It's starting to look like I need a budget of $300k to $330k for a "move-in ready" 2br/2ba condo in my area. At this price range, I've estimated that my housing cost will be around $1,914 - $2000/month = mortgage (P&I only) $1,274 + associations fees around $300 + property tax $340 + insurance $10. (The reason why my "insurance cost" budget is $10 is because I'm only taking into account the increased premium from a condo-owner's policy vs. my current renter's insurance policy.)
I'm currently paying $1,175/month in rent, so this is a jump of $739-$825/month in my cost of living. Of course, I'm currently only renting a 1 br/1 ba apartment, so it's not really an apples-to-apples comparison. If I were to rent a 2 br/2 ba apartment at my complex, I would be paying approx. $1,600 - $1,700 month. So I concluded that buying makes sense, even with the significantly increased cost of living.
With this conclusion, I made two offers:
1.) $300,000 back-up offer on a townhome for which the seller had already accepted a $300k cash offer from someone else. The buyer, however, has a date certain that they need to move-in. With the townhome being sold as a short-sale, the property may not close in time for the buyer. In the event the buyer drops out, my back-up offer will be considered.
2.) $329,000 on a short-sale townhome. The seller countered yesterday with minor concessions, which I accepted. The seller is entertaining multiple offers so I'm not sure whether I'll "win" the bid yet.
I have mixed feelings about this process. On the one hand, I hope I can buy the $329k property. On the other hand, the thought of the increased cost of living is giving me heartburn.
Sunday, July 31, 2011
Saturday, July 30, 2011
My Budget Round One: From $231,250 to $275,000
My initial, "What I Can Afford" budget was a condominium up to $231,250. I based that budget on a cursory review on Zillow for 2 BR/2Ba condominiums in my area. There were a couple of apartment conversion units with upgraded interiors (i.e., granite countertops, stainless steel appliances) in the $229,000 - $230,000 price range. Poifect!
My agent sent me an updated MLS listing with a search criteria of 2+BR/2+Ba up to $235,000. I got 9 hits. The 2 condo conversion units were still on the market. Yipee!
Unfortunately, when I did a "drive-by," I quickly discovered why those units were so cheap... errrr.... I meant affordable. The units' balconies and windows face a major freeway. Semis and trucks drive through this freeway all day and all night. The noise pollution from the freeway is overwhelming. There's no way I can sleep at night. *Sigh*
Okay... Maybe if I increase my search criteria to $275,000? Yikes. That means I need to come up with a $55,000 down payment and my loan amount will be $220,000. My monthly mortgage payment will go from $890 to $1,066. I tell myself, "I can swing it! It's still less than my monthly rent!" (I'm conveniently ignoring property taxes and COA fees.) I instructed my agent to increase the search criteria.
I got a couple of more hits. There was one unit for $257,000. The MLS pictures were kind of dark and depressing. But the location is great, so nothing a little paint, extra lighting and some elbow grease can't cure, right?
The walk-through was scary... errrr... I meant enlightening. Everything from the common area to the living area screamed 70's kitsch. Imagine a generic Motel 8 structure with an age-worn Brady Bunch decor. The unit doorway had a tiki-like, wood panel embellishment. I like tikis well enough, but at Disneyland or Trader Vics. Not my home. And since the ugly tiki is in the common-area, I can't just rip it out.
Once inside, it was bright and spacious, but everything was soooo dated. The prior owner appeared to have started DIY removal of the acoustic (popcorn) ceiling in the kitchen. But they stopped a little ways into the living room area, probably saying, "F*#k it. This $#it is too much work." The fireplace had some weird, orange-ish psychedelic tiles above it. When I got close, the tiles had a picture of a flamenco dancer. Egads.
*Sigh* I'm coming to the realization that even in this economy, a 2BR/2Ba for <$275,000 will only get me a fixer-upper. If it's move-in ready, I have to be prepared to wear earplugs at all times while at home. I'm getting depressed...
My agent sent me an updated MLS listing with a search criteria of 2+BR/2+Ba up to $235,000. I got 9 hits. The 2 condo conversion units were still on the market. Yipee!
Unfortunately, when I did a "drive-by," I quickly discovered why those units were so cheap... errrr.... I meant affordable. The units' balconies and windows face a major freeway. Semis and trucks drive through this freeway all day and all night. The noise pollution from the freeway is overwhelming. There's no way I can sleep at night. *Sigh*
Okay... Maybe if I increase my search criteria to $275,000? Yikes. That means I need to come up with a $55,000 down payment and my loan amount will be $220,000. My monthly mortgage payment will go from $890 to $1,066. I tell myself, "I can swing it! It's still less than my monthly rent!" (I'm conveniently ignoring property taxes and COA fees.) I instructed my agent to increase the search criteria.
I got a couple of more hits. There was one unit for $257,000. The MLS pictures were kind of dark and depressing. But the location is great, so nothing a little paint, extra lighting and some elbow grease can't cure, right?
The walk-through was scary... errrr... I meant enlightening. Everything from the common area to the living area screamed 70's kitsch. Imagine a generic Motel 8 structure with an age-worn Brady Bunch decor. The unit doorway had a tiki-like, wood panel embellishment. I like tikis well enough, but at Disneyland or Trader Vics. Not my home. And since the ugly tiki is in the common-area, I can't just rip it out.
Once inside, it was bright and spacious, but everything was soooo dated. The prior owner appeared to have started DIY removal of the acoustic (popcorn) ceiling in the kitchen. But they stopped a little ways into the living room area, probably saying, "F*#k it. This $#it is too much work." The fireplace had some weird, orange-ish psychedelic tiles above it. When I got close, the tiles had a picture of a flamenco dancer. Egads.
*Sigh* I'm coming to the realization that even in this economy, a 2BR/2Ba for <$275,000 will only get me a fixer-upper. If it's move-in ready, I have to be prepared to wear earplugs at all times while at home. I'm getting depressed...
Friday, July 29, 2011
I'm In the Market to Buy My First Home
The US economy is on the brink of crumbling and I've decided now is the good time to buy my first home. I've always had a knack for good timing. Like that line from the movie Airplane!: "I guess I picked the wrong time to quit drinking."
I won't be writing about stuff like "How I found my agent" (friend referral), "How I found my first mortgage" (credit union), "How I determined what I can afford". Other (much knowledgeable/experienced/smarter) people have already covered that territory ad nauseum. I'm just going to write about my personal experience. My posts, for all practical purposes, will be of no use to anyone but myself.
I started the process on Monday. So far, my emotions have ran the gamut of hopeful, excited, optimistic, scared, ambivalent, dejected, sad, frustrated, anxious, impatient, depressed, etc. I don't deal with stress very well, so these extreme fluctuations in emotion have immediately manifested into cold sores (plural) on my bottom lip. Nothing exudes and inspires confidence like outwardly visible herpes sores.
I've already had to adjust my "maximum" budget twice in the span of a week. *Sigh* Not a good sign. For those who like witnessing a train crash, you may be in for treat.
I won't be writing about stuff like "How I found my agent" (friend referral), "How I found my first mortgage" (credit union), "How I determined what I can afford". Other (much knowledgeable/experienced/smarter) people have already covered that territory ad nauseum. I'm just going to write about my personal experience. My posts, for all practical purposes, will be of no use to anyone but myself.
I started the process on Monday. So far, my emotions have ran the gamut of hopeful, excited, optimistic, scared, ambivalent, dejected, sad, frustrated, anxious, impatient, depressed, etc. I don't deal with stress very well, so these extreme fluctuations in emotion have immediately manifested into cold sores (plural) on my bottom lip. Nothing exudes and inspires confidence like outwardly visible herpes sores.
I've already had to adjust my "maximum" budget twice in the span of a week. *Sigh* Not a good sign. For those who like witnessing a train crash, you may be in for treat.
Saturday, March 19, 2011
Paid Off My Private Student Loans
I purged the variable-rate-debt snake from my household and paid off my private student loans on St. Paddy's Day. Yep, made one lump sum payment of $31,584.24 to pay it off. Now I have approximately $51.5k in federally subsidized student loans remaining. I'm less concerned about paying my federally subsidized student loan off because: (a) it has a fixed interest rate of 5.125% and (b) the monthly payment is only $360.08/month.
You may be wondering how I got the money to make a huge lump-sum payment. Back in December 2009, I came across a significant windfall of ~$33k. (Due to a confidentiality clause, I can't divulge the source or the reason for the windfall.) I spent some of the windfall on various things, but managed to hold onto $28.5k for over a year. I didn't know what I wanted to do with the money. Should I keep it as a potential down payment for my first home? Should I just stash it as my secondary emergency fund? Or should I pay off my student loans?
I finally worked up the courage to use the money to pay off my private student loans. Although the interest rates are really low right now (3.583% APR), I'm not sure how much longer it will stay low since it is a variable rate loan. Secondly, I've been accruing anemic interest on my savings accounts ranging between 0.5% - 1.59% APY. Thirdly, if you add my EF balance and my "earmarked" savings, I have approximately $24,000 remaining in the bank. I felt I had enough of a financial cushion to pull the trigger.
I was planning to snowball my entire student loans but I've changed my mind. As I've indicated above, the minimum monthly payment and the fixed interest rates on my remaining federal student loans are both relatively low. Although the balance is still relatively high, I feel less urgent to pay it off.
Instead, I'm going to focus on saving money for a down payment on my first home. Although I'm pretty confident that interest rates aren't going to skyrocket any time soon (in the next five years or so), I want to be able to have money to buy something before it does.
You may be wondering how I got the money to make a huge lump-sum payment. Back in December 2009, I came across a significant windfall of ~$33k. (Due to a confidentiality clause, I can't divulge the source or the reason for the windfall.) I spent some of the windfall on various things, but managed to hold onto $28.5k for over a year. I didn't know what I wanted to do with the money. Should I keep it as a potential down payment for my first home? Should I just stash it as my secondary emergency fund? Or should I pay off my student loans?
I finally worked up the courage to use the money to pay off my private student loans. Although the interest rates are really low right now (3.583% APR), I'm not sure how much longer it will stay low since it is a variable rate loan. Secondly, I've been accruing anemic interest on my savings accounts ranging between 0.5% - 1.59% APY. Thirdly, if you add my EF balance and my "earmarked" savings, I have approximately $24,000 remaining in the bank. I felt I had enough of a financial cushion to pull the trigger.
I was planning to snowball my entire student loans but I've changed my mind. As I've indicated above, the minimum monthly payment and the fixed interest rates on my remaining federal student loans are both relatively low. Although the balance is still relatively high, I feel less urgent to pay it off.
Instead, I'm going to focus on saving money for a down payment on my first home. Although I'm pretty confident that interest rates aren't going to skyrocket any time soon (in the next five years or so), I want to be able to have money to buy something before it does.
Sunday, January 23, 2011
Give More Than You Get
I've made a personal commitment to live by this motto.
In the past, I lived by the motto, "Do unto others as they have done for me." For example, if some one didn't do "X" for me, I won't do "X" for them either. I guess in many ways this is a pragmatic way to live. But it also made me miserable because I was keeping score. And I've come to the conclusion that keeping score is exhausting, limiting and ultimately, self-defeating.
Don't get me wrong - - I have no intention of trying to make friends with those who have intentionally wronged or back-stabbed me in the past. I'm just talking about those people who haven't necessarily reciprocated my kind gestures in the past.
I bring this up because my BFF told me, "If 'giving more than you get' is your motto, you're going to discover that you got taken advantage of your entire life." My BFF said this with respect to my friend, "Tara," who I take out to lunch every year for her birthday. Tara has never remembered my birthday. This irked me for a while, but I came to the conclusion that I'm just being petty.
Tara is a single mother who is sandwiched between taking care of her college-bound daughter and a sick, invalid father. She has a lot on her plate and I doubt remembering my birthday is high on her priority list. Besides, I haven't really cared about my birthday since I turned 30 either.
My BFF said, "Tara is just using you and she'll see you nothing other than a free meal-ticket. She will do nothing for you. You watch." Of course, my BFF has never met Tara and is casting a broad judgment based upon this one issue. Fact of the matter is, Tara wouldn't care if I never paid for her lunch. I just take Tara out to lunch on her birthday because it's an excuse to get together and catch up. She never expects or have asked to be taken out.
I took Tara out to lunch for her birthday last week. She offered and even insisted on paying for her own meal, but I paid anyways. She finally sheepishly said, "You always do this for me and I don't even know your birthday. When is it?" I told her my birthday was in June but didn't say the specific day . After all, I don't take her out with the expectation that she'll take me out for mine.
On a side note, my BFF complains that she has no "girl-friends" that she can hang out with. What she really means is that she has no friends that she deems worthy to hang out with. I guess when you expect your friends to reciprocate every kind thing you do for them, you're pretty much going to limit your circle of friends.
In the past, I lived by the motto, "Do unto others as they have done for me." For example, if some one didn't do "X" for me, I won't do "X" for them either. I guess in many ways this is a pragmatic way to live. But it also made me miserable because I was keeping score. And I've come to the conclusion that keeping score is exhausting, limiting and ultimately, self-defeating.
Don't get me wrong - - I have no intention of trying to make friends with those who have intentionally wronged or back-stabbed me in the past. I'm just talking about those people who haven't necessarily reciprocated my kind gestures in the past.
I bring this up because my BFF told me, "If 'giving more than you get' is your motto, you're going to discover that you got taken advantage of your entire life." My BFF said this with respect to my friend, "Tara," who I take out to lunch every year for her birthday. Tara has never remembered my birthday. This irked me for a while, but I came to the conclusion that I'm just being petty.
Tara is a single mother who is sandwiched between taking care of her college-bound daughter and a sick, invalid father. She has a lot on her plate and I doubt remembering my birthday is high on her priority list. Besides, I haven't really cared about my birthday since I turned 30 either.
My BFF said, "Tara is just using you and she'll see you nothing other than a free meal-ticket. She will do nothing for you. You watch." Of course, my BFF has never met Tara and is casting a broad judgment based upon this one issue. Fact of the matter is, Tara wouldn't care if I never paid for her lunch. I just take Tara out to lunch on her birthday because it's an excuse to get together and catch up. She never expects or have asked to be taken out.
I took Tara out to lunch for her birthday last week. She offered and even insisted on paying for her own meal, but I paid anyways. She finally sheepishly said, "You always do this for me and I don't even know your birthday. When is it?" I told her my birthday was in June but didn't say the specific day . After all, I don't take her out with the expectation that she'll take me out for mine.
On a side note, my BFF complains that she has no "girl-friends" that she can hang out with. What she really means is that she has no friends that she deems worthy to hang out with. I guess when you expect your friends to reciprocate every kind thing you do for them, you're pretty much going to limit your circle of friends.
Saturday, January 15, 2011
2010 Year-End Progress Report
This is my (belated) 2010 year-end financial review.
Due to family obligations last year, I hadn't been updating my blog regularly other than to blow steam about my parents' financial irresponsibility.
With my father now deceased (RIP), I am hoping that my life will return to "normal" and that I will be able to resume a semi-regular update of my financial progress.
MY DEBT
I totally fell off of the snowball plan last year. It's partly because my monthly budget took a whack every time I traveled out-of-state to attend to my parents' bankruptcy and health care issues. I also blew beaucoup cash to deal with my emotional upheavals in dealing with my parents. Hey, retail therapy is a proud American tradition, no? Even if it isn't, our economic recovery depends upon it, sadly.
Anyhow, here's a recap:
Total debt in 12/31/09: $96,750.67
Total debt in 12/31/10: $85,439.37
Reduction in $: $11,311.30
Reduction in %: 11.69%
SAVINGS
The savings I report here is with respect to my emergency fund savings only and does not include my future spending earmarks. My ultimate goal is to save $36,000.
Total EF in 12/31/09: $8,472.64
Total EF in 12/31/10: $9,696.45
Increase in $: $1,223.81
Increase in %: 14.44%
MY "X"-FUND
My "X"-Fund represents a part of a recent windfall that I'd set aside for some unplanned expense. I was thinking it could serve as a supplement to my emergency fund or a down-payment for my first home, but I'm very, very tempted to use this money to pay off my private student loans some time down the road. After all, this money is currently accruing interest at an anemic 1.3% APY. My private student loans are costing me ~3.6% APR. On paper it's a no-brainer, but the emotional security this money gives me is incalculable.
MY ROP (LIFE INS) FUND
Long story short, I bought term life insurance but created a hypothetical whole life insurance policy (or, return of premium (ROP) term life insurance policy). I'm basically trying to see whether I can earn back my life insurance premiums through various investments.
So far, my investments have yielded a 9.06% return. With the stock market surging though, I don't think I'll be buying any stocks or ETFs in the near future. I'll wait for the inevitable (yet somehow unexpected) market correction.
MY NET WORTH
Looks great doesn't it? But if I omit my 401k and IRAs, my net worth is... -$35,413.41. I'll do the happy dance when my net worth (excl-retirement accounts) is no longer in the red.
Net worth on 12/31/09: $53,922.34
Net worth on 12/31/10: $143,084.85
Increase in $: $89,162.51
Increase in %: 165.35%
The increase in my net worth is mostly attributed to: (a) 401k value increased by ~$45,000, (b) net windfall of ~$28,000, (c) debt reduction of ~$11,000.
The breakdown and the history of my net worth can be seen here.
Due to family obligations last year, I hadn't been updating my blog regularly other than to blow steam about my parents' financial irresponsibility.
With my father now deceased (RIP), I am hoping that my life will return to "normal" and that I will be able to resume a semi-regular update of my financial progress.
MY DEBT
Starting Debt (6/08) | Last Month | This Month | DIFFERENCE | |
| Private SL | $49,528.99 | $33,936.80 | $33,486.00 | $(450.80) |
| Fed'l SL | $55,852.68 | $52,101.45 | $51,953.37 | $(148.08) |
| Car Loan | $9,779.33 | $0.00 | $0.00 | $(0.00) |
| CC | $13,610.75 | $0.00 | $0.00 | $(0.00) |
| TOTAL | $128,771.75 | $86,038.25 | $85,439.37 | $(598.88) |
I totally fell off of the snowball plan last year. It's partly because my monthly budget took a whack every time I traveled out-of-state to attend to my parents' bankruptcy and health care issues. I also blew beaucoup cash to deal with my emotional upheavals in dealing with my parents. Hey, retail therapy is a proud American tradition, no? Even if it isn't, our economic recovery depends upon it, sadly.
Anyhow, here's a recap:
Total debt in 12/31/09: $96,750.67
Total debt in 12/31/10: $85,439.37
Reduction in $: $11,311.30
Reduction in %: 11.69%
SAVINGS
| LAST MONTH | THIS MONTH | DIFFERENCE |
| $9,592.59 | $9,696.45 | +$103.86 |
The savings I report here is with respect to my emergency fund savings only and does not include my future spending earmarks. My ultimate goal is to save $36,000.
Total EF in 12/31/09: $8,472.64
Total EF in 12/31/10: $9,696.45
Increase in $: $1,223.81
Increase in %: 14.44%
MY "X"-FUND
| LAST MONTH | THIS MONTH | DIFFERENCE |
| $28,443.10 | $28,523.41 | +$80.31 |
My "X"-Fund represents a part of a recent windfall that I'd set aside for some unplanned expense. I was thinking it could serve as a supplement to my emergency fund or a down-payment for my first home, but I'm very, very tempted to use this money to pay off my private student loans some time down the road. After all, this money is currently accruing interest at an anemic 1.3% APY. My private student loans are costing me ~3.6% APR. On paper it's a no-brainer, but the emotional security this money gives me is incalculable.
MY ROP (LIFE INS) FUND
| LAST MONTH | THIS MONTH | DIFFERENCE |
| $1,003.23 | $1,066.14 | +$62.91 |
Long story short, I bought term life insurance but created a hypothetical whole life insurance policy (or, return of premium (ROP) term life insurance policy). I'm basically trying to see whether I can earn back my life insurance premiums through various investments.
So far, my investments have yielded a 9.06% return. With the stock market surging though, I don't think I'll be buying any stocks or ETFs in the near future. I'll wait for the inevitable (yet somehow unexpected) market correction.
MY NET WORTH
| LAST MONTH | THIS MONTH | DIFFERENCE |
| $133,127.73 | $143,084.85 | +$9,957.12 |
Looks great doesn't it? But if I omit my 401k and IRAs, my net worth is... -$35,413.41. I'll do the happy dance when my net worth (excl-retirement accounts) is no longer in the red.
Net worth on 12/31/09: $53,922.34
Net worth on 12/31/10: $143,084.85
Increase in $: $89,162.51
Increase in %: 165.35%
The increase in my net worth is mostly attributed to: (a) 401k value increased by ~$45,000, (b) net windfall of ~$28,000, (c) debt reduction of ~$11,000.
The breakdown and the history of my net worth can be seen here.
What Are You Doing with the Social Security Payroll Tax Cut?
I got my first paycheck of 2011 and it was more than I expected. (This is partly due to the fact that I reduced my 401k contributions by 1% back in August because I would have otherwise maxed out my 401k contributions before my last paycheck and missed out on some of the company match.) But it looks like my Social Security payroll tax cut accounts for an additional $80 per paycheck or so.
I'm not too thrilled about this tax-cut, though, because I've always been worried about the solvency of the Social Security program when I retire. As a sign that we probably can't afford this tax cut, the government is borrowing $112 billion to make Social Security whole.
I guess the thought behind the SS payroll cut is to stimulate the economy. Unfortunately, I'm probably not going to put the money back into the stream of commerce. I intend to use the money to pay down my private student loans and/or to increase my Roth IRA contributions. I guess I'm no better than the companies that are hoarding cash rather than hiring, despite tax cuts and other government cheap money.
If I'm worried that I won't be able to collect on Social Security, I might as well reduce my debt and sock this money into my Roth, right? But does this make me a bad citizen? Maybe to alleviate my guilt, I'll continue to buy I-Bonds despite the less-than-thrilling rates they've been giving lately.
I'm not too thrilled about this tax-cut, though, because I've always been worried about the solvency of the Social Security program when I retire. As a sign that we probably can't afford this tax cut, the government is borrowing $112 billion to make Social Security whole.
I guess the thought behind the SS payroll cut is to stimulate the economy. Unfortunately, I'm probably not going to put the money back into the stream of commerce. I intend to use the money to pay down my private student loans and/or to increase my Roth IRA contributions. I guess I'm no better than the companies that are hoarding cash rather than hiring, despite tax cuts and other government cheap money.
If I'm worried that I won't be able to collect on Social Security, I might as well reduce my debt and sock this money into my Roth, right? But does this make me a bad citizen? Maybe to alleviate my guilt, I'll continue to buy I-Bonds despite the less-than-thrilling rates they've been giving lately.
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