Goal: $479,875 by 2019
(As a reminder, this is to get me to 3x my current salary, which is now $66,625, so $199,875; NT to 3x his, which is now $60,000, so $180,000; and AS to 2x hers, which this year is projected to be $50,000, so $100,000)
Current balance: $285,018
May 2016 balance: $279,380
To reach the goal by our birthdays in 2019, that's 30 months, so we'd need to contribute (or have assets appreciate) $6,495 per month to reach it. We came somewhat closer to that level of progress this month!
Archive for August, 2016
Goal: $479,875 by 2019
NT's UK pensions:
#1: 17,105 pounds ($25,658)
#2: 20,501 pounds ($30,752)
#3: 5,523 pounds ($8,284)
NT's 401(k): $44,856
NT's Roth IRA: $10,436
AS's trad. IRA: $15,685
AS's Roth IRA: $29,931
AS's SEP IRA: $9,735
CJ's 401(k): $93,312
CJ's Roth IRA: $16,369
NT's flat: 180,000 pounds ($270,000)
CJ/NT/AS house: $470,000 (value -6%)
Total Assets: $1,025,018
US Mortgage (duplex) $402,949
Loan from friends (duplex) $9,000
UK Mortgage 1: $43,766
UK Mortgage 2: $9,225
UK Mortgage 3: $9,716
Total Debt: $474,656
Current Estimated Net Worth: $550,362
July 2016 estimate: $543,746
Change in net worth: +$6,616
Summary: No huge gains anywhere but we contributed over $3K to retirement and paid off nearly $1K of debt, so we saw a nice bump.
Notes on the numbers above: House value estimates are approximate. UK pension values updated about once a year. UK asset values and debt amounts are calculated figuring $1.50 for every British pound.
AA started school today! She finally got to wear the sparkly outfit she bought a month or so ago. It's a nightgown; none of the real dresses at Target were fancy enough for her taste.
Overall it went well, though she was nervous and out of sorts at first. SL is champing at the bit to start school, so it was hard for her to watch AA get to have another special first day. Next year she'll have her turn.
I'm feeling tired and distracted after the excitement and noise of dropping her off. Wish I could take the day off, but alas, I can't. I do have a work-from-home day planned for Wednesday, and we have Friday off, so I really can't complain about being at work today.
Well, two days of the State Fair was super fun, but it was a frenzy of spending and we dropped a small fortune on it. Also, utilities bill was higher than usual (possibly due to letting the kids play with the hose and sprinkler more often). So the deficit in our shared spending got about $100 bigger.
But, AS's client who was supposed to pay at the end of the month paid a few days early! $1975, and we netted $1226.
Even though the hole is a little deeper, I decided to go even further than planned and add $650 to savings instead of $500. There are a few more payments from my company expected soon, so I'm hoping they get their act together and pay a bunch of them in one big check. It'll all work out in the end. And now we have $1500 in our U.S. savings!
The shared spending deficit is now $484.79. Hoping my company pays up on Monday, before our next few expenses (swim classes and alumni event refreshments) increase the deficit.
I also really want to get new running shoes so I can use our new (to us) Freecycle treadmill. And I want to start putting together my fall capsule wardrobe, which is going to need some new pieces. And there are a bunch of little household items, not needed but wanted, that we'd like to get. But those things can wait a bit longer. I like adding to savings knowing it'll enable us to satisfy some big want(s) in the future.
Well, my company is lagging in promised payments to AS for her freelance work, whereas planned expenses are happening right on schedule. Therefore our shared spending looks pretty bad right now: $954.47 in the hole.
The extra bathroom-contractor charge was about $850, so we actually wouldn't be doing too badly if not for that. And, we have $850 in savings that I could pull if needed, but I'm going to hold off on that and see if we can just clear it up with incoming money.
If my company gets its act together, they should soon be sending AS $1748.75. If we net $1136 from that and send $500 of that to savings, it's $636 toward our deficit.
However, we do have two more expenses coming up shortly: kids' swim classes ($180) and refreshments for an alumni event I'm hosting (unknown how much we'll spend, possibly a couple hundred). If both came to $400, that would take us to about $718 in the hole.
AS is expecting another $1975 at the end of the month. She'll net $1226 and if I send $500 to savings, that gives us $726.
So if no other unexpected expenses came up, we should just barely be able to cover the shared spending deficit by the end of the month and still add some money to savings. Fingers crossed it works out this way!
Every once in a while I check in mentally on how much we're spending on transportation to make sure it makes sense for us to continue as is. Our expenses for this category are fragmented as we use a combination of transportation methods and payment types.
- NT's bus pass is fully reimbursed by his job, up to $90 per month. During summer months he sometimes uses it less and AS or AA can use those funds while he bikes to work. During the winter he gets the $85 unlimited rides monthly pass.
- Bike maintenance is very cheap, a couple hundred bucks per year at most. He's probably looking to get a new bike next year but we'll partly fund it with the birthday gift budget. (AS and I also have bikes; we hardly ever use them but they're there if we need them or want to use them.)
- My bus pass is paid for with pretax money, so it comes directly out of my pay. I get the unlimited rides pass at $85 per month, but with the tax benefit the net impact is a bit less than that. (I should note the bus pass also covers traveling on the light rail, which goes to St. Paul, the Mall of America and the airport.)
- AS doesn't use the bus daily now that she works at home most days, so she gets stored value and pays per trip. Sometimes in summer this is covered by NT's work stipend. Otherwise it's out of pocket, probably about $45 per month. It's so irregular that I don't have a budget line item for it.
- AA is 6, which is when people are supposed to start paying for their bus rides. She would use hers about as much as I do, so I have $85 per month budgeted. But most bus drivers don't think little kids should pay, and AA forgets her purse a lot anyway, so it ends up being a lot less right now. Maybe $30 per month, though at some point I'm sure she'll get into the habit and she'll look old enough that drivers will expect her to pay.
- For times when the bus is too slow or doesn't go where we're going, and walking or biking won't cut it, we use a combination of two carshares (one works for longer round trips and rides the whole family needs to go on; the other one is better for short one-way trips for one or two people). And we occasionally use Lyft, though it must be getting more popular; more often than not it seems there's a 50%-75% upcharge for high-demand times, and it can get REALLY pricy (don't ask me about a trip to the airport we took at those rates). So what seemed like it would be a regular part of our arsenal is now only for emergencies or special occasions. We budget $90 per month for carshare services and it seems to work out most months; occasionally we're over or under a bit. For staycations we take car expenses out of our shared spending, not this category. If one of us wants to use these services and the budget has already been spent, it comes out of our personal spending.
So, a rough estimate of monthly transportation costs:
NT bus pass $0
Bike maintenance $15
My bus pass $85
AS bus pass $45
AA bus pass $30
So about $265 per month for a family of five.
If we bought a car there would be a big outlay of cash plus insurance, gas and maintenance, so it would be a lot more than this at least initially. Plus, our current system allows all members of the family to travel independently, whereas a car would have to be agreed upon who got to use it when. NT and I go into downtown at different times, so one of us would need a bus pass anyway, and AS doesn't drive, so she'd need a bus pass or else be dependent on us to drive her places. Monthly parking in downtown costs more than a monthly bus pass.
Being carless requires patience and planning, but having a car comes with a whole other set of responsibilities too. So for us, it continues to be a good decision not to have one.
Our homeowner insurance sent us a refund check for $233 due to the reduction I worked out recently. I'd forgotten or hadn't realized they'd be giving us a refund for the premium we already paid, so that was a nice surprise.
I decided to send $94.23 to the savings account to bring it to an even $750.
Then AS got a small freelance payment -- $260.15. We netted $169.10 after tax and retirement, and I sent $50 of that to savings.
We did get AA's school supplies; I'd guessed it would be $50 and it came to $54.94. I got a 4-pack of kleenex boxes and we only have to give the school two, plus I got AA a candy treat, so in actuality it was pretty much $50.
Anyway, the part of the checks that didn't go to tax, retirement or savings went to reducing the shared-spending deficit caused by the larger contractor bill. But the school supplies bumped the deficit up a bit again. Now we're $615.77 behind.
Still expecting some slightly larger checks from my company; they didn't come this week so I'm hoping they come next week. They should just about get rid of the deficit (as well as let us add more to savings). Some of the wants on our list are coming up though, so that's going to affect it too. Overall I'm hoping for a lower deficit a week from now, but we'll see.
When I found out about our $40 U.S. mortgage payment savings, I put $100 of the $180 projected surplus into our U.S. savings account. Even though we now have a shared spending deficit, I want to keep adding at least a little bit of every windfall or freelance check to savings for future big wants such as renovations. (It can of course be used for emergencies too if need be, but I'll try to avoid that.) Just over the past month, I've gotten the balance from about $5 to $655.77.
NT's rental income hit his account and I was able to transfer 475 pounds ($712) over to his UK savings that we're considering to be our emergency fund. The EF is now at US$1,837.55, almost 20% of our goal in just over a month!
I'm not expecting to always add this much to savings in a month, but then again maybe some months we'll be able to add even more. Either way, it's nice to see that our savings has grown from practically $0 to nearly $2500.
While balancing the budget this morning I noticed an $82.80 charge on a credit card for NT's dentist. At first I thought he'd double-paid for a procedure but found out he had the same done to the other side of his mouth. Instead of waiting for it to go through insurance I guess they billed him upfront. That was about as much money as we had in shared spending; now it's gone.
For the past month or so we've been trying to get in touch with our contractor who has handled all our home-improvement projects so far. First, because we still owed him some money for the basement bathroom work and second, we wanted to ask him about fixing some track lighting and installing a dishwasher we got from Freecycle.
Today he was finally able to stop by. He showed AS how to get the track lighting on and off free of charge, and was skeptical of the dishwasher's condition. Our current one hasn't been acting up recently so we can probably just pass along that dishwasher and replace ours with a new one whenever it does break down (or when we save up enough to remodel the kitchen).
But the bill for the end of the bathroom project was $2025, more than the $1125 I'd planned for. (I'm not surprised or upset; there were several unpredictable bumps in the road during the renovation.) We've been splitting the cost with our neighbors paying two-fifths, so I had $675 set aside for our share. Our share is at least $540 more; our neighbors paid for tiling supplies for the DIY portion of the bathroom so I asked if they want to calculate that into their two-fifths, which will make our share bigger (not sure by how much). (EDIT: The neighbor said tiles and supplies were about $400, so our share is $1455, or $780 more than I had set aside.)
So looks like the next few freelance checks that come in will go to making up that deficit. I'm looking forward to our wants list but it can wait.
By the time we pay off this deficit, some more items on the list will probably need to move in front of the new running shoes AS and I hope to get. School supplies for AA, fall swim lessons for the kids, and spending money for the State Fair may all end up moving ahead. It depends how many freelance checks AS gets this month. She's done a lot of different jobs lately, so there's a chance she'll get a lot of checks in August, but it's so hard to predict.
AS and I have taken walks the past few days past recently sold homes to try and determine why the sale prices were what they were and see how the homes compared to ours (at least from the outside).
Based on what we saw, we feel pretty comfortable that our home is worth at least $490K. But not quite confident we'd reach $503K, so I don't think we'll try for a refinance right now. I'll keep an eye on home sales and our debt amount and hopefully will feel more sure of our equity in a few months or a year.
But, all my work getting insurance quotes paid off to some extent. I got the results of our escrow analysis, and our payment is actually going down $41.63, not $24 like I thought! It's because the escrow shortage payment went down as well as the regular insurance escrow. Every little bit helps, so I'm happy! And since I already worked up our 2017 budget as well as having the rest of 2016 worked out, there's a nice ripple effect on our finances.
EDIT: Oh! And I just saw some new messages in our UK mortgage account. Turns out the interest rate on all of those is decreasing from 1.49% to 1.24%. Our total payments are going down about $8. Again, I'll take any little bit!
Our many expenses in the first half of this year (shoulder surgery, trip to Europe, tax bill, dental procedures) meant that we pushed off a lot of nice-to-have or will-need-eventually things. Now we're gradually taking care of things as AS's freelance checks come in and no longer need to be applied to a budget deficit.
First on the list, I set aside $300 for painting the interior of our house, though NT might not buy the paint until the weather cools. Then he and I got new underwear to replace worn-out stuff, and I replaced a broken umbrella. (About $30 for all that.)
Then it was new sneakers for the kids. They wear them out so fast! About $50.
Back-to-school outfit and backpack for AA: about $60.
Work trousers for NT: $30
New laptop for AS: $480
Among all of this I've also managed to send $750 to savings. What we're saving for is up in the air; I just wanted to start trying to accumulate a bigger amount for some of our bigger needs and wants.
Now we're waiting on more freelance checks so we can cross some more wants off our list. I've got a list going on our shared spending tracker roughly organized by urgency of want:
Athletic shoes for me and AS
School supplies for AA (the school sent us a list)
Refreshments for an alumni event I'm hosting
Replacement bowl for food processor
Handheld steamer (recommended by snafu & Thriftorama!)
Fridge water/ice filter
Fall swim classes for kids
Work shirt for NT
Add to AA & SLs's mutual funds
We can always move things around, add or take things off, but this helps so when money comes in, everyone understands where it's going. I also hope to put half of net freelance income into savings, but sometimes it'll be less than that. But I'll always put at least a little bit of each check away.
We bit the bullet and paid the year's membership to Instacart. It just adds so much to our weekend to have someone else do the grocery shopping.
But there's one small problem: They don't use reusable bags, and they double-bag (which I can understand because they don't want the strap breaking while delivering). But now we're accumulating a massive pile of paper bags.
What can be done with them? They're perfectly good, but we have no use for them.
Just about to lock in a rate with the online lender AIMloan, I raised a concern about appraising high enough to roll costs in. The broker checked another home value site, Eppraisal.com, and instead of $550K like Zillow now estimates, they valued our place at $474K. Well, even if we paid all closing costs, we'd need it to appraise for at least $503,750 to get rid of mortgage insurance.
The guy then checked what mortgage insurance rates were, to see if I could get a better deal (and one that wouldn't last the life of the loan), but quickly realized that since I have a 2-unit property, private mortgage insurance isn't an option. No, I can only refi to a private lender if I have the 20% equity.
He suggested I check with a realtor, so I did. Our real estate agent who sold our condo for us got back to me with comp sales in our area. Nothing is exactly comparable and there aren't many sales of places even sort of similar to ours in our area. But the ones she found ranged from $440K to $600K.
I'm still waiting for her to email the comps, but from what I remember, removing those two outliers, most places sold for low $500s. But that low outlier is out there, and it's a more recent sale. So she didn't know what to advise. She said it looked like the $600K place was really updated. Our place has some updated appliances and such but it's far from done; there are lots of shabby worn-out things like the main-level floors, clawfoot tub on main floor, plastic-based patched-up shower tray upstairs, partly finished basement bathroom.
Meanwhile, the ranty broker checked in with me via email, and I gave him the estimates I'd gotten from AIMloan but told him about the appraisal fears. He wrote back, much more conciliatory in tone, that he agreed I should be more sure of value before I try, and that the AIM estimates were now close enough to his prices that he'd like a chance to beat them if we did decide to refi down the road. I'll definitely give him a chance now that he seems interested in competing, although I also like AIMloan so far too.
So, it is what it is. After all this work, I've only managed to lower our property insurance by about $24 per month. I called our lender and they're going to do an escrow analysis so hopefully our monthly mortgage payment will be a bit less soon.
I noticed when I was doing this research something about a prepayment penalty on our current mortgage. I asked the lender about that while I was on the phone with them, and they said it was only if I paid off the mortgage within three years without requesting a payoff amount or something. So small extra principal payments should be fine.
I wanted to check on that in case I want to start paying down the principal to get closer to feeling comfortable about the equity we need. It's just a thought that occurred to me; I haven't really considered the idea in depth and we don't have a ton of extra money floating around in the budget this year.
Got the comps from the realtor. Clearly can't trust Zillow or eppraisal's estimates, and the few sort-of-like-ours homes aren't selling for anywhere near $550K.
3,710 square feet, 6 bed 2 bath, built 1927
Sold $480,000 in January 2016
4,222 square feet, 7 bed 4 bath, built 1900
Sold $475,000 in May 2016
4,068 square feet, 7 bed 4 bath, built 1913
So yeah, definitely prudent to wait!
First of all, I'm so grateful for all the concerned SAers who have been offering advice and opinions on my refi musings.
I got AIMloan's estimate and used the ranty email from the local broker to send a bunch of questions to AIMloan. I also went on the Bogleheads forum and couldn't find very many negative comments about AIMloan. (One was about their servicing, not the closing, but apparently they sell most loans, so they might not end up servicing.)
I'm still feeling a bit queasy about it, like I hope this isn't a Nigerian email scam type thing where I'm chasing an elusive profit and keep putting more into it.
After I asked questions and gave more details about the refi (including that it was a duplex), the so-far very patient guy at AIMloan sent me one more estimate. It's not nearly as good a deal as the original rough estimate, but still substantially better than the local guy.
I'm leaning toward locking in a rate, getting a formal quote, and then taking it to the ranty guy to see if he can do better.
I'm circling two main options:
$8537.55 closing costs plus $2098.66 escrow prepay= $10,636.21
Bring $2636.21 to closing and roll $8000 into mortgage
P&I payment $1793.05, total payment w/escrow $2564.91
$4200 closing costs plus $2098.66 escrow prepay= $6306.09
Bring $2300 to closing and roll $4000 into mortgage
P&I payment $1850.06, total payment w/escrow $2621.92
The local guy's offer was:
$7325 closing costs plus $1710 escrow prepay= $9035
Bring $2035 to closing and roll $7000 into mortgage
P&I payment $1850, total payment w/escrow $2621.83
All of these are improvements on my current loan payment, which is $3102.
I feel like I should do something, but I'm very nervous about making a decision. I suppose if I got shafted by AIM and had to back out or it fell through, it would be a $495 mistake (for the appraisal) and not ruinous. It just feels scary to play with this much debt.
It's been a week of getting and selling. First, we sold an old oak door for $50. The lady asked if we'd consider a trade. I said we were looking for track lights, a ceiling fan or a treadmill. She didn't have any of those so she paid the $50. Then she nicely emailed me that she'd spotted a fan in an alley near our house. AS walked over there and lugged it home!
Tuesday AS and I hosted trivia at a bar and she left her work laptop, which was a rinky-dink little stopgap solution bought when we were still broke from all our house-related shenanigans (she's been saying for months she needs something more powerful). That night I'd also made a last-ditch effort to improve the speed of our old laptop. The old one was still slow so I told her to go ahead and order a new one and if her cheapie one turned up, it could become the household one. She bought a much better one for only $480, and then her other one did turn up at the bar! As soon as we save all our pics from the old laptop we can sell it for parts.
Then yesterday someone Freecycled a treadmill! For a $20 truck rental we picked that up!
So let's see, for a net cost of $450, we got rid of a door that was taking up space and acquired a ceiling fan, treadmill and laptop. And if we can sell our old laptop for a few bucks, we'll have paid even less. Not a bad week! We're about $420 in the hole on shared spending now, but those checks for AS from my company should be coming along any day.
This is so not my favorite thing to do, but the thought of bringing our mortgage payment down to a reasonable level keeps me going.
The 2nd broker sent me some kind of quote, but it was so confusingly structured all I could tell was that the interest rate was 3.75%. He'd felt hard to communicate with, constantly pushing me to submit an application and schedule an appraisal, so I decided to just ignore him as an option.
I called Quicken but they would charge more than the 1st broker I talked to for a 3.5% interest rate loan.
I had a testy exchange with the first broker because I asked him to consider helping me out on interest rate or closing costs based on what I was seeing online. He asked to see itemization of rates I was seeing online and I sent him what AIM was saying. He kind of went off about how it wasn't a "real" offer (which he hadn't explicitly asked for) and how shady brokers blah blah blah. I wrote a terse email back saying I'd get a "real" offer from the site and get back to him.
I submitted an application with AIM. Near the end I got freaked out that closing costs were $10K instead of $7K and tried to cancel but it wouldn't let me. I spoke to a broker and he said the $10K would include escrow funding. I no longer had the itemization in front of me, but when he calls me later to go over the options I'll make sure of that. Because the monthly property insurance estimated was half of what I actually pay, so it might be more than $10K. Of course that was for a 3.175% loan, so I'll see what their total costs are with an accurate property insurance estimate and at 3.5% so I can properly compare with the 1st broker's quote.
The 2nd broker emailed me back to follow up, so I just said I'm not interested in refinancing for a rate higher than I already had, so I'd be waiting to refi if that was my only option. If he gets back to me with a 3.5% offer, I'll ask for itemization the way broker #1 and AIM have provided so I can do a comparison.
Feeling unsure about any of the choices so far, but I'm reluctant to try any other brokers/sites that haven't been recommended to me by someone who knows more about this. I feel very ignorant in this area and worried that I'll get cheated or waste a lot of time and money on something that's not going to work out.
I got in touch with one of the brokers my real estate agent recommended. He sent me three possible refi options. None of them involve a lower interest rate than what we have, and two of them are higher. He said it's really expensive to refi to lower than 3.5% for a 30-year loan right now.
So I'm pondering the one that keeps the interest rate at 3.5. I really don't want to go higher, because the other parts of the mortgage payment could go higher in subsequent years as property taxes and insurance premiums rise. I need to keep that flat part of the payment, the principle and interest, as low as possible, I think.
He doesn't think there's an actual escrow shortage, just that the balance isn't where the current lender would like it. So it's possible there's nothing to pay off there.
The 3.5% one is the most expensive, of course; it would involve $7300 closing costs and putting $1700 into escrow. All of that could be rolled into the principal bringing our loan from $403K to $412K. Again, I'm really reluctant to bring the principal back to where it was a year ago. So I'm thinking if I go for this, I'd bring $2K to closing to at least bring the principal increase a little lower.
The old (new) payment is about $3102. The new new one, if his projections pan out, should be $2622. That's a $480 difference! I could use that savings over the next 4 months to fund the $2K I'd bring to closing, and then we'd start 2017 with a much nicer budget surplus.
The $9K added to principal/closing cash would be offset by saving $264 per month on mortgage insurance. Looks like that would pay for itself in about 3 years. Seeing as how the mortgage insurance is here to stay, that's probably worth it.
So, I'm thinking about trying for it.
Wow! We let our kids have their first sleepover at our house (they've had them at daycare and with our downstairs neighbors but never hosted one). The guests came Saturday after lunch and left today before lunch, so just about 22 hours.
We made it! We had a 6YO and a 7YO as well as our own 6YO and 4YO girls. (We tried to get a friend closer to the younger kid's age but the schedule just wasn't working out.) There was some exclusionary stuff going on with the older girls but our 4YO has an overall sunny disposition and didn't seem to notice for the most part. And they did play with her willingly, many times, so it wasn't too bad. And NT took her out for a couple hours of "special time" (playground and ice cream parlor) just to make sure the older girls got some time to themselves and SL got some extra attention.
Spending-wise it wasn't too terrible. $47 for pizza delivery and $11.59 for SL and NT's ice cream. Entertainment was hose/sprinkler outside, playing in the kids' rooms, movies on Netflix and DVD, blanket fort under the dining room table, and hide and seek. Food besides the pizza Saturday night was worked into the grocery budget; vegan rice krispie treats, various raw veggies, watermelon, cupcakes, pancakes, raspberries and strawberries.
After the guests left and we ate lunch, our kids had honest-to-god 2-hour-long naps. We actually had to wake them up because we'd planned a playdate with another friend's kid! Luckily it was at a playground about 4 blocks away. Needless to say though, I've had my fill of kid stuff for the time being!
My nerves felt frayed a few times during the sleepover, especially as it got later at night. (I'm sure my tone got sharp a couple times.) But our kids kept saying it was the best sleepover ever and their friends seemed happy. We sent them away with leftover pizza and treats and the girls gave them various little toys from their own belongings, and everyone seemed happy (especially the parents who got a free date night; I was happy to provide that because I know how rare they can be).
In some ways I know these will get easier as the kids get older. But I know in other ways the psychodrama gets more intense the older they get. Either way, I don't see hosting them very often but it was nice to give my kids a memorable night. And in the age of Facebook, I periodically posted photos and updates that the parents could see, because I know I love being able to see stuff about my kids when they're with someone else!
Come to think of it, it's been a spendy weekend kid-wise. I took AA to buy her first-day-of-school outfit at Target, and we ended up spending about $80. Everything was pretty reasonable--we got sneakers, flats, a dress (OK, a princess nightgown; it was what she wanted and I think it can pass for a dress!), a backpack and a hairband, and I think the sneakers were the most expensive at $27 or so. It just kind of adds up!
We've also got her supply list from the school and will have to do that big shopping trip in the next couple weeks. Again, it's nothing big but the little things will add up. I'm hoping AS gets a freelance payment soon so we don't go too far in the negative on our shared spending. My company is overdue on a small payment to her ($146) and she's got some bigger ones from them expected next week ($1100 and $500) that I'm hoping they'll send a bit early once they work out why that other payment is way late. Either way, if we go in the red a bit, we know it won't be for long!
Well, my queries about homeowner insurance haven't yielded much. I contacted a broker who was initially shocked at how much we pay, but then looked into it and couldn't find a more attractive option.
My current agent gave me a quote with a lower replacement value and lower sewer coverage, but he also added a new option called "limited matching of undamaged property" for $100 per year to the quote, so the difference was virtually nothing.
However, I wrote to him saying I liked his quote except for that, and the identity insurance $45 per year, which is unchanged. If he took those away, and with the reduced replacement value, It would reduce our payment about $25 per year. Annually it would go from $4274.69 to $4037.59.
I also contacted our real estate agent for refinance broker recommendations and she gave me two glowing reviews with email addresses. I emailed the first one explaining our situation.
I don't think we'd get much of a break from the 3.5% rate. But if we saved $25 on our homeowner insurance, eliminated the $262.89 mortgage insurance, and got rid of the shortage makeup (by paying it off before the refi, $2000 or so), even without an interest rate reduction our payment could go down to $2625.34. That's $476.60 less per month! The savings on the last four months of 2016 could almost make up for having to pay off the shortage in a lump sum.
So that's interesting. We'll see what the mortgage broker says!
Bear with me; I've been in a very posty mood this past week!
So I haven't heard back from the mortgage company about how much of the increase is temporary and when that part will go away. But I found the breakdown on their not-very-intuitive website, and I think I remember the temporary escrow shortage fee would be 12 months. So I think I've got it figured out.
Here's how our payment breaks down:
Property Insurance $360.38
County Tax: $435.86
Mortgage insurance: $262.89
Shortage makeup: $188.71
(As a reminder, this is a 30-year loan. First payment was 6/1/2015. Interest rate is 3.5% fixed. Principal balance is $403,000. Zillow home value is $538,000.)
So, the good news is, nearly $200 of the increase is temporary. Next August it will go away.
But besides that, I see a few things I should probably consider.
First is the homeowner insurance. I've already got a call in with a broker who should be getting me a quote any day now.
I did hear back from my current broker and he showed me what it could look like with reduced replacement value but he also tacked on a new expense to his estimate. I know I could turn that down but it was just frustrating that he really didn't get that I was trying to cut this extremely big expense down. Anyway, assuming I did say no to the new item and yes to the new quote otherwise, it would be $4082. Vs. the current $4325. So it would save us about $20 per month. Better than nothing, but I want to wait and see if the broker can find anything better.
Second thing to consider is interest rate. I don't think I could do much better than 3.5% on a 30-year loan, but I'll keep my eye out. I know we could get better rates on a 15-year loan but that it would also mean higher fixed payments, so I'm not sure we'd want to do that.
Third, that mortgage insurance. If the Zillow value is anywhere near accurate, we have about 25% equity in the place. However, our current loan is an FHA, and that mortgage insurance doesn't go away when you reach a certain amount of equity. I think it stays for 11 years or something.
Now I'm wondering if a refi would be worth it if only to eliminate that $260 per month. If we got incremental improvements from a lower interest rate and found a slightly cheaper insurance, the combined benefit could be pretty good.
But with that escrow shortfall, I don't know if that affects it. Would we need to pay it off? Roll it into the new mortgage?
I emailed the real estate agent who sold our condo for us to see if she has a good mortgage broker she can recommend. I really don't want to use our last guy; he very much got on my nerves with all the misinformation about how much we had to pay upfront on our last refinance in early 2015.
Just thinking out loud about all this. And, of course, happy to read any thoughts/advice you all have!
Today I noticed that I'm a month ahead on AS's healthcare premiums. Meaning I just paid for August but still had a line item for it. I think at some point it changed from the end of a month to the beginning and I probably ate the cost and didn't realize it was already there in the budget.
So anyway, that was $228 out of the blue! I put $28 in our grocery budget because we're badly over budget from stocking up on various things and from forgetting to pick up our CSA veggies one week (grr). $100 I put in our shared spending because we have a growing wish list that we're waiting to get the money to buy. And the other $100 I stuck into savings. I'm going to try and put at least a bit into savings every time we have an influx of unallocated money.
Speaking of groceries, we've used Instacart several times for weeks when we were really tired or our weekends were super booked. I have to say, it shaves hours of chores out of our Saturday! It's not exactly frugal; there's a $6 delivery fee and I definitely feel like I need to tip the person at least 10% since they're not just delivering; they're actually doing the shopping for us.
But the good thing is if the delivery and tip puts us over budget, we can go through the cart and see if there are things we don't need. At the grocery store, we sometimes go over budget because we only estimate costs of things before we get there, or we throw in an impulse item. This way, we can really see what things cost and scale back or eliminate impulse purchases to stay within budget.
Long story short, last time we ordered I saw an offer to sign up for an account, with a 2-week free trial. After that, it's $149 per year, with unlimited free deliveries. At $6 per pop saved, it would take 25 deliveries before it was worth it.
But, that means that if we used it every week, the delivery charge would average out to less than $3 per delivery. And, we've been using it for one store each week and still going in person to the other stores, so the delivery charge wouldn't add up. If we kept this membership we could potentially do almost all our grocery shopping online. For not having a car, it's a huge time-saver for not much extra money. And like I said, with clever adjusting we could probably still stay within our existing grocery budget.
Bonus: They just emailed me today that they're now doing liquor-store deliveries! I'm definitely going to look into that and see what the prices are like, but I saw that our favorite boxed wine is a good price on there.
We got Chase Freedom offers in the mail this past week for spend $500, get $150 back. Also, if you add an authorized user and they make a purchase, you get another $25. My dilemma: I read the fine print and it specifically says people who open credit cards only for the promotional offers are not eligible.
Now I know for a fact that they'll still give it to me, but having actually read that in the fine print, I'm having misgivings about signing us up for it. It's such a good easy deal that I'd definitely sign all three of us up and get $525 for spending $1500! So tempting, but not sure if I'll do it.
We have the kids' first sleepover this weekend-- a 6YO and a 7YO staying Saturday afternoon through Sunday mid-morning. So...wish us luck! I think we'll order pizza for dinner, but if so we're gonna cheap out and not order from one of our two favorite gourmet pizzerias. I was thinking Pizza Hut. I do love their spicy breadsticks.
We haven't planned much in the way of activities but we already know what food and treats we'll be giving them, so that's a start. I'll talk to my kids tonight and see if they have any elaborate ideas that we need to start planning now, or if they just want to hang out and play with the girls.
Speaking of the kids, the older one (AA, 6) wanted some "special time" with me last weekend. I knew exactly what would thrill her; she's brainy and silly, but she's also a super girly girl. So I hired a car and took her to get a manicure, then to a coffee shop for soda. She adored it, as I figured she would. I went in the hole on my spending money for it, so I can't do it all the time! The car was covered by our carshare budget, but the mani cost me $12 and we ended up spending almost $18 at the coffee shop because she wanted to bring back drinks for the rest of the family.
I can tell my kiddo is going to appreciate the finer things in life, so even more reason to make sure I give her a good financial education as part of her upbringing!
Yesterday I had some down time at work and tinkered with my 2017 annual budget. I'd actually started it a couple weeks ago by making a duplicate my 2016 Google sheet and changing all the years in it. This time I went through and updated exact dates for when paydays, grocery shops, etc. were going to come out of the budget.
As a refresher, I switched from monthly budget to annual budget starting in 2015. I used to have a single-sheet monthly budget and if there were infrequent expenses like Xmas and the CSA, I would set aside a little each month.
Now I set up big annual expenses to come out of the month they're in and estimate utilities amounts based on real fluctuations from the previous year. We pretty much have a big enough surplus every month to do this, but I did have to divide up bday and Xmas line items over a couple months to make sure we didn't have a deficit any month. That's because those holidays come during the winter, when our estimated utilities are at their highest and our grocery budget is higher not having the CSA box to supplement.
My annual budget consists of 13 sheets: one for each month and a final sheet that adds up income and expenses and divides expenses into Needs, Wants and Savings.
I'm sure there will still be changes to the 2017 budget before it's in effect, but right now it looks like our "Needs" will increase about $3000 next year. This is due to a number of factors:
- Our mortgage payment increase is adding $2200 to the year's expenses. (That might be less if I can figure out when the temporary part of the increase ends in 2017 and by how much.)
- Bus passes for AS and AA is now a regular line item, adding $1000. (We used to just pay for them by moving stuff around, but now that AS is going out more during the day and AA is 6, decided to budget something for it.)
- Increases to my and AS's healthcare premiums total $600.
- Utilities are estimated to be $400 more than what we estimated in 2016.
- Daycare costs are going up $300 (for the whole year, not per month).
That's actually about $4500 more, but it was offset by the exchange rate on the UK mortgage and management expenses being lower.
Do any of you follow the 50/30/20 rule (50% needs, 30% wants, 20% savings)? That's my rough benchmark of ideal, but we're not anywhere close to it. (Keep in mind we don't budget AS's freelance income at all; I add that in quarterly but don't track where it's spent, so the annual income ends up accurate but not how much of her paycheck goes to wants/needs/savings beyond the planned stuff. I do add in how much we pay in taxes for her though.)
So, with just my and NT's income and the rental income from both places, my spreadsheet does calculate percent of budget by needs/wants/savings. Of course, me being me, I get in the weeds about how exactly to calculate that, so I have several different results for "needs":
Needs total including NT and CJ tax withholdings: $108,270.92
Percent of gross income 69.23%
Percent of set budget 71.02%
Needs excluding taxes: $86,668.76
Percent excluding tax 66.24%
Percent of post-tax income excluding tax 64.30%
Even though it seems out of whack, when you add in AS's income, our set needs are a much more reasonable portion of our income. For instance, on the 2016 budget, with 2 quarters of her income being added, percent of post-tax income excluding tax is 58.76%. That percentage will decrease as we add Q3 and Q4 income to it.
So, what are my biggest annual expenses? Well (and again these amounts aren't final, especially the mortgage which may decrease about $1000), right now for 2017 it's looking like:
Duplex mortgage (including tax/insurance escrow): $37,223.28
Daycare (some of which is pretax): $13,545.00
CJ medical premium (covers me, NT, AA, SL): $5,136.00
The highest "want" that's a regular budget item (we'll probably use AS's income for other big wants like travel and home improvement): $6,843.00
That includes $40 per week for each adult and an allowance for each kid ($4 and $6 per week, will go up $1 every birthday). This year I restarted their allowances and have been scraping it together from other funds, so for 2017 I'm making it easier and adding it to the weekly spending money line item.
I like the annual budgeting a lot. It gives me extra stuff to fiddle with. And when bills or income increase, I can soon see the impact on an entire calendar year. It's not a perfect spreadsheet; as I said, I don't track what we spend AS's income on besides tax and retirement. But it is a valuable tool. And I can easily paste it gradually by the month into my main budgeting tool, my ledger or future checkbook spreadsheet which I call "Number Crunch."
AS did 4 hours of work for my company yesterday and accepted a $500 job from another place. Those combined pushed her for-sure earnings up over $40K for the year!
Last year she earned just over $57K, so that was the benchmark for 2016. But early in the year she hit a couple hurdles; 2015 had started with some big checks coming in for 2014 work, whereas she didn't have as many delayed paychecks for her end of 2015 work. January 2015 she pulled in over $7,200, vs. $805 in January 2016. She also must have had a bigger start to her year than she did this year; Q1 of 2015 she earned $19,400 vs. $5,600 in Q1 of 2016.
But, despite that staggering $14K handicap in the beginning of the year, she's done really well since then. She thinks she can pull in at least another $8K by the end of the year, which would take her to $48K, just $9K short of last year's earnings. Which would mean she's billing higher in later months than she did in 2015. That's promising! She's starting to be able to be a bit choosy and has quit or turned down clients whose hourly rate doesn't cut it or whose work isn't as satisfying. (She tracks her time carefully so she has an hourly rate calculated even for flat fee jobs -- which the majority of her jobs are.)
I'm very proud that she's managed to make this career for herself -- and with her working at home, the house has never been cleaner! (She worked on-site at my company for the past two weeks and the difference showed in our house.) She also can take care of little organizing/admin things that occur to me or NT during the day, which cuts down on our after-work to-do list.
We may someday look at a workspace-sharing thing for her so she can be out of the house more, but for now, her business runs so cheaply, with virtually no expenses, and we get the benefit of a SAH adult at a time we can't afford a house-cleaner. So for where we are right now, it's perfect.
All our mortgage payments hit:
US: $677 to principal
All told, that's $978 of debt paid in August.
In four or five months, the U.S. mortgage will be under $400K in principal! That's exciting.
A couple months ago we got the unwelcome news that our monthly mortgage payment was increasing from $2,789.40 to $3,101.94, effective Aug. 1 (today). That's $312.54 per month! It more than wipes out my and NT's raises this year, which is a big bummer.
We got the notice a few weeks before our Europe vacation and I just couldn't be bothered to look into it at all. I knew from the letter that part of the increase was to make up for an escrow shortage and the rest was to increase our escrow for the future. So the first part of the increase will be temporary (about a year I believe).
So anyway, I'm looking into it now that the higher amount has hit our checking account for the first time.
I looked at our insurance, and it went up from $3,791.88 per year to $4,324.57 per year. It seems this is due to higher valuation of everything. I'm not sure if I can do anything about that; as I recall this was the best deal we could find. Apparently you can save quite a bit if you bundle home with car, but we don't have a car, so that wasn't an option. But I don't know, I may go ahead and sign up for a "Farmer's friendly whatever" to see if there's any way to lower this bill.
Then I checked county property taxes, and they increased from $4,943.56 per year to $5,230.26 per year. Obviously, nothing I can do about that one. They actually value the home way lower than its market value.
Together, these two increases come to about $68.28 per month. Leaving $244.26 of my mortgage payment increase unaccounted for.
I don't have the letter with me at work, so I'm going to check it when I get home to see if that's the temporary increase part of it, or if there's something else contributing to this giant leap.