Debt

Extra Payments to Mortgage Principal

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We bought our house in January 2012 for $489,000. It’s a renovated two story 5 bed/3 bath with a good sized pool in a nice, quiet neighborhood. We put 20% down ($97,800) and received 3% from the seller towards closing costs. We scored a good interest rate of 3.75% for a 30 year term. The home has appreciated considerably since we purchased it, with comps in the area valued ~$650,000. Our current mortgage balance is $368,895.

I feel good that we bought at a very fair price (for San Diego County) and locked in a good rate. We would have loved to have secured a 15 year loan, but the monthly payment would have been tight for us. Instead, our plan was to make extra payments to the mortgage principal as funds allow, while having the flexibility of paying the lower payment when necessary.

Over the past three years, we have failed to make progress paying extra to principal. It simply hasn’t been as much of a priority. That changed last month when we made our first extra mortgage payment of $1,100 and we paid an extra $100 this month.

Needless to say, we have some ground to make up.   One of our goals for 2015 will be to refocus on accelerating our mortgage payments. To that end, a portion of my wife’s future bonuses will be diverted to the mortgage.

Early Retirement, General

Life is Short…Don’t Forget To Live

My friend’s father has owned a shoe repair shop as long as I have known him (30+ years).  He was always so nice to us kids when we were growing up, that it didn’t surprise me to learn that he would bring coffee every morning to the owner of the gun store next to his shop.

On Friday, he stopped by the gun store with coffee and interrupted a robbery in progress.  One of the two robbers pushed my friend’s 85-year-old father to the ground, fracturing his skull.  He was pulled off life support today and his soul is in heaven.

Whenever someone in my life passes away, it reminds me to quit taking life for granted.  I love early retirement planning, but it’s important to balance planning for the future with living today. None of us knows when our time will be up.

Rather than read multiple finance blogs tonight, I think I am going to spend a little more time playing “Batman” with my son, daughter, and wife.

Goals

20 Years of Net Worth Goals

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Back in early 2007, I posted annual net worth goals for the next 20 years.  Time flies and we’re nearly 8 years into it and one year ahead of schedule (see table below, current year in yellow).

The annual goals were based on a few assumptions/guesses that I made back in 2007: 1) An 8% average return on investments, 2) $12K in contributions to retirement accounts each year, and 3) $12K in debt reduction each year. Back in 2007, we had a household income of $101K, so those seemed like good challenges. Thanks to my wife’s dramatic increase in income, our household income is up to $250K+ this year. As a result, we have been able to contribute more than my original estimates to retirement savings and paying down debt.

My hope is that we can continue to outpace the annual goals, hopefully by years, and get to a point where we can semi retire in 2027. To do so, we will have to continue to increase our retirement contributions each year and focus on paying down our mortgage.

nw_goals

Blogging

What Migrates In Winter Besides Birds? …My Blog!

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I finally got around to migrating this blog from Blogger (BlogSpot) to WordPress on my own domain.  A nice improvement in preparation for 2015!

The migration yesterday was relatively painless and quick.  I have some experience and familiarity with WordPress from my last job that certainly helped.  Of course YouTube and other online resources help make it look like I know what I’m doing.

Overall, I am happy with the change and look forward to better connecting with fellow bloggers and readers.  I am still tweaking and improving the layout…as time allows.  Remember, I have two kids and am also trying to find a new job, so bear with me.  Plus, I’m a little slow.

Please let me know what you think of the new digs and subscribe below:

 

Net Worth

NOT Included In Our Net Worth…Darn It!

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We have been blessed with good incomes for the past 8 years, breaking the $100K mark in household income in 2008 and working our way up to ~$250K in 2014. Our net worth has grown considerably as well. From $23K at the end of 2008 to nearly $300K at the end of 2014.

With that being said, I feel like we should have made better progress on our net worth, considering our incomes. I looked back at the last couple of years and determined that a considerable amount of money has been “invested” into our new home, but are not accounted for it in our net worth calculation. Some of the larger ticket items are:

$7,000 new HVAC
$1,200 new pool pump
$1,700 pool fence
$1,600 white picket fence in front yard
$1,800 security camera system
$1,500 refrigerator
$2,500 wash and dryer
$600 dishwasher

I use the purchase price of our home ($489K) for its value when calculating our net worth. If I included home appreciation, that would add another ~$150K based on comps in the area.  

I have no plans to begin accounting for improvements to the property or home appreciation but it does make me feel good to know that we bought at a great time and have invested in our home to make it safer, nicer, and if we sell one day, maybe more valuable.

How do you account for your home as an asset?

Income Statement

November 2014 Income Statement

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November a very good income month and a larger than budgeted expense month (see spreadsheet below).

Our total income in November was $14,923.69. In addition to my wife’s paycheck, she received an $800 auto allowance and a $130 company reimbursement for internet service and FasTrak pass. The big news was that she also earned a quarterly bonus of $12,490 gross ($7,664.17 net). Such a blessing! We received a $96.79 home owner’s insurance refund for removing our jewelry rider (another post, another time) and earned $5.60 in interest income from our online savings account.

In November, we spent a total of $9,201.88. Some of our larger non-standard expenses were $597 for airline tickets, $373 urgent care bill for our son, and $1,100 in extra mortgage principal payments. If you subtract out our extra mortgage principal payments, our expenses were a slightly more reasonable $8,101.88.  Better than last month.

Next month should be a pretty typical income month. Obviously Christmas will bring additional expenses in the form of gifts and holiday travel, but hopefully not too much.

college

College Savings For Our Kids

We opened 529 Plans for both of our kids within a couple of months of their births.  We selected the Vanguard 529 Nevada Plan and invested in the Vanguard 500 Index Fund.  We choose Vanguard because we have Traditional IRA’s and Roth IRA’s with them and their expenses and fees are among the lowest in the industry.

The minimum initial investment was $3,000 and the minimum for additional contributions is $50.  Our son is 3 years old (Sept birthday) and has $11,020.92 in his account, while our daughter is 6 months old (May birthday) and has $3,457.07 in her account.  We encourage our families to contribute in lieu of birthday and Christmas presents, but have only been mildly successful at convincing them. 

In addition to the 529 Plans, we have a Upromise account that allows us to earn cash back for college on eligible purchases.   This is achieved by shopping shop online through upromise.com or registering credit/debit cards to your Upromise account and making purchases at participating restaurant, stores, gas stations, etc. You can register credit/debit cards of family and friends as well.

We haven’t taken advantage of Upromise as much as we should, but have accrued $410.41 so far, of which $396.94 has already been automatically transferred into our son’s Vanguard 529 Plan that we linked to Upromise.  Free college money is good!

General

Nanny Costs…$20,800/year

We have a nanny that watches our 3-years-old son and 6-month-old daughter during the day.  We pay her $80/day or $400/week.  That’s $1,600/month for typical months and $2,000/month for longer, 5 week months.  Annually, we’re paying $20,800 to our nanny.  Not a large income, but it’s a huge sum of money for us.

I’ve seen a number of articles stating that daycare costs more than college.  I’m not sure about that, but it’s pricey indeed.  We have reduced our nanny’s schedule to three work days a week, for $240/week, while I am not working.  This arrangement gives me three days a week to focus on my job search, while saving us $640/month for typical months and $800/month for longer, 5 week months.

We choose to go with a nanny over daycare for a few reasons:

  • We love the personal attention that our kids receive
  • We can come home anytime to see our kids
  • Using our home security camera system, we can check on thing remotely

I dream of the day our kids begin public school.  The boost to our cash flow will be awesome.  Sure, there will be other expenses, but they will be small by comparison.  Technically, our son is already in school, but it is preschool and costs $297/month.  LOL!  Kids are expensive, but worth every penny.

Deals and Bargains

Never Blacker November

I’m not a big “Black Friday” shopper, but I enjoy watching the news to see all of the craziness.

This year, Black Friday seemed to start more than a week early, based on all of the pre-Black Friday deals that I saw. On the news this morning a reporter commented on the lack of crowds at a local mall and how a large number of consumers are purchasing online. I think that is probably true, but I also think Black Friday is being watered down by “Grey Thursday”, “Small Business Saturday”, and “Cyber Monday”. By the way, why isn’t there a cleaver name for Sunday? Something like, “Super Black Sunday” or “Jet Black Sunday”.

Anyways, as Black Friday spills over into the days around it, it seems likely that retailers will stretch this opportunity to sell over a longer and longer timeframe in the years to come. I could see the entire month of November becoming one big SALE. We could call it “Never Blacker November” and have discounts available the whole month. It’s the perfect time to get deals for the upcoming Christmas holiday, purchase model year end vehicles, update your wardrobe for the New Year, etc.

I could also see some out of the box thinker taking it the other direction. Short “flash” sales that offer huge discounts but last just an hour, maybe even minutes. With smart phone technology, the time seems ripe for this type of thing. “Ultra Black Hour” could create a buying frenzy like non other.

Our path to financial independence and retiring early.