May 8, 2017

On the home(buying) front: making the numbers work

HouseHunt 2017: the budgeting process I’ve been crunching the numbers constantly and noisily. And I do mean constantly. It’s a morning, noon, and night sort of hobby.

Taking on a new mortgage when we were within 5-7 years of paying off this one was not in the list of dreams I held for 2017. Not even close!

Buying in the Bay Area is a stiff proposition. Competition is fierce, people are making all cash or no contingency offers right and left, it’s easy to get caught up in the fervor. But not I!

Even ignoring the desire to retire early, which is quite a bit further away once the new mortgage happens, there are serious constraints on our ability to buy. Which is to say, I refuse to stretch ourselves beyond our means.

Budget considerations

First things first. Ignore what the bank tells you that you can “afford”. We all know that the bank only cares about the money it’s going to earn off your loan.

This is what I did:

  1. Set my top comfort level limit. There’s a number that would just make me run for the corner, gibbering. I absolutely won’t buy a home at that price.
  2. Ran the numbers based on that limit: 20% down payment, loan amount, possible monthly payments and total loan cost.
  3. Looked at how much the new mortgage would cut into our monthly and annual savings, assuming all other costs stay the same: investing, utilities, daycare, food, gas, travel.
  4. Then I looked at how that total number stacks up against the regional comps. This was a bad comparison – our number was not competitive at all. Instead of increasing our number, I adjusted our expectations of what we could get. Adjusted = dropped the bar to the floor.
  5. I had a moment of madness where we checked to see if we could increase our pre-approved loan limit but then I came back to my senses. It wasn’t worth it.
  6. I asked our prospective loan officer 30 questions: what products they offered, the loan terms, and how much they charged to recast the loan, if anything. After deciding which of the lenders was the best fit for our needs, I gathered all our paperwork – oh so much paperwork! – and started the loan process.

We now have a somewhat reasonable range for making offers and I’ve got a fleshed out spreadsheet to work our numbers in for each time we plan to make an offer. I also asked our insurance provider to give me a quote for coverage based on an equivalent property to what we’re hoping to find.

This means I can quickly calculate our monthly, annual and life of loan costs, taxes and insurance, and see right away if we’re making a totally unrealistic commitment. This also means I can see that our “reasonable offers” are laughable in this market. But I do NOT care. We’re going to make this work.

Helpful tip 1: Even when they say you’re fully underwritten and you can proceed with making an offer, you might still want a loan contingency because the early underwriting process isn’t the final process. Things can still change.

Helpful tip 2: Be careful about what you do with cash and your accounts that they’ve already assessed. It’s a huge pain to have to explain pretty much every transaction that you make between the time they approved your loan and when you get to closing.

Helpful tip 3: It should go without saying that you shouldn’t be running out to spend a whole lot of money after an offer is accepted and before closing. Not that you should spent a boatload after closing, unless you’re so flush with cash that there’s literally no use for that money but spending. But before closing, the important thing is that the lender can decline to fund your loan if your assets drop enough before closing.

:: Have I missed anything important in this early stage? 

Disease Called Debt

May 5, 2017

Just a little (link) love: hedgie v dino edition

LinkLove

CAREER + MONEY THINGS

This situation really sucks.

I wonder if this reason explains why I always get some percentage of totally unsuitable mystery candidates applying for the jobs I post with no explanation for why a stenographer would apply for a farmhand job (for example).

How do you define work?

HAPPY THINGS

Prairie dogs have complex communication and are warning each other about us

THINKING THINGS

Do people ask you for help?

Consistent bedtimes, family mealtimes, and limited screen time at an early age appear to be linked to prevention of obesity later in childhood 

This story about two young people and radicalization, and the paths that could have been taken, makes me sad.

How casinos manipulate people

Hedgie ruler

May 4, 2017

Net Worth & Life Report: April 2017

Money and Life Report: April 2017

On Money

Income

Our normal income comes from two full time day jobs.

We experiment with earning money on the side, including minimal cash flow that we don’t touch from an investment property and investing in dividend stocks. Some of our side income comes from Swagbucks, selling clothes on Poshmark which is hit or miss, and Achievemint (my introduction to it). Any purchases you make going through my Amazon links keep these blog lights on.

The goal is to replace our day job income before my health declines prevents me from working.

***

I conserve cash for savings by earning money for gift cards to the stores we frequent: Amazon, Target, PetSmart, or buying discounted gift cards to make each dollar go further. Every spending dollar that I earn or buy at a discount means one more dollar of our day job income is saved and invested.

***

This month I kept a VERY close eye on our incoming cash flow, quickly diverting all irregular cash flow from our FSA reimbursements and any gift money into a savings account. This is a little bit of a psychological thing, and an accounting assist, so that I can easily identify income that’s normally earmarked for spending. I keep the usual cash separate from the irregular income which is tucked away to be used when unusual expenses crop up. We know they’re coming, in the form of a down payment and closing costs at the very least, so I’m doing my best to pad our landing when we jump down into that rabbit hole.

Spending

Our normal spending includes the living expenses for two households so this update ignores those ordinary living expenses. When buying anything online, I always check Mr. Rebates and Ebates first for cashback.

Thanks to Dad’s major rent increase, we’ve had some serious conversations, one of which is the need for him to start taking on more of his own expenses because we will no longer have wiggle room in our budget to cover his rent and overdue utilities once the new home situation comes into effect.

One of those conversations led to the realization that my extended family still believes that a nice house means you’re doing well, that if you own a house, you’re well off. By old country standards, back in the day, that might have been true, but that just doesn’t work here and today. When I see a big house, I just see a huge pile of debt until the place is paid off. They see: must be wealthy, life must be cushy and smooth.

This major misconception is why I don’t share my financial information, history, or plans with them – there’s a strong sense of duty-obligation that runs through the community even today. If we seem to be relatively comfortable, the expectation that we would continually fund those who aren’t as well off, like keep enabling Dad no matter how much of our future is compromised, is strong. This system only works when the entire community helps and helps alike, but the imbalances are far too great the way it’s worked out now. We’re already the first port of call when someone needs help, but while I’m all for helping people who need a hand, I’m not willing to keep making the situation worse in the long term as has happened with my own family.

Meanwhile back at the farm, we’re tightening our belts and pulling together all our pennies in anticipation of a large down payment. We’re examining every spending choice rigorously and deciding how to make do without, or pay for it creatively. This also means I’m spending an unhealthy amount of time staring at our expenses spreadsheet! It makes me feel better. A little bit.

Saving and investing

We max out a 401(k) and IRA every year and save 20% of cash of our net salaries.

Our stock portfolio is with TradeKing – I’m a low maintenance investor so they suit me perfectly with low-cost trades. They’ve got two good offers right now: New accounts opened with a $500 minimum deposit get $500 in free trade commission and new accounts opened with a $5000 minimum deposit get $1000 in free trade commission!

Some savings accounts are untouchable, like our saved income from the rental. That money is being set aside because over the next several years, I’ll be paying for maintenance like paint, carpet, a water heater, and possibly a new roof. This also means that, like our net worth, when those expenses come down the pipeline, our savings will appear to drop like a rock off a cliff.

Finding savings where I can: I went through another semi-annoying process with cost comparing life insurance policies through a broker and found a comparable policy from Transamerica for less than $700, saving about $240 annually over my policy with Allstate. I did ask Allstate if they would price match but that was not an option. The process was a pain, and the broker’s agents when we got to the approval stage were aggravatingly naggy, but that’s over with for now.

Disability insurance is up next. This isn’t savings in the sense of keeping money in our pocket. Rather, it’s part of a well-rounded financial plan that takes into account that accidents happen. And some accidents can make it impossible for you to work anymore, whether in your chosen field or any other one. I’ve started the quote process with a company to see what they can provide, and if I like their work I’ll have them quote for PiC too. I’ll let you know what I think of them.

Our net worth: increased 2% from last month, and 9% from January.

Our investments went up this month, and we earned some minor dividends. We also received a couple unexpected cash infusions, and our tax returns, all of which were banked in anticipation of housing costs. Can you tell that I’m bracing really hard for home-impact? I am!

Moments

  • A contractor advised me not to go buy a brand new BMW as soon as an offer on a house is accepted lest we lose financing. People do that?! (I’m told yes. Good grief.)
  • A contractor suggested “You could wire the house with Nest, cameras on 3 sides, hook in your fire alarm to the same system, too.” Me: DOES NO ONE REMEMBER BSG?

Links from this month

On Health

Working out

My steps this month: 124,696, or 56.11 miles (at 2,222 steps per mile).

My resolve to aim for a higher monthly average slumped a bit this month thanks to attack of the virus. I was hit with several days of a sore throat, which has always presaged a massive cold or flu. I managed to exercise some brain cells and went to bed “early” each night instead of working the third shift past midnight. Darn if it didn’t work pretty well at keeping me from getting worse than a little congestion, minor cough, and a swollen throat for the first two weeks. Practically a walk in the park compared to my illness last year!

Of course, later, it landed on me like a ton of bricks but that’s a story for next month.

On Life

Oh Seamus. This poor guy just can’t catch a break. Thanks to Linda‘s suggestion, we’ve swapped out his salmon oil for tinned sardines, and he seems to be doing pretty well on it. It’s been several weeks since his last serious breakout, he’s only had a minor episode since the sardines diet started and that resolved itself in a couple of days. But he scratched up his eye again, we have no idea how, and that required another two weeks of medications and veterinary visits. Sigh. This month we’ve racked up $410 in vet bills, less than my previous recollection of $530, but still annihilating the savings I just found with a cheaper life insurance policy. And he’s due back in May for another routine check.

I’m also contemplating putting him on a raw diet to see if that gets him all the way home on the allergy front. It’s never been an option because we have very little space and cost is a concern, neither of which has necessarily changed, but I’m still pondering how it might be possible and how we might experiment with it. I already do nearly all of our logistical household planning and adding one more special diet might be what tips my system into chaos.

On the home (hunting) front. We’re talking to a lot of workpeople right now: general contractors, roofers, all the people we might need when the time comes, since it’s become clear that any house we can afford will require a lot of work. It’s both disheartening how much this work costs, especially since it’s not an option for me to do the work myself – imagine me with my knees that refuse to bed climbing on the roof to check a chimney!

We’re making progress but it sure feels like I can’t breath freely for a while. Of course that means I should be doing much more deep yoga breathing and not less.

:: How was your April? How long did you save for a down payment if you chose to buy a home? Am I the only one who guards against hackers and Cylons by refusing to upgrade to the highest of tech?

Read past monthly updates here!

*Part of Financially Savvy Saturdays on brokeGIRLrich.*

Swagbucks: summer travel promo

I’m always looking to plan ahead to maximize our spending dollars, and buying discounted gift cards is one of my ways to double dip: I get credit card rewards for buying the gift card, and the value of the gift card is more than the money I paid.

For summer, they’re running a special promotion where you get a $1 (100 SB) bonus when you get a gift card for Hotels.com, Jiffy Lube, Southwest, CVS, and Groupon.

Jiffy Lube is also currently offering 15% cash back. This Summer Travel offer is good from Thursday, May 4th through Sunday, May 7th.

Here’s a handy tutorial if you’d like to join Swagbucks and earn. I track my earnings here.

Swagbucks: May sign-up bonus

This month, if you sign up using my link and earn 300 total SB before 6/1/17, you get a 300 SB bonus.

If you spend at least $25 in Shop and receive your shop credit before 7/1/2017, you get an additional 200 SB bonus. That deadline means it’s better if you shop early in the month than later since some credits take a few weeks to credit.

Usually I point you to Mr. Rebates or Ebates for good cashback, and it’s always worth checking them first in case they have double or more cashbank. With the extra bonuses, this might net you more money back.

Here’s a handy tutorial if you’d like to join Swagbucks and earn. I track my earnings here.

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