Eccentric Cute Aunt’s College Days

This is a guest article written by Eccentric Cute Aunt.

I grew up with a family of engineers around me, so it was time for college, I knew I was going for an engineering degree. In fact, my dad is a civil engineer with 3 Bachelor’s degrees (Mechanical engineering, civil engineering and computer science). He got the latter 2 degrees while working full time. I still remember days when I was a little kid riding with my dad on his bike touring his university. My dad helped me pick Purdue University (Boiler up!) for its reputable engineering school. His other rationale included that climate in Indiana is similar to my hometown which will help me adapt to new college life. He was right, the climate for my hometown and Indiana suck equally.

Luckily, my parents covered all my tuition and expenses in college, so I didn’t have any financial concerns. I had never worked before prior to college, so I was eager to find a job and be an adult. My first job was in my favorite dining court on campus. I absolutely loved my job. Now that I think about it, the job was nothing more than mundane minimal wage manual labor. But when I worked there, every day was so exciting with loads of fun. Part of it was because it was the first job ever and the other part was the people I worked with. 7 years later, today, I can still remember the smile from the faces I worked with and how kind everyone was to me. I worked there only for one semester as I needed to make time for things that better prepared me for graduate school.

My plan for the first summer was to be in Purdue’s Summer Undergraduate Research Fellowship Program. However, things did not work out. I missed the deadline for a recommendation letter, as I asked for recommendation from my academic advisor who did not qualify for a faculty. I was quite upset at the time, but it must be the best thing that has happened to me! I found a summer job in the resident hall and met Eccentric Rich Uncle, my future husband.  Our paths would never have crossed if I did not work there.

Then the new semester started, I became an undergrad teaching assistant (TA) for a physics class which I was super proud of. This was the highest paid undergrad job on campus ($9/hr vs. $7.5/hr everywhere else). I enjoyed being a TA and leading the physics labs. At the same time, I interviewed a few research assistant (RA) jobs. My goal then was to go to graduate school right after my undergrad to get a Master’s in Engineering, so research experience was crucial. My job as an RA was to genetically modify mint plants. (Yes, I love GMOs. It is GMO that makes it possible for the world not to starve) I had so much fun nurturing baby mints and cutting them under the fume hood. Most importantly, I loved my boss and we became good friends. She was a great inspiration as she is continuously curious of the world and eager to explore. We would make handmade soup together using the mint essential oiling distilled from the mint we grew too.

With the TA and RA experience in semester 2&3, a professor agreed to sponsor me for my graduate school. The plan was to be enrolled in an accelerated program that allows me to graduate with Undergrad and Master’s in 5 years total. The second summer, I finally got to be in Purdue’s Summer Undergraduate Research Fellowship Program sponsored by the professor realizing my dream from the first summer. This is also the summer I got married to Eccentric Rich Uncle.

Semester 4 was quite uneventful as I continued working as TA and RA. At the end of semester 4, I realized with the current speed, I would graduate one semester before Eccentric Rich Uncle. I saw a brochure about  Disney World internship in Florida. Since our relationship was at all time low due to some conflicts about the past wedding and I had the extra semester, I decided to take the semester off from school and go work for Disney. I enjoyed the time in Disney (truly happiest place on earth) but did not like the job. I worked in a fast food restaurant right next to Tower of Terror. I was not strong enough to lift the French fries from the hot oil and I had to stand all day long. I am always glad that I went to Disney, as during my internship in Disney, Starbucks Corp interviewed me for the upcoming summer internship opportunity and they were really pleased to hear I was interning with Disney.

The third summer I flew to Seattle and interned in the Starbucks Headquarters. This was my first corporate job using my engineering degree and it completely changed my path. The last day of the internship, I was given a full time offer for me to return after graduation. I was so excited that I had to give my HR manager a big hug before she showed me my offer letter.

I returned to Purdue starting Semester 5. By then, Eccentric Rich Uncle and I had been apart for 8 months, so it was great to be together again and we got over the relationship trough. The last 2 semesters (5&6) was stress-free and easy except I had to tell my professor that I will not continue with my Master’s degree. It was hard as I had great respect for the professor and I am grateful for his support in my change of mind. I became the lead undergrad TA for physics class. I also tutored 2 students math and physics and became good friends with them.

I had lots of cool jobs along the way when I was in college. Although I was never paid very high, all the jobs were very meaningful and help build who I am today. It makes me smile going down the memory lane and thinking about the various jobs I had.

Rent or Buy and Why

Huge disclaimer:  I’m not classifying as financial tips or advice, buying a home is a huge financial decision and all options should be considered.  In many cases, renting is actually the best way to go, but I own a house and here’s why:

Eccentric Cute Aunt and I moved into our current home on Halloween of 2013.  We live in a brand new townhouse in Seattle, WA, about 3 miles from downtown Seattle.  It has 2 bedrooms and 2.5 bathrooms and about 1400 square feet with a detached garage.  We are the first owners of the home and purchased it while it was still under construction.  We didn’t get to customize much, all we had a choice in was the color scheme used for the cabinets and floor, but it came out quite nice and the floor layout is good, so I can’t really complain.

THE BREAKDOWN:
We purchased our home for $301,000 with an original loan amount on the mortgage of $226,000.  We locked in a 15 year loan at 3.375% with a down payment of $75,000 and closing costs of just around $5,000.  Our monthly payments are just a tiny bit under $2,000 a month with $380 escrow for property taxes.  Our home insurance costs $375 per year.  Last year, we paid $4700 in interest and $3,400 in taxes, in 2014, we paid $6150 in interest and $2130 in taxes.  We also have a $150 quarterly payment for sewage capacity charge which is charged to new buildings in Seattle.  We are also required to be in an HOA which has a monthly charge of around $170.  So, for 2014 and 2015, the cost of the house has been $21,660 or about $10,830 per year, or $450 per month.  In addition, we have paid around $300 a year for trash pick up ($26/month), $150 a year for natural gas ($12.50/month), $360 a year for electricity ($30/month), $460 a year for water ($38.50/month), and $450 per year on internet ($37.50/month).

HouseCosts

TO-DATE MONTHLY COST OF OWNING AND LIVING IN A HOUSE:  $1,065
MONTHLY COST OF OWNING A HOUSE (EXCLUDING UTILITIES):  $890
AVERAGE MONTHLY COST OF RENT IN SEATTLE:  $1284 

CAVEATS:
Other than the fact that this is completely my personal situation and it may not reflect your experiences with home ownership, there are a couple of other caveats to bring up.

In my cost calculation, I’m ignoring the premium of my mortgage.  I assume that over time, my home will gain value (and it has).  My actually monthly payment is more like $2,750.  This payment may unfortunately be a little too high for many people…

I’ve ignored income tax savings on interest and real estate taxes paid.  This reduces the monthly cost by around $190.  Rent can also be deducted, which for my tax bracket would reduce the monthly cost of rent by around $360.  Therefore, the monthly cost of the house becomes $260 and the cost of renting becomes $924 before utilities.

As I write this (January 2016), we owe just a tiny bit over $100,000, our next bi-weekly payment will put us into 5-digit territory.  We’ve basically paid half the loan in two years and could easily pay it off fully in two more, but we have decided to slow down our repayment a little bit and invest our money in higher-return investments since the cost of the interest on the loan is fairly low, but we may change our minds looking at the current market.  Our accelerated repayment has considerably lowered the amount of interest we’ve paid, so that should be taken into account when trying to determine the cost of owning a home.

I have also not taken into consideration home improvement or maintenance costs.  Some of these are covered by my HOA such as gardening and the exterior of our home.  The average annual cost is around $3,435 according to Zillow.  I expect that my home maintenance costs will increase over time as the house ages, but it won’t be quite as high due to some of the coverage from the HOA.

THE VERDICT:
We started renting a 500 square foot studio apartment pretty close to where we live currently and were paying $860 per month before utilities.  We could have kept that apartment indefinitely for $1060 per month after our lease expired on a month-to-month basis.  If we would have stayed, we would have basically paid the same amount we have thus far for owning our home (which is much bigger and nicer).  Furthermore, after we pay off the loan, the monthly cost will be more like $615.  It might be worth it to consider the lifetime costs of housing between renting and owning, which for us makes owning worth it.

Also, I have neglected to mention the fact that our home value has increased tremendously since we bought it.  We were lucky to be able to buy a home when we did, its value has nearly increased by 150% from the time we bought it.  In addition to that, we put the spare bedroom to good use by renting it out on Airbnb which also generates a decent income and is generally something you cannot do if you rent.  But of course, these again are both very situational.  Perhaps renting is truly the best option for you, do the math and make sure it is truly the best investment.

Sources:
Rent costs – http://www.seattletimes.com/business/seattle-area-apartment-rents-climb-to-average-1284-a-
Home Maintenance Costs – http://zillow.mediaroom.com/2015-06-17-U-S-Homeowners-Can-Spend-More-Than-9-000-Per-Year-in-Hidden-Homeownership-Costs-and-Maintenance-Expenses
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Why I consider myself Rich…

SocialClass

The vast majority of Americans consider themselves middle class. But exactly what that means varies from person to person. I generally consider myself to be upper-middle class. In that with my income and my net worth, I can buy anything I need and almost anything I could possibly want without consequence.  And maybe because I grew up in a lower-middle class family, I consider upper-middle class “rich”.    But what puts me in the upper-middle class is more nuanced than just the fact that my household makes six figures a year.  It has more to do with what such an income allows.  I can buy a used car without taking a loan with just a few weeks of savings.  I can easily max out my 401k without worrying about making ends meet.  I never have to worry about bouncing a check.  All my bills and credit cards are paid in full each month automatically, I literally do not have to even consider whether or not I have the money to pay them.  I have a large, secure income stream such that I always just do have enough.  I never knew anyone who had money like this growing up, but if I did, I would have considered them rich.

Continue reading “Why I consider myself Rich…”

Humble Beginnings…

My story isn’t really as interesting as other things I write about in my  honest opinion, but it can be useful to understand where I’m coming from and why I see things the way I do. I believe our personalities are heavily influenced by our environment during our formative years of late childhood and adolescence.

Continue reading “Humble Beginnings…”