Home > Archive: September, 2020

Archive for September, 2020

teasing out our spending

September 24th, 2020 at 12:14 am

I spent some time this past week working on personal capital looking at our spending. Okay it's out of control. This pandemic probably helps but it's interesting. We have been spending less on things you would expect like groceries and eating out but more on stuff like home renovations, school/office stuff.

2019 Spending
$22149 Travel
$20713 Groceries ($1727/month)
$10759 Pet (dog surgery)
$9358 Eating out ($780/month)

2020 Spending thus far
$17550 Travel
$12467 Home Improvement (shed)
$11548 Groceries ($1316/month)
$4689 Eating out ($521/month)

What is interesting is that our grocery bill dropped while we are eating at home most of the time and DH no longer has free lunches/snacks. Last year we were spending that much and DH wasn't eating lunches. Now 4 people eating 3 meals a day at home and we're lower groceries and lower eating out. Also groceries has gotten much more expensive during this period.

We are saving about $650/month food, no kids activities, less traveling, which it doesn't seem like it but it is. I would say we are saving at least $3k/month.

We'll see how the rest of the year plays out. We have about 6 more months until the new budget resets.

paid off car...and refi mortgage!

September 14th, 2020 at 11:46 pm

yes it drives better. Actually I haven't driven but I figure it really does. Smile We had $8000 left and 2.49% and I had no idea why we were still paying on it 3 years later. Honestly I was a bit annoyed that we hadn't paid it off and I hadn't paid attention. So I wrote a check and dropped it at the bank. I like not having a car payment and I like owning my cars.

We lived from 2003-2010 without a car payment with a 1998 toyota corolla and 2000 ford focus. Had a kid and bought a 2010 Subaru outback new and had a loan from 2010-2015. We borrowed $20k and had 1.49%. We also bought in 2012 a 2006 hyundai sonata for $10k and I think it was 1.99%. We paid off both cars in 6/2015. DH wanted a new car in 12/2015 and we bought a new 2016 Subaru Legacy. We paid that off in 12/2018. I got a 2015 Toyota Sienna in 12/2017 and just paid that off this month.

Does it drive better? I would say that it does. I find myself suddenly excited that we are finally without a car loan again after 10 years of car loans. Ugh. We spent a decade not owning out cars. Yes it wasn't a large amount each time. And yes our interest rate was low and the reason why we kept the car loans around. But I like not owing anybody anything.

I was about to refi our mortgage to another 7/1 arm. But instead Chase offered us 2.875% 27 year fixed rate mortgage for FREE. They fedex us a legitimate offer for reducing our rate from 3% for a 7/1 arm to a 30 year fixed jumnbo. Amazing. I did pay $1168 for an appraisal with Bank of America. We will save $88/month so it will take 13 months to break even for the appraisal. But it's a fixed rate and we will be staying in our place like i said potentially until 5/2023.

So for $1168 we just fixed our rate to 2.875% on a jumbo mortgage!

Recent purchases and future purchases

September 11th, 2020 at 05:53 pm

LuckyRobin reminded me of some stuff I've bought, will buy, and planning on buying. I bought this summer a new knife and three new frying pans. I got the pans from william sonoma at 50% lowest discounted price from william sonoma clearance so I ended up spending $159 for three frying pans and lids. Very good deal when you consider how that's the price of usually 1 pan. This was a purchase I had been waiting for and mentioned to DH since the beginning of the year it was time to replace our calphalon pans from 2005 when we got married.

I painted the kids rooms and bought them

Text is new mini loft beds. and Link is
new mini loft beds.

I also got a
Text is new desk and Link is
new desk for myself instead of working on the kitchen island. This is a more permanent setup and DH is moving out to our office shed. I'm so excited and will try to post pictures when we get it done.

Finally I dropped our food processor and cracked the container. I think it's time for a new one. Another item from our wedding registry. I also would like to replace our crockpot which was a black friday $10 deal in 2000. I'm debating buying in instapot. But is it worth it? I heard it doesn't work quite like the slow cooker and i love love love my slow cooker and I don't pressure cook much. And I don't have space for both.

Just some cute stuff to look at.

PITI Rule of Thumb

September 8th, 2020 at 09:42 pm

Home purchasing has rules of thumb. The general rule of thumb is 28% PITI. So your mortgage should be no more than 28% of your income. The second part is 36% of your gross income including all other debts. Meaning if you have a lot of medical, student loans, credit cards, car payments, your entire debt load should be no more than 36% of total income. The flexibility is if you have no other debt you could stretch more and buy more house. Or if you have a lot of student loans maybe the answer is to buy a smaller home or wait for a bigger down payment.

So you know we are in the process of refinancing. We are also in the process of taking a salary cut. We have been in our current house 3 years. When we bought it we were at a PITI of ~20%. That was pretty comfortable. I have to say that staying within the 28%/36% isn't a bad thing.

But now we are creating a new budget and our PITI is at 30% and I have to say it feels tight even without us going to the new budget. This is the first time in a long time I recall what it was like to live where we stretch ourselves to afford our home. We are officially going to be "house poor" again.

When we bought our condo in 2002 we were at about 40% of our income and it was tight. But we weren't saving for retirement and we were used to living like students (which we were). In 2005 we bought our townhouse and if I recall we finally were comfortable at 30% PITI. It was a bit tight but getting easier. During the next 10 years we had a couple of promotions/raises, lost 1 income, and refinanced our mortgage to get it down to 15% income. It was awesome. We were finally able to really save and enjoy life.

We moved, rented, and then bought 3 years ago. And when we bought at 20% income it was really comfortable because really it was much lower with DH's income skyrocketing. But now we are going back to a much tighter budget and suddenly the house is looking like an albatross.

I am grateful we bought way less house than we could afford. But it makes me reflect that often times people struggle to budget and get out of debt. And I can see that easily happening to us. It's not the small things. We don't have any other debt so in theory we could afford 36% PITI and we are at 30% PITI which isn't much more than 28% PITI. But every % counts and it really just has this ripple effect on the rest of the budget. Makes you more aware of how much your heating/utilities are. Makes you aware of how expensive your daily starbucks habit it.

While the truth is the $100/month starbucks habit shouldn't be why you can't afford your house. Your house should be affordable because you bought it to be affordable. Not looking to scrounge. I guess now that I'm in that position of examining every expense. If people ask me my opinion?

I can now firmly state that I'd rather have a smaller mortgage and less house and be able to comfortably afford it than something we stretch to buy. And as I get older it's so much harder to live the same lifestyle we had in our 20s that we did. So our lifestyle is different.

Have you noticed a change in lifestyle from 20 years ago? Do you think you could go back to when you were younger and made less money?

Budget Revamp

September 4th, 2020 at 05:11 pm

Okay so a budget revamp is due since DH is switching jobs in March 2021. Our budget I think will be done annually. It'll be easier. This is our tentative budget for 2 years. Right now the plan is to fund our Roth IRA @ $6k/year and 2 ESA @ $2k each.

Salary $180k
-$60k mortgage PITI
-$25636 Federal Taxes, SS, Medicare
-$6000 Medical (no idea just estimating)
-$3000 Auto Insurance/Umbrella
-$1800 Electric
-$1800 Water
-$1200 Internet
-$3120 Cleaner
-$1560 Yard Guy
-$1400 Life Insurance
-$2400 Gas (this is obviously down for 2020, but in past)
-$12000 Groceries
-$6000 Eating out
-$6000 Kids extracurriculars
-$12000 Roth IRA
-$4000 ESA Kids

=$148,516 spent

= $31484 Leftover

Here is the problem. That seems like a lot of leftover. Enough to cover saving for retirement at 15% = $27000. That means we need about $13k more than we were planning on saving. And it seems tight since $31k slush I think needs to cover our misc spending and travel and things that happen.

I'm thinking if we compromise and do 10% savings on $180k so $18k, so if we move $2k into savings cash or 529 then we'll hit 10% savings rate. Yikes.

Looking at a finer tooth comb for our spending historically we spent $115k last year not including the mortgage and $102k in 2018 and $88k in 2017. Lifestyle creep. We've gotta rein it in a lot I think.

I think we need to start with the basics. Tracking what we spend till the end of the year. Then we start living on the new salary. We are refinancing our mortgage and it will go down another $500/month. We just spend too much money. I am feeling it now looking at everything with a fine tooth comb. I'll probably post in January/Feb as we get closer to it in the forum for picking over.

Stock Market Insanity

September 2nd, 2020 at 12:41 am

So the stock market insanity. I mean i can't explain it at all. Can you? I mean Singuy's explanation that we aren't in a real recession and people are parking money somewhere because Bonds and CDs are paying nothing makes sense. Everything I've read saying it's going up because the fed is inflating asset prices by printing more money. QE is real.

This stock market has skyrocketed our investments. Our retirement accounts are $1.15M today. Our taxable investments are up to around $650k. I don't know whether to hope or panic if we manage to pass $2M in cash assets this year.

But it seems surreal. Like all of this is due to a bubble. That the valuations of these stock assets aren't real. I'm not sure what is real. I do know that cash appears to be a bad place to be sitting so I've been dumping more and more money into the stock market.

Right now so many changes. I'll post more as we get close to March 2021 but DH is changing jobs. But how do we balance risk with reward?

What are you doing?