Net Worth Update – November 2017

I’m a home owner! And I LOVE my new place. There are a few minor (cosmetic) changes I am looking to make in the future, but overall the place doesn’t require any updating. I’m getting used to a new neighborhood and I like being close to so many great restaurants!

I’ve decided not to disclose my loan amount or monthly mortgage payments,  instead I’ll be listing my equity using Zillow as the basis for my home value estimate.

One interesting thing I noticed about my condo is that the previous owner understated the square footage in the listing. That alone adds additional value to my home. Zillow isn’t taking the extra square footage into account.

The first and only previous owner lived in my unit for only a year before being relocated by his company. That means everything is only a year old.   I really think do think I got a good deal. When I bought this place there was a considerably smaller unit on the market in the same building. I was actually deciding between my current place and the smaller one before I placed my offer. The smaller unit sold last week for more than my current place. I think this place could have easily sold got $15k more than it was listed.

Liquid Assets Start End Change
Cash & Checking $1,000 $1,000  ($0)
Brokerage #1 $166 $168  +$2
Emergency Fund $3,395 $3,400  +$5
Short Term Savings $1,900 $50  ($1,850)
Illiquid Assets Start End Change
Brokerage $482  $490 +$10
Savings Bonds $2,125 $2,130  +$5
Retirement Start End Change
Roth IRA $18,952 $19,545  +$493
Traditional 401K $20,359  $23,375 +$3,016
Furniture Loan ($1,898) ($1,898)
Liabilities Start End Change
401K Loan ($10,860) ($10,799)  +$51
Equity Start End Change
Home Equity $11,850 +$11,850
Net Worth $37,519 $49,203 +$11,614
% Change +31%

I’ll post my November spending later.

Net Worth Update – October 2017

I’m buying a condo!! So my net worth is way down this month. I’m not going to write a long explanation defending my decision, but it’s definitely the right decision for me. I did have to borrow from my 401K though.

Ok! So where do I stand financially in all of this?

Liquid Assets Start End Change
Cash & Checking $1,000 $1,000  ($0)
Brokerage #1 $161 $166  +$5
Emergency Fund $3,390 $3,395  +$5
Short Term Savings $3,000 $1,900  ($1,100)
Illiquid Assets Start End Change
Brokerage $472  $482 +$10
Savings Bonds $2,120 $2,125  +$5
Retirement Start End Change
Roth IRA $18,249 $18,952  +$703
Traditional 401K $29,477  $20,359 ($9,118)
Brokerage $472  $482 +$10
Liabilities Start End Change
401K Loan $0 ($10,860)  ($10,860)
Net Worth $57,869 $37,519 ($20,350)
% Change – 35%

So there you have it, I’ve lost over a third in net worth! This is mostly because I’m not a condo owner yet.

I’ll have a little bit of equity by my next Net Worth post. Had I included the equity, my net worth would have decreased by $8,350, or 14.4%, instead. I am treating the 401K withdrawal as a loan. And.  for every $1 I repay, my net worth will increase by $2. I plan to pay it off faster than the payment plan.

The great thing about buying in November is that my first mortgage payment isn’t due until January. This will allow me to max out my 401K for the new year AND buy a condo! I won’t be trying to max out in 2018.

I spent a lot in October. Due to the condo situation, I didn’t really follow a budget. I’m going to list my spending anyways against an ideal budget, for the record.

Category Budgeted Actual Remaining
Rent $1,650 $1,650 $0 over
Fixed Expenses $125 $119 $6 under
Condos $- $6,225  $-
Food $200 $274 $74 over
Travel $90 $90 $0 over
Everything Else $250 $566 $316 over
Total  $2,315  $2,699 $384 over

Rent – I paid the usual too much

Fixed Expenses – I had to increase this budgeted category due to my internet costs increasing. There is a monopoly in my internet provider market so I can’t negotiate.

Condo – These are expenses directly related to getting my condo.

Food – I went over but not as much as I was expecting.  I’ve been eating out more due to the move that’s upcoming.

Travel – this is for my upcoming vacation. It’s the Airbnb costs for 7 days in South America.

Everything else – I went over budget. This is mostly due to the move. I also purchased an expensive gadget. The gadget will make my life easier and I’d been thinking about it for a while.

My (very) tentative goals next year will be to:

  • Max Roth
  • Save 15% of income towards retirement
  • Keep monthly recurring variable expenses to $500/month (Electricity + Cellphone + Internet + Food + Everything Else).
  • Budget better for periodic expenses.

 

Net Worth Update – September 2017

I’m going to try to make this short and sweet since September didn’t bring any surprises. My final account balances at the end of the month:

Liquid Assets Aug-17 Sept-17 Change
Cash & Checking $1,158 $1,000  ($158)
Brokerage #1 $150 $161  +$11
Emergency Fund $3,385 $3,390  +$5
Short Term Savings $2,000 $3,000  +$1,000
Vanguard Fund  $500 $0 ($500)
Illiquid Assets Aug-17 Sept-17 Change
Brokerage $466  $472 +$6
Savings Bonds $2,085 $2,120  +$35
Retirement Aug-17 Sept-17 Change
Roth IRA $17,657 $18,249  +$592
Traditional 401K $27,423  $29,477 +$2,054
Net Worth $54,824 $57,869 +$3,045
% Change 5.6%

The biggest change is that I’ve merged some funds into my short term savings to prepare to buy a condo.

I’m not going to update my goal progression this month because I’m lazy and don’t feel like it.

September Budget

Category Budgeted Actual Remaining
Rent $1,650 $1,650 $0 over
Fixed Expenses $100 $90 $10 under
Medical $- $275
Food $200 $146 $54 under
Travel $250 $270 $20 over
Everything Else $250 $315 $65 over
Total  $2,450  $2,471 $21 over

My food budget is low because I was on business travel for half of the month. I don’t include my reimbursed business expenses.

I broke out my travel expenses for once as I prepare for my next vacation. My plane tickets were roughly $200. The other $70 can be explained by things like Uber.

Overall I was $21 over budget.

Why I Will Be Borrowing From My 401K to Pay For My First Home

It wasn’t easy deciding to go against popular advice of not borrowing from my 401K now that I’m condo hunting. When it came to saving for the down payment and closing costs I weighed three saving strategies:

  1. Saving aggressively in liquid savings accounts, only contributing the minimum to my 401K to receive my employer match.
  2. Continuing to max out my 401K and then borrow from it
  3. Saving the notoriously recommended 15% of my income in my 401K and the rest in liquid savings.

I did a comparison of the three strategies and quickly realized borrowing from my 401K is most advantageous.
Strategy 2

Strategy 1 Strategy 2
(1) Time to save 1.5 years 0 years
(2) Amount to Save* $27,500 $25,000
(3) Time to repay self 0 years 5-10 years**
(4) Foregone 401K contributions $21,000 $0
(5) Lost interest income× $140,000 $30,000××
* – Strategy 1 requires more savings due to anticipated increases in housing prices
 ** – 10 years is the worst case scenario. I actually anticipate less than 5 years due to salary increases
 ×- this is an extremely crude estimate that assumes a 7% market return and no market fluctuations over 30 years
 ××- For every additional $1,000 saved towards a condo outside of my (maxed out) 401k, I’ll save ~$2,200 in potential interest

The main risk associated with Strategy 2 would be the need to repay the 401K loan if I were to lose or change jobs else I’ll have considerable taxes and fines. I do not anticipate either but I have emergency funds in place otherwise.

Strategy 3 would obviously have pros and cons that fall somewhere between the first two strategies.

After being on the housing market for about a month I’ve learned it’s brutal out there! I may not find a place for a while since those with cash or sizable down payments scoop up places 1-2 days after listing. I’ve placed one offer on a condo and bid equally to an all cash offer so mine was not accepted.

Net Worth Update – August 2017

I’m continuing my condo hunt but am also still aiming to max out my retirement accounts this year. I’ll only be placing an offer on the perfect place.  I do want to increase my cash on hand though. So, in August, I contributed less to my Roth and 401k than in previous months and plan to do the same in September. I’ll increase my contributions eventually and slowly tighten my monthly spend.

Here is where my accounts stand at the end of August:

Liquid Assets Jul-17 Aug-17 Change
Cash & Checking $1,000 $1,158  +$158
Brokerage #1 $0 $150  +$150
Emergency Fund $3,380 $3,385  +$5
Short Term Savings $1,125 $2,000  +$875
Vanguard Fund  $500 $500 +$0
Illiquid Assets Jul-17 Aug-17 Change
Brokerage $460  $466 +$6
Savings Bonds $2,060 $2,085  +$25
Retirement Jul-17 Aug-17 Change
Roth IRA $17,367 $17,657  +$290
Traditional 401K $26,171  $27,423 +$1,252
Net Worth $52,063 $54,824 +$2,761
% Change 5.3%

I’m surprised my net worth increased as much as it did. I usually aim for an increase of $2,500 which I exceeded even though a lot less of my money was placed in my pre-tax 401K account. I even opened a brokerage account with some extra income I received this month.

I’m now a little behind on my goals for 2017 since I’ve decided to adjust the timeline, but I’ll get there unless I buy a condo, I have fully funded my next vacation though:

Fund/Goal Contrib. Total  Goal Progress
401K $886 $11,552 $18,000 64.2%
Roth IRA $160 $4,160 $5,500 75.6%
Emergency Fund $30 $5,470 $5,500 99.5%
Vanguard
Fund
$0 $500 $3,000 16.7%
Vacation* $—- $1,125 $1,000 112.5%

 

August Budget

You saw the play by play of my August spending. I was pleased with my spending habits. I had an emergency towards the end which required me to buy last minute plane tickets in order to attend a funeral halfway across the country. Luckily I have a travel credit card with plenty of reward points so the ticket purchase wasn’t that expensive.  I didn’t have to dip into my emergency fund and it didn’t throw off my budget.

Category Budgeted Actual Remaining
Rent $1,650 $1,652 $2 over
Fixed Expenses $100 $91 $9 under
Medical $- $74
Food $200 $91 $109 under
Everything Else $250 $265 $15 over
Total  $2,200  $2,099 $101 under

Not included in the above is reimbursed (business) food spending. I had a business trip early in the month which explains the low food expenditure.

The daily budget approach seemed to be really helpful. I was $100 under budget, at the end of the month.  Things I would like to focus on in September include:

  1. Limiting online purchases to two days a week
    • I’m not sure I actively attempted to do this in August. I’m aiming for Mondays and Thursdays.
  2. Keeping track of daily expenses.
    • I’ll try to keep a manual diary from now on utilizing the daily $15/day budget. I’d like to decrease this to $10/day eventually.
  3. Limiting nonsocial eating.
    • I saw this suggestion elsewhere in the blogosphere. It essentially limits eating alone.  This means little to no starbucks, takeout, food deliveries, etc. I don’t do much of this anyways, but I would have saved $50 had I followed this rule in August.

August Spending – Week 4 & 5

Spending Overview:

I’m keeping track of my spending to hopefully break the habit of going over budget. This daily budget approach actually ended up going very well! It is definitely what I needed to get out of the monthly overspend habit. The weekly spend:

Shopping: $11
Food: $51
Travel: $33

I’ll post my monthly totals in my August net worth post, which will be coming shortly. My spending habits broken down by days:

Day 1-6

Beginning Balance: $90
Spending: $0
Ending Balance: $90

I did really well with no spending for 6 days in a row! My longest streak yet!

Day 7

Beginning Balance: $105
Spending: $33
Ending Balance: $72

I spent $33 oan very last minute plane tickets. Thank goodness for credit card reward points that allowed me to attend a funeral.

Day 8

Beginning Balance: $87
Spending: $24
Ending Balance: $63

I went out to eat ($13) and made a purchase on Target.com ($11)

Day 9

Beginning Balance: $78
Spending: $38
Ending Balance: $40

I stocked up on some snacks for my trip.

Day 10

Beginning Balance: $55
Spending: $0
Ending Balance: $55

The purchases I made on this day ended up showing up on my Credit cards as a September 1st purchase. My laptop that is in the repair shop has not been returned so the $75 was not paid out either. I was $55 under budget for the month of August!! The daily budget approach worked. I’ll try to keep this up but most likely not on my blog.

August Spending — Week 3

Spending Overview

I’m keeping track of my spending to hopefully break the habit of going over budget. This week went well. I’m no longer in the red! I was actually really sick this week so not going outdoors helped. The weekly spend:

Shopping: $46
Misc.: $1
Health: $55
Utilities:$91

I’m not counting the health and utility categories against myself (that’s why they’re greyed out). My utilities are relatively fixed and my healthcare expenses are reimbursed from my FSA. I also do not constrain my healthcare spending.

My cumulative monthly totals thus far are:

Food: $40
Shopping: $221
Misc.: $23
Health: $74
Per diem bonus: $55
Utilities:$91

The goal is to spend $15/day in the first three relevant categories. So far I’ve spent $284 over 21 days for an average of $13.52/day.

Day 1-3

Beginning Balance: $12
Spending: $0
Ending Balance: $12

No spend!

Day 4

Beginning Balance: $27
Spending: $30
Ending Balance: ($3)

I’m back in the red here because I bought stuff on Amazon: toothpaste, toothbrushes, bathroom cleaner, etc. Ahh, necessities.

Day 5

Beginning Balance: $12
Spending: $1
Ending Balance: $11

I made an in-game purchase on my phone. Yeah I’m that person.

Day 6

Beginning Balance: $26
Spending: $0
Ending Balance: $26

No spend!

Day 7

Beginning Balance: $41
Spending: $16
Ending Balance: $25

Amazon purchase.

August Spending – Week 2

Spending Overview

I’m keeping track of my spending to hopefully break the habit of going over budget. This week had fairly minimal spend:

Food: $22
Shopping: $15
Misc.: $20

Admittedly I’m not including times that I ate out which totaled $55. This is due to my business trip earlier in the month in which I received a per diem. If I don’t spend all of my per diem during a trip I allow myself to spend it in a similar fashion in my city. This way I can frequent a new or favorite restaurant without blowing my budget.

My cumulative totals are:

Food: $40
Shopping: $175
Misc.: $22
Health: $19
Per diem bonus: $55

Day 1

Beginning Balance: ($70)
Spending: $0
Ending Balance: ($70)

I did so well! $0 Spend!!! (Okay I actually ate on left over per diem).

Day 2

Beginning Balance: ($55)
Spending: $32
Ending Balance: ($83)

I bought $22 worth of groceries and took out $10 in cash. I’m getting better at eating my groceries before they spoil.

Day 3

Beginning Balance: ($68)
Spending: $15
Ending Balance: ($83)

Amazon spending! I forgot exactly what I bought but I’m sure it was important.

Day 4-5

Beginning Balance: ($53)
Spending: $0
Ending Balance: ($53)

I did well! $0 Spend!!!

Day 6

Beginning Balance: ($38)
Spending: $10
Ending Balance: ($48)

Uber! I went house hunting this day and also ate on left over per diem.

Day 7

Beginning Balance: ($48)
Spending: $0
Ending Balance:  ($33)

House hunting wore me out. And I actually placed an offer on the second house I saw!!! Scary!! I’ve managed to make up for most of last week’s spending except my computer broke. The repair will definitely put me over budget. But since that’s beyond my control I’m going to continue the challenge of $15/day average spend minus the impending repair. I’m writing this entire post on my phone! That’s why it’s a bit late and not so detailed.

Condo Hunting

The hunt is officially on! I’m looking for a condo, albeit much earlier than anticipated.

So why the sudden change of heart?

  1. really want to live in a 1 bedroom place.
    • I hate living in a studio, especially since having a chronic illness means I spend a lot of time at home. I’m convinced that having only one room is not healthy in the long term.
    • The average 1 bedroom in this city rents for $2,100/month in my neighborhood it’s closer to $2,500. A mortgage payment plus HOA fees would lie somewhere in this range.
  2. Housing prices are rising quickly in my city.
    • They’ve risen 10% in the past year. Should this trend continue a $300,000 house would be worth almost $400,000 in 3 years. I am not sure I can afford this  sort of increase in three years.
  3. I came across the perfect mortgage through my local credit union and the interest rate is super low. I am considering other loans now too.

How will I come up with the down payment then?

I’ll be taking out a 401K loan.

I know this is generally ill advised, but I figure I’ll be ahead in the long run. I had been muling over various strategies to save for a 3-10% down payment plus closing costs over the next couple of years.   Realistically saving for a down payment would entail me halving my current 401K contributions in order to save. I plan on taking a loan out for the amount of contributions I would forgo had I decided to wait a couple years to purchase.

How will this change my monthly budget?

I’ve come up with a few scenarios.  The scenarios  are in the chart below and show my post-condo monthly disposable income at various 401k contribution levels (10%, 15% and $18,000). For privacy purposes I don’t disclose my salary so I am going call the various salary possibilities (a) , (b) and  (c), where:

  • (a) – is my current salary;
  • (b) – will be my salary in 2 months;
  • (c) – is my potential salary in 2-3 months if I am promoted; and
  • COLA – represents the  cost of living adjustment (COLA) I’ll receive in January.
  • I round all figures to the nearest $50
Monthly Disposable Income Scenarios  After Buying a Condo and Contributing
10 percent, 15 percent or the Max to my 401K
Scenario Salary Amount Disposable Income Amount
 10 percent  15 percent  Max
#1 (a) $200 $0
#2 (b) $300 $100
#3 (b) + COLA $350 $150
#4 (c) $550 $300
#5 (c) + COLA $600 $400

What do I make of the above chart?

  • If I don’t get promoted, I will likely contribute 10% of my income to my 401K.
  • If I do get promoted, I will max out my 401K.

Alright, I’m off to fantasy hunt online!

August Spending – Week 1

Spending Overview

Food: $18
Shopping: $160
Misc.: $2
Health: $19

My goal is to spend $15 a day, on average, throughoutI the month of August. I am tracking my daily expenses, week by week, for at least the month of August. Technically Day 1 was in July  (as in July 31), but I think it’s simpler to work with a 7-day week from the start. I’m certainly not off to a stellar start, hopefully I can smooth this over in subsequent weeks.

Day 1-4

Beginning Balance: $45
Spending: $0
Ending Balance: $45

I was on a business trip, so all my meals and travel expenses will eventually be reimbursed. I typically don’t include reimbursable expenses in my budget/calculations. Since I was out of town I didn’t make any purchases except for one ($19) at a pharmacy.  This falls into the “health” category.  And since I don’t constrain my medical expenses, I left this out of my budget as well.

Day 5

Beginning Balance: $60
Spending: $49
Ending Balance:  $11

I returned home this evening and did my biweekly online shopping. I don’t have a car, so this is  how things are usually purchased. My purchases included:
(1) a memory card ($10) for my phone; and
(2) home-goods ($39).

Day 6

Beginning Balance: $26
Spend: $18
Ending Balance: $8

I had a low-key day so I mostly stayed at home. I got groceries ($16) and did laundry ($2). The weather was unusually mild so I also went for a walk (as my doctor ordered). I also did some work.

Day 7

Beginning Balance: $26
Spend: $111
Ending Balance: ($85)

I spent most of the day cleaning my apartment and attempting to meet a work deadline. But I also went on an amazon shopping spree, ugh. My purchases included:
(1) a printer ($73); and
(2) more home goods ($38)
All purchases  I had been eyeballing for several months, so they weren’t impulse purchases. I got rid of my old printer because it was too heavy for me.