A Very Happy Balance Sheet

After 5 years of cultivating wealth, as of today (9/12/17), ECA and I are millionaires!  Well… at least on paper (and being very generous with estimations on a few points).

Here’s the breakdown:

balance sheet

Almost all of these figures are the present market value of our assets, in other words, what is shown on the account balance pages. There are two exceptions to this. The value of the car is based on the Kelly Blue Book value for selling directly to a buyer (assuming it’s in good condition) and the value of the house is the high-end that Zillow estimates, so it’s unlikely that we would actually be able to sell it at that price if we sold it right now (and we would have expenses, reducing what we receive).

Still, we are right on the precipice, and in a few months, we will definitely be there (barring any huge market crashes).  Still, thanks to diligence, hard work, and a little luck I’m really happy with what we’ve accomplished in 5 years!

The experience of crossing over this level of wealth is a bit surreal to me.  Growing up in rural southern Indiana, it was a big deal that someone was a millionaire and it was common for us to talk about what we would do if we had a million dollars.  Now that I actually do have it, I know the answer.  Nothing.  I would and will continue to do exactly what I have been doing.

 

 

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The Wonderful World of Credit Card Churning

We have been using credit cards for all our purchases for a very long time.  We always pay off the balance every month and never buy any more than what we would anyway, so there has been no cost to do so.  And other than the shear convenience, with cash-back on every purchase that all of our credit cards offer, we have made a few hundred bucks every year.

But then there’s credit card churning which is on a whole ‘nother level.

Continue reading “The Wonderful World of Credit Card Churning”

Pay Off the Mortgage or Invest?

Eccentric Cute Aunt and I hate being in debt.  I’ve always hated asking for a loan, even just borrowing a buck or two from someone.  And anytime I’ve had a loan in my life, I’ve tried to pay it back IMMEDIATELY.  In college, I was forced to take a few Stafford student loans which I started to pay back well before graduating, and was fortunate enough to end college with around $8,000 in loans which we promptly paid back before the grace period ended (whew! No interest!).  And although I have never found it difficult to save up enough money to buy anything that I need, including cars (I’ve never had a car loan and I’ve always owned, never leased), saving up enough money to buy a house with cash was not something that seemed reasonable.  So, we got a mortgage…

We bought our home in October 2013, with a down-payment of around $80,000 which we had saved the prior year and a half after graduating.  We were debt-free at the time, and then suddenly, $225,000 in the hole.  Of course, we owned the house too, but if you’re like us, that somehow feels like a small consolation (I know it’s irrational).  So, with our obsession to be debt-free, we started to pay down the loan.  Today, the balance sits at just under $48,000 and we are extremely far ahead of our 15 year timeline.  If we don’t make any additional payments, the mortgage will be fully repaid in April, 2019, 9 ½ years before the original December, 2028 timeline for our 15 year mortgage.  And knowing us, we will almost definitely be putting in more, so it will likely be paid off within the next year!

All this is great, but was it the right choice?  Is continuing to pay down the mortgage the way to go, or would I be better off investing that money?  I looked at how much and when we put in extra towards the mortgage and compared it to the amount we would have made by investing this money into the S&P 500 with reinvested dividends.

Here is what we actually did (approximately) for the past year: 1

And here is the theoretical alternative would have been for the past year:2

5

I used this calculator to determine the gains on the S&P 500 for each month.

From the theoretical version, if we were to take the total value of the portfolio and use it to pay down the loan at the end, we would end with a loan amount of $55,893.  Compared to the actual value of $57, 611.  Therefore, we would be about $1,700 better off investing just over the past year.

The discrepancy gets a little bigger when I look at the entire life of the loan.  When I go further back and do my “what-if” scenario, I found that we would be around $6,000 better off if we would have been investing the extra money instead of paying down the mortgage.

So in the end, we could have been a little richer by investing, but we have earned a greater peace-of-mind going the safe route and getting that mortgage off our backs.  I’m not sure which is the best choice.  What would you do?

Plugging a Tire DIY

 

Recently, I picked up a self-tapping screw in my tire.  Not sure where it happened, but I’m betting it was in the parking lot of my work.  Fortunately, the screw itself made a pretty good seal, so I wasn’t leaking air very fast, (about 7 psi overnight), so I went and bought a tire repair kit.  The kit I ended up getting has everything you might need to plug or patch a tire and cost me just around $10, but it’s pretty common to find just a plug kit for around $5.  Once I had my repair kit, I grabbed a few other tools and went to work!  It probably took me about 10 minutes to do it, but I got lucky that I didn’t need to remove the tire.  I decided to just plug the tire for now since the hole was pretty small and I don’t have a tire changer, but next time I go get an oil change, I may very likely patch it then.IMG_2348.JPG

Tools used:

Flat-head screw driver

Vise grips (pliers would be fine too)

Tire reamer (comes with repair kit)

Plug Hook (comes with repair kit)

Utility Knife

Gloves (not needed, but keeps your hands clean)

First, I used my screw driver to get the bolt out far enough to grab it with my vise grips.  I didn’t need to take the wheel off the car to do this, I just parked it in such a way that I had access.  I just put the car in park, but I should have probably used the e-brake too since the car moved a few inches when I put in the plug.  Once I got a good grip on the bolt, I slowly pulled it out.  I didn’t let out any air or anything so, air started escaping pretty quickly after doing this.  I then inserted the reamer into the hole and pushed it in and out a few ti

mes.  This is just to clean the hole and make it big enough to put the plug in.  I left the reamer in the hole to keep the air in while I prepare the plug.  I took out a plug and threaded it through the eye of the plug hook.  The one I bought actually splits apart when you pull it out, others are actually more hook-like.  I tried to push in the plug, but the hole was a little too small, so I reamed it a little more.  I then pushed the plug in, with some effort, until only about 1/3 of each end of the plug was showing.  I then very quickly pulled out the hook, leaving the plug behind.  The last step is to cut off the tails of the plug, I left a little bit on assuming that it will be smashed while driving.

IMG_2351
The offending screw.

And that’s it.  It was really easy.  You can get this done at a shop for pretty cheap, so it’s not an amazing way to save money, but you will save a buck or two by doing it yourself and maybe some time.  I know that Costco does this for around $11.  I’m sure other places are about the same, but for how simple it is, and how little time it takes, it’s a nice little DIY repair that I think pretty much anyone can do and I would personally much rather do it myself than wait for an hour or so for a shop to get around to it.  It might even be a good idea to keep a kit in the car in case you need to plug while on a trip.  Of course, if you are unsure, always err on the side of caution.  If the hole is too large or in the side-wall of the tire, the damage may not be repairable.  If the steel rings in the tire get damaged, or exposed, they can rust and the tire can fail catastrophically later too due to rusting.

How to Get Cell Phone Service for Free!

A large bill that can pretty easily be avoided every month is a cell phone bill.  According to J.D. Power and Associates, the average monthly cell bill was $78 a person in 2010.  I pay $0 per month.  Here’s how I do it:

Get a Google Voice Number

Google Talk

Google has a service called Google Voice.  You can get a phone number through this for free which can receive calls through Google Hangouts, sends voicemail to your email and transcribes the audio, and can send and receive SMS messages.  You can make and receive calls using your computer’s microphone and speakers as well.  The quality is generally as good as your connection though, as long as you have DSL or cable though, it works great.  You can use Google Hangouts to make calls from your favorite web browser, so you don’t need to download any apps or anything.  You can also get hangouts on iOS and Android, so you can use it with a smartphone or tablet and use it on the go.  This way, as long as you have wifi, voila~ you have a free working phone!

If you need to make international calls, you can do that too, but Google charges $.10 a minute.  I haven’t tried this aspect, but I’m betting it works fine.

FreedomPop:

Of course, you won’t have wifi everywhere.  The way I get around this is I have a mobile hotspot (MiFi) with FreedomPop.  This is not completely free as you need to buy the hotspot, but once you have it, you can use it to connect to the Sprint LTE wifi network for free for each month.  You are limited to 500 MB for the free plan, but I only use around 250 or so a month, so it works well for me.  Still, service is a bit spotty and the wifi likes to drop for no reason.  My phone is also getting old too, so I’m sure that has something to do with it.  I only paid around $80 total for having FreedomPop for the last 3 years or so, so I can’t really complain about price!  The hotspot is also supposed to work internationally now.  I haven’t tried it yet, but that alone might be a good reason to get a hotspot.

FreedomPop also has a free phone plan, so you can just skip all this and just get one of their phones.  Or you can bring your unlocked phone over.  I haven’t personally done this, so I can’t recommend it, but I will probably do that when I’m thinking of upgrading.

I think these are the rock-bottom ways to save money on the cell-phone bill.  Have you heard of any better?  If so, leave a comment!

Time Does Not Equal Money, Time = Time!

Everyone knows the saying that “time is money”.  The idea has been around for ages, but it was Ben Franklin who wrote it in this form in his “Advice to a Young Tradesman”.  Why then shouldn’t we take the advice of the man on the One-hundred dollar bill?
1024px-usdollar100front
Because he omits a very basic, very simple question…  Why do we care about money or time?

The main problem with the saying is that it is not advice for the vast majority of us.  It’s advice for a business owner, a tradesman.  The sole purpose of a business is to make money.  If a company is not profitable, it ultimately fails.  And for a company, wasted time means that either goods or services are not being provided to as many customers as possible, or that unnecessary wages are being paid to workers.  Wasted time is a throttle for a business’s cash in-flow and a leak for its cash out-flow.

However, unless you are Mitt Romney, you wouldn’t call a corporation a person.  The average Joe/plain Jane is not out to make as much money as they can.  We work for a living.  Five or six days a week, we wake up, go to work, and convert our time to money.  Most of this don’t do this because we want to.  In fact, most of us hate our jobs…  We would rather be at home with our loved ones, playing a game, watching a movie, reading a book, but we must work to earn enough money to get by.

We need to buy things that will sustain us, food, shelter, etc.  Once we achieve the basest level of human existence, we are able to buy things that we want a-la-Maslow’s Hierarchy of Needs.  For us, time we spend at work is converted into money so that we can do the things that we really want to do.  Money is just the intermediary, it’s just a tool that we used to convert our time into the things that we really need or want.  But what happens if you don’t want to work?  What if you want to retire?  If money is the intermediary tool, it becomes obvious.  We spend time in our jobs today so that tomorrow we can live a carefree life.  Conversely, every time we spend money, we must delay our retirement.

Some of us may love our jobs and our jobs may even define a few of us.  But ultimately, what’s important for us is the time we spend doing what we love.  And for most of us, money is just the tool that allows us to do it.

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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