Category Archives: Finances

Our Story – Part 2: The Panic

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I’ve always been interested in personal finance, but it never “clicked” for me until the end of 2011.  Before Daughter Person was born, we didn’t budget, we didn’t do more than the minimum for saving in our 401(k).  As long as the cash flow was OK – I thought we were OK.  We always had money in the bank, never made a late payment, never even had to time our bills to our paychecks, never been declined/denied for credit, and always had available credit on our credit cards.  So we thought we were doing good.  Obviously, I (at least) had my head in the sand.  This is our story.  It’s not intended to be an excuse for our poor decisions, but to give some background.

Part 1: A Tale of Two Houses

During 2009-2011, we were paying 3 mortgages on 2 houses, and still had about $2k/mth left over for eating out, buying things, etc.  We figured we were pretty flush.  I didn’t *like* having to fix things on our remaining townhouse, and was trying to patiently wait until the two years was up to see if we could sell it.  Daughter Person was born in January 2011, right as the renter’s lease was up.  I had met the Realtor in November to see if it might be worth selling, and notified the renters that I wouldn’t be renewing their lease.  When I hauled Daughter Person over to the townhouse to meet the Realtor, I was frankly disgusted at the mess that the renter’s left and started trying to pursue keeping their security deposit – turns out since I wasn’t re-renting it, the county laws said I couldn’t keep it (boo!).  So, we spent about $7k on fixing it up just to be presentable – we had to paint, replace carpet, replace closet doors – a huge mess.

We listed it in March, and got our first offer in April – the buyer backed out in May because he didn’t like the condo rules.  It went back on the market and we had two offers in July – I took the offer for the person who would be living there, not the investor, and turns out that was a bad decision, despite her pre-approval letter that said she could borrow *way* more than the value of the house, the lender wouldn’t approve her.  Finally, I got an all-cash offer in September, and through a hilarious sequence of events, finally made it to closing – where I brought $8k (borrowed). Yes, I basically paid to get someone to take the property off my hands, I was so tired of it at that point.

And this experience is why we have no intentions of ever owning rental property as a second income stream.  I know we could do it (and make money on it), especially if we selected an appropriate property, but we just don’t want to.

Meanwhile, I go back to work in April, and Daughter Person goes to daycare, at $1600/mth.  Now, we’re down to $200/mth extra and trying to fix all of these problems and issues with the townhouse.  I start to panic about how we’re going to survive, etc.  I can be a bit of a drama queen when things look bleak…

Part 3 – The Awakening

Our Story – Part 1: A Tale of Two Houses

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I’ve always been interested in personal finance, but it never “clicked” for me until the end of 2011.  Before Daughter Person was born, we didn’t budget, we didn’t do more than the minimum for saving in our 401(k).  As long as the cash flow was OK – I thought we were OK.  We always had money in the bank, never made a late payment, never even had to time our bills to our paychecks, never been declined/denied for credit, and always had available credit on our credit cards.  So we thought we were doing good.  Obviously, I (at least) had my head in the sand.  This is our story.  It’s not intended to be an excuse for our poor decisions, but to give some background.

When Dad and I met, we both had already been working and living on our own for 10-15 years.  We each had careers, and more importantly: townhouses.  We both bought during the great runup in home prices, luckily not at the very top.  I bought in 2004, Dad bought his first house somewhere around 2002, and his second in 2005.  He “made” a lot of money on the first house and put it into a down payment on his second.

We got married in April 2008, when the market was still somewhat decent, but things hadn’t collapsed yet.  His house was worth more, in a nicer neighborhood, and didn’t need as much work on it to sell, so it went on the market right after we returned from our honeymoon.  It sold in August 2008, and two days later, we had an offer in on “our house” – a single family – we both hated living in townhouses.  We had a nice down payment of about 10% thanks to Dad’s old townhouse, but we had two loans – intending to pay off the second when my townhouse sold.

The market had pretty much started crashing at this point, and the value of my townhouse was about exactly equal to what I owed on the mortgage, so we decided to rent it for at least two years, and make a decision then.  It rented for below expenses (mortgage, condo/HOA fee, management fee), but -$300/mth was a much better cash flow than -$1700/mth, so we took it.  We were hoping that the combination of making mortgage payments, rent increases, and market value would let us sell it at some point in the future.

Part 2: The Panic

Happy Dance #1

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Our Line of Credit is “paid off”! I say “paid off”, because I think I’ll owe them about 6 cents on our next statement. I sent in the payoff amount, but marked it as “extra principal payment” so it didn’t show as paying off the loan. The principal balance is a negative value equal to the interest currently on the loan. The nice lady at PNC offered to fix it for me, but the new statement should be generating in the next few days, so I’ll just wait for that and whatever we owe will be auto-debited in May (or I can go in online and pay it early – by checking the “apply to next payment” option this time!).

Now, on to the next debt: student loans.  There are three student loans, ~$3k at 2.14% and two (about $10k) at 6.55%.  I’m going to explicitly send in extra money and have it applied to the higher interest rate loans first, and those should be paid off in about 5-6 months.

YAY!

Detailed Financial Picture – April 2013

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March’s Numbers

As of April 9, 2013, we are $469,922.50 in debt (that includes the mortgage).  Without the mortgage, we’re at $45,405.71 in debt.  This includes credit cards, student loans, lines of credit and an auto loan.  We currently have $924,691.81 in assets (including our house).  Our retirement accounts are at $279,886.34.  Our Net Worth is $454,769.31 (includes house and mortgage), down from $455,341.70 last month (0.13% decrease).

Our overall net worth decreased a little this month as I updated our car values through KBB.  My car lost about 5k in value (considering it’s a 2012 model, I think that’s pretty good), while our house lost some value as well – according to Zillow anyway.  I realize that it’s not perfect, but it should be in the ballpark, and we have no intentions of selling the house anytime soon, so I’m too lazy to run the comparables 🙂

Our retirement accounts did OK this month (up 1.77%); I changed my withholding to 5% in a 401(k) and 1% in a 401(k) Roth account, since we make too much to contribute to a Roth otherwise.  It lets us hedge our bets on taxes in retirement.  But we’ve evened out our new paychecks, so I have a better idea of how much money is coming in.

Our electric bill has increased by about $40-$50/mth to run the humidifier, but we think it’s worth it, so we’ll keep paying it.  And it’s almost 85F here today, so we’ve had the heat pump turned off the last 3 days and the windows open.  We probably won’t turn on the heat part of the system again until next season.  Once humidity levels start to climb though, the A/C will be on.

I got rid of a lot of things to goodwill, and not making too many.  Most of what I have left on Amazon are Japanese language items, which will likely sell better towards the beginning of the school semester, so not too many things leaving by way of Amazon.

Dad had an extra paycheck in March, so I was able to really pay down some of our debt.  And I filed an FSA claim for Daughter Person’s daycare and got a nice fat check for about $1400 to put towards debt payment as well.

I also sent more money to Chase – I think they’re skirting the new CARD rules on applying payments to the highest interest rate balance first.  The annual fee and interest end up being charged at the stated interest rate of 12.99%.  You’re supposed to overpay the minimum for them to apply it to the highest interest – I did last month, but not enough to make sure (only rounded up to $100 from a min payment of $96).  This month, I paid $100 + the balance at that rate: $93.70, so I expect that balance to be gone on the next statement – and if it isn’t, I’m going to be making some phone calls.

We’re really close to paying off our line of credit, and I’m most definitely getting excited at the prospect.  It will be paid off in May, and then one of the student loans is next on the target list.

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

  • Line of credit (8.75%): $1,300 (-4,600.00)
  • Student loans (aggregated 6.55%):  $13,766.70  (-0) <- auto-debit hasn’t happened yet
  • Chase (4.99% for life): $6,449.01  (-167.39)
  • Car loan (0%): $23,970.00 (-490.00)
  • Mortgage (4.125%): $424,516.79 (-635.44)

Total paid off in March: $5,892.83

Detailed Financial Picture – March 2013

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February’s Numbers

As of March 8, 2013, we are $475,895.33 in debt (that includes the mortgage).  Without the mortgage, we’re at $50,743.10 in debt.  This includes credit cards, student loans, lines of credit and an auto loan.  We currently have $931,237.03 in assets (including our house).  Our retirement accounts are at $275,024.19.  This includes my February contribution.  Our Net Worth is $455,341.70 (includes house and mortgage), up from $437,309.58 last month (4.12% increase).

Our retirement accounts did well again this month (up 3.32%); I spent a good portion of the month moving our investments around to reduce the fees and keep our allocation.  The fees in my 401(k) account *start* at .65% for an index fund!  I have no intentions of leaving my company anytime soon, and the company match makes up for the fees (100% of the first 4%), so I’m not going to be moving out of that account anytime soon.  I have all of the money in that account in the lowest fee fund and have been making it up in the other accounts.  We crossed the magic $10,000 threshold for many of the funds we’re in at Fidelity and qualify for the “Advantage” class funds – same shares, less fees.  I actually moved some money around to make us hit those numbers in the funds that offer an Advantage class share.   I got our average fees down from about .85% to .40%, while keeping the same allocation (more or less).  I moved almost everything out of actively managed funds into index funds except a few “alternatives”, in which case I selected the lowest fee fund that met my criteria for an “OK” fund.  To balance out the extremely high fees in my 401(k), Dad’s 403(b) account with Fidelity offers “Institutional” class shares, for a mere .04% fee.  For those funds that tend to have higher fees, like real estate and commodities, we put those in Dad’s account since he gets that benefit.

We slowed down on paying down debts this month so that we could add a whole house humidifier to the “new” furnace.  We went with a steam humidifier since I abhor wasting water.  We weren’t able to get the main room of the house above 25% relative humidity with our console unit, and we were tired of filling it up (and hearing it).  Our skin was starting to notice the arid air, and our wood floors were not happy either, so we got the whole house unit.  We can now easily keep the main room at 40% (or even 45%, but that tends to cause condensation on the windows, so we don’t keep it that high).  It’s controlled by our existing thermostat and there’s an “auto” setting, so we don’t really have to do much other than figure out what setting we want and it’ll go from there.  It will increase our electricity bill by an estimated $30-$40/mth, but we won’t see how much for us until next month – and it’s wired into the heat pump, so I can’t put a kill-a-watt on it either :(.

Making up for last month’s bonus, I  changed my tax withholding to see if we could not owe so much at the end of the year.  I set it to “married, but withhold at higher single rate”.  It took *way* too much out – $400 extra per month – which would make up our average tax difference in three months.  I need to actually do the math and tell it how much to take out.  I also bumped my 401(k) withholding up to 6%, with 5% going into the traditional 401(k), and 1% going into a Roth 401(k).  Our income is too high to contribute to a Roth IRA, and I think it’ll be nice to have some completely tax-free money come retirement, so we want to have a Roth to help with taxes when we’re older.

I didn’t have many bites on selling stuff this month. I earned about $100 on an old DVD that I’m pretty sure I paid $25-30 for, but it’s out of print.  I have another out of print DVD set listed, which the lowest price is almost $200 – it’s a collector’s item which I just don’t need any more.  Hopefully it sells.  I have been getting rid of things on Craigslist and Freecycle though, so things are leaving the house.

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

  • Line of credit (8.75%): $5,900 (-361.73) <-shooting to pay this off by the end of May
  • Student loans (aggregated 6.55%):  $13,766.70  (-145.42)
  • Chase (4.99% for life): $6,616.40  (-71.02)
  • Car loan (0%): $24,460.00 (-490.00)
  • Mortgage (4.125%): $425,152.23 (-633.26)

Total paid off in February: $1,701.43

Detailed Financial Picture – February 2013

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January’s Numbers

As of February 8, 2013, we are $477,596.76 in debt (that includes the mortgage).  Without the mortgage, we’re at $51,811.27 in debt.  This includes credit cards, student loans, lines of credit and an auto loan.  We currently have $914,906.34 in assets (including our house).  Our retirement accounts are at $266,177.40.  This includes my January contribution.  Our Net Worth is $437,309.58 (includes house and mortgage), up from $419,485.53 last month (4.25% increase).

I notice that our assets are approaching $1 million.  That’s a nice number to shoot for.  Having our net worth at half a million dollars looks nice too. I did the math, and assuming retirement accounts don’t increase in value (a bad assumption, but a conservative one in this case), and our house doesn’t change value significantly, we’ll have a net worth of half a million dollars once our debts are paid off.  What gets me is that $250,000 in our retirement accounts qualifies us for “wealth management services” at Fidelity.  We’re not going to take advantage of them yet, but once debts are paid off, it’s very likely that we will meet with their adviser. I don’t think that 250k in a retirement account is really all that much.  We’re projecting to need 1-2 million in that account to retire (in the DC metro area anyway), $250k is just a drop in the bucket.

Our retirement accounts did well this month (up 3.6%); the stock market is on a roll – hopefully it continues that way.  I also got a bonus in January, of which a percentage is taken out to add to my 401(k).  This is the first time my contribution and match have shown up in the account before the 15th – maybe it’ll continue this way?  We had a rather large bill to the accountant for representing us in front of the IRS: $3,000, and that came out of our emergency savings + what we had already set aside for taxes.  We didn’t owe the IRS anything more, so we shouldn’t see more on the audit front.  But a good chunk of my bonus went to “paying back” our emergency fund.

I’ve already done our taxes in TurboTax, but I’m waiting until the final audit paperwork comes in before filing, so I already know what we owe/get in taxes.  We net $118 between owing the IRS and getting a refund from our state.  So, the money I had been setting aside to pay taxes went to debt repayment instead 🙂

We’re really doing well with paying down our line of credit.  Dad gets an “extra” paycheck in March (he’s paid bi-weekly), so that will be going to the line of credit, and will hopefully kill it off in April.  After that, I’m going to separate out my student loans (the new processor allows that), and attack the 6.55% loans first, leaving the 2.15% loan until after the Chase card is paid off.  I’m starting to get really excited because if nothing bad happens (yeah right!), we’ll have everything but the car paid off by the end of this year.

I’ve been collecting some cash from selling old games, and most of that is going to debt repayment as well as getting “stuff” out of the house.

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

  • Line of credit (8.75%): $62,61.73  (-1638.27)
  • Student loans (aggregated 6.55%):  $13,912.12  (-71.85)
  • Chase (4.99% for life): $6,687.42  (-22.11) <- annual fee hit this month
  • Car loan (0%): $24,950.00 (-490.00)
  • Mortgage (4.125%): $425,785.49 (-631.09)

Total paid off in January: $2,853.32

Been quiet lately

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I’ve been pretty quiet lately, but that’s just because I’ve been really busy and the whole family has been really sick.

In the sick department:
I got pink eye at the end of last week, which either was from or turned into a sinus infection putting me in bed for a day. Then Daughter Person woke up with a fever on Sunday, prompting us to cancel her birthday party. Grandma was already in town, so we had cake anyway, and then Grandma stayed to help babysit on Monday. Monday, her fever got worse and we took her to the doc suspecting a sore throat and maybe strep. It was *just* a virus (not strep, and not flu), but the doc said something’s been going around that takes about a week to get over. Dad and I have been taking turns taking care of Daughter Person, so that we can each get some work in each day. She finally went back to daycare on Thursday, with no fever. But now Dad and I are sick. I really started coughing and lost my voice yesterday – I at least feel halfway decent, even if I can’t talk. Dad started coughing and feeling bad last night. We’re just trying to avoid passing it back to Daughter Person.

In the non-sick department:
We got an IRS audit notice earlier in the month – and the examination appointment was yesterday: the recommendation is “no change” – which means we had all of the receipts and documentation to show our expenses (it was related to a rental property we sold in 2011). It has to get passed up the management chain and be signed off on before it’s final though – up to 30 days. We paid a CPA $3k to represent us – which was *way* less than our refund last year, but it still rankles us that we paid to have the taxes done (they were quite complicated), and then pay *again* to show the IRS that no, really, we’re right. On the plus side, only about 1 in 32 returns that are audited are in favor of the taxpayer, so we were lucky in that respect.
I’ve also been taking a cake decorating class, and getting ready for Daughter Person’s birthday party. And we were cooking all of this food at the same time too. The last two weeks have just been exhausting.

Despite my lack of voice, I feel pretty decent and am starting to get other things done (like taxes for 2012). On the plus side, my weight has dropped slowly – not as quickly as I’d like (I blame the cake class…), but it’s going.

2013 goals

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It’s the new year – and everyone’s making resolutions.  I’m avoiding the gym for two reasons: 1) until I feel better, and 2) until the January hubbub dies down.

I have several goals for 2013, none of which are really “resolutions”, because I’ve been working on them for a while, I’m just continuing to work on them in 2013.

  • Lose the final 25-ish pounds I need to lose to be at a “healthy” BMI. If I keep going as I’m going, that’ll be somewhere around November; if I really focus on it, it might be this summer.
  • Pay off 3 of our debts: the line of credit, and two of my three student loans. As a reach goal, I hope to also pay off my remaining Chase credit card. With no emergencies, it can be done, but there’s a lot that can happen in a year.
  • Get rid of 365 things – one for each day of the year. Not necessarily one each day, but 365 total. The games/DVDs I have listed on Amazon and eBay won’t count, since I already made the decision to get rid of them.

I’m sure that I’ll decide to have another goal somewhere in the middle of the year – it almost always happens, but these are the three big things I want to focus on.

Detailed Financial Picture – January 2013

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December’s Numbers

As of January 8, 2013, we are $480,450.08 in debt (that includes the mortgage).  Without the mortgage, we’re at $54,033.50 in debt.  This includes credit cards, student loans, lines of credit and an auto loan.  We currently have $899,935.61 in assets (including our house).  Our retirement accounts are at $257,038.00.  This doesn’t include my December paycheck deduction or match – that doesn’t get deposited until the 15th of the month.  Our Net Worth is $419,485.53 (includes house and mortgage), up from $394,691.18 last month (6.3% increase).

December saw gift expenses (which were mostly planned for throughout the year), and January was slightly reduced because I expect we’ll owe taxes and I’m starting to put that money aside so that it’s ready in April.  We have the maximum taken out of our paychecks, but we almost always end up owing money, it’s just a matter of how much – and our deductions are *well* above the standard deduction (we’re estimating $23k in deductions more or less).  Stupid marriage penalty.

I managed to make $.77 in dividends on my single share of McDonald’s in my taxable account – which was a bit of a rush, but I know it’s nothing important or big at this moment. I’m glad that we’ll still be paying 15% tax on any dividends we make for a while.

Our paychecks have unfortunately decreased by about $200 every month ($100 for each of us), so instead of attempting to pay $2800 towards debt every month, we’re at paying $2600. I’ll adjust that as we start to get all of the paycheck data in. Dad has had one paycheck, I haven’t had one yet in 2013. I’ve been making at least $100 in sales stuff over the last two months, but so far, not much in January – and no one’s biting on my baby stuff on Craigslist – guess they got it all for Christmas.

On the plus side, we don’t expect any trips to Pittsburgh in the near future, and gas should be nice and low. Family is coming to the DC area for Daughter Person’s birthday later this month.

All of us have contracted the plague. I was sick from about Christmas until this weekend, and this weekend, both Dad and Daughter Person had really high fevers. Daughter Person and I warranted a doctor’s visit (with attending co-pay), but Dad has so far weathered it better himself. As a result, I haven’t really done much in the meal planning department. I’ve picked our recipes, but when I went to put them on a menu, my brain froze. I think I’m more of the “cook a bunch and eat from the freezer as you go” type of person. More details in a new post on the topic.

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

  • Line of credit (8.75%): $7,900  (-1696.27)
  • Student loans (aggregated 6.55%):  $13,983.97  (-139.57)
  • Chase (4.99% for life): $6,709.53  (-67.79)
  • Car loan (0%): $25,440.00 (-490.00)
  • Mortgage (4.125%): $426,416.58 (-628.93)

Total paid off in December: $3,024.56

2nd cooking session and howto

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We’re starting to run out of food in the freezer, and it’s time to start thinking about our next massive cooking session. This time, I’m not going to tackle as many recipes at once, and I’m not going to take off work to do the cooking, so it’ll all be Dad and I in the evenings after work. I’m going to start planning now, but I won’t go to the grocery store until January. In the next few days, I’m going to post our planning for other folks to follow along. Hopefully, it’ll make it easier for anyone else who wants to try their hand at freezer cooking. I’ve taken many suggestions from other websites on how to plan, and modified them to meet my needs, so take what works for you, and forget the rest.

Most of the planning is going to take place at Grandma’s while we’re there for the holidays. I also promised my mom that I’d help her make a few meals and leave them with her to show her how easy it is.

These are the general steps I follow, and as I post the details, I’ll link them in here:

  1. Pick your general recipes
  2. Plan your meals
  3. Write out all the prep work you need and decide what order you’re going to prep/cook in
  4. Write out your grocery list
  5. Go shopping
  6. Prep work
  7. Cooking/Assembling
  8. Labeling!
  9. Freezing
  10. Update your freezer inventory