.

As I said before, we almost love our house, and we *really* like it’s location (which in real estate is almost everything). While we’d love a smaller house with a bigger kitchen, we’re willing to sit tight until we find the “perfect” opportunity. Until then, we’ll work on purging our stuff and cleaning up the house so we’d be able to put it on the market quickly when the time comes.

If/Then in New York City

I just spent the last few days in New York City for work, and I took advantage of the trip to see a Broadway show. I’m a huge fan of Idina Menzel, and so I looked up tickets for “If/Then”, her new musical. Dad graciously used his fun money to buy my ticket because I wasn’t going to spend “that much” money on one ticket ($101.25). Go see it if you get the chance, but take tissues!

The show is all about the choices we make and what those consequences can be, and the missed opportunities we’d have or not have based on those choices. The show starts with Elizabeth (Idina Menzel) making a choice in a park in New York City. Then the rest of the show follows the two paths that “happened” after that first choice. You follow the two paths “Liz” and “Beth” through the show, including work, love, heartbreak and friendship. I admit I bawled during the 2nd half after intermission. The central theme of the show is all about making our choices and owning them, and not constantly wondering what if.

The central theme applies to our lives as well. We made choices to get to where we are today, whether we’re happy about that or not. And we can’t keep wondering what if we had made a different choice. We have to own our choices, good and bad, and live with them. Once those choices are made, we can’t undo them, and we shouldn’t even try, but instead make our next choice to the best of our ability.

When it comes to our financial lives, most of us probably wish we made different choices in the past – living more within our means, saving more, borrowing less. But we are where we are now, and the best we can do is make the best choices we can from this moment on. So, if you borrowed money in the past – even just moments ago – start making the choices you want to make right now.

No one knows what the future holds (or we’d all be lottery winners!), so you do what you think is best at the time given what you *do* know. Don’t waste time wondering what would have happened if you had made a different choice, you didn’t – so own your choice, and make a better choice next time.

New Cash Flow

Dad’s first paycheck which takes out the maximum retirement contribution for the year has hit our bank account.  I was pretty close with my estimate, almost exactly $250 less per paycheck.  It slows down our debt repayment somewhat, but not significantly, We’re still looking at July/August to have all of the student loans paid off.  In the meantime, we’ll have at least one fully funded retirement account!  And the amount taken out of each paycheck will be slightly more this year than on next year’s paychecks since we weren’t taking out the max for the previous 5 paychecks, the system “makes up” for it throughout the remaining paychecks.

Now, to just (impatiently) wait until July/August to increase my 401(k) contribution.  Changing mine now could put us in a serious cash flow crunch while paying off debt because I’m only putting 6% in and could be putting as high as 17% in – that’s almost $1000/mth difference.  But once the student loans are paid off, we’ll be able to do it easily!

Early Retirement Plan

As we’re getting closer to paying off our non-mortgage debt, I’m plotting how and when we’re going to retire early.  My goal is to replace our current expenses minus mortgage (but not insurance and taxes) and daycare plus 20%. We currently do not pay health insurance premiums (100% covered by my employer), and we’ll expect to be paying for those in retirement.  I also want to travel more, since we’ll have more time.  I figure 20% gives us a lot of wiggle room to reduce expenses if we need to.

I want to grow our investable assets to $1.6million, which gives us a safe withdrawal of $48,000 (at a 3% rate) – $64,000 (at a 4% rate), which will cover essential expenses plus some.  At 6% interest, when we have that kind of nest egg, the interest/increases alone can cover our current costs (with mortgage).

Inspired by Mr 1500, I’ve made some estimates on what our goals are for contributions and interest accumulation and spread it out over the next few years.  I used an assumed 6% interest rate, which is moderate, and may be too aggressive depending on who you ask.  Also, there’s no inflation accounted for in this plan, mostly because I suck at doing interest rate calculations when they involve inflation.

I’m hoping my contribution numbers are kinda low, 60,000 is only 32% of our gross income, which is a pretty dismal savings rate.  But these are the numbers I feel are realistic given our current situation and plans.  If we happen to contribute more, that’s great, but these are the minimums I’d like to see.  Seeing the information in table form like this will help make sure we’re on track or if we need to revise our plans (for better or worse).  This table only includes our invested assets, not our savings accounts, nor our house, so it’s already a bit conservative, but Dad’s a bit conservative as well, and we’d rather not have to return to the workforce if we don’t want to.

Date Contribution Interest/
12/31/2013 - - $337,687.88
12/31/2014 $35,000.00 $20,261.27 $392,949.15
12/31/2015 $45,000.00 $23,576.95 $461,526.10
12/31/2016 $55,000.00 $27,691.57 $544,217.67
12/31/2017 $55,000.00 $32,653.06 $631,870.73
12/31/2018 $55,000.00 $37,912.24 $724,782.97
12/31/2019 $55,000.00 $43,486.98 $823,269.95
12/31/2020 $55,000.00 $49,396.20 $927,666.15
12/31/2021 $60,000.00 $55,659.97 $1,043,326.12
12/31/2022 $60,000.00 $62,599.57 $1,165,925.68
12/31/2023 $60,000.00 $69,955.54 $1,295,881.22
12/31/2024 $60,000.00 $77,752.87 $1,433,634.10
12/31/2025 $60,000.00 $86,018.05 $1,579,652.14
12/31/2026 $60,000.00 $94,779.13 $1,734,431.27