Uphill Battle

I'm sorry I've not posted here more.  But, now I understand how busy one gets with a full time job and a new baby.

Financially, we are all over the place.  We can't seem to get back on track post baby.  While our incoming salaries remain the same or better, our outgoing expenses are much. much higher than normal.

Child care is running $1900 a month ($22,800 a year) which appears to be way higher than normal for Florida, but I don't know anyone in my circle paying the Florida annual average of $8300.  Add in diapers, formula, wipes, etc. at $300 a month or so and we are up to $2200 in expenses.  And, we actually don't spend much on Baby Sam, we hit the thrift stores for books and toys and I stick to super sales for baby clothes.  At present, we are also adding $200 a month to Baby Sam's college fund.  So in total, about $2400 a month in baby expenses.

Another challenge, we are converting a rental property from rental to family.  We have, in the past, utilized one of rental properties for our snow bird relatives which was a financial hit.  Now, that we are turning the rental property to a family property, we have had a couple of months where our old tenants have not paid us.  So that also, obviously, impacts our cash flow.

Anyways, we continue to contribute to our 401ks, at max level, and continue to put money into savings, but we need to catch up on our IRAs.

Hope your summer is going well.

Cash Money

We have new tenants in Rental # 3 and they prefer to pay their rent in cash.

The upside of cash is that it is cash.  I know there is not going to be a bouncing check issue and when I deposit the cash it is instantly credited.

As an aside, have you seen the new $100 bill?  It has a 3-d security ribbon and a liberty bell hiding in the ink well.  There is also more color on the front and back.  I had several new $100 bills, which were new to me, a couple of the 1996 $100 bills and one 1990 $100 bill.  After I got over my amazement at the new $100 bill, the old school 1990 $100 bill really looked fake to me.

The downside of cash is that I have to go to the bank to deposit since, sadly, there is no remote way to deposit cash.  The other downside of cash is that it is hard to keep track of.  With checks, I have an image of the check for my records.  So, we have come up with a system.  First, we give the tenants a receipt so they have a record and we have a record in the receipt book.  Then when I deposit the cash, I am keeping an ATM receipt and putting that in my records in place of the check image.

What Would You Tell Your Younger Self?

Over at Get Rich Slowly April Dykman posed the question of what would you tell your younger self regarding personal finance.  Below is my post.

This is fun! 

To College Sam – walk away from the credit card offer, you don’t need that free t-shirt.
To post college Sam – good job on taking that personal finance course through the local extension system. You learned a lot and it will help you in the future. Good job on paying off that college credit card, now you really ought to cut it up. Also, congrats on opening your first IRA even though you are earning poverty wages in social services. And tell your parents thanks for paying your way through college, you probably didn’t even appreciate the fact that they saved each month your entire life to give you a great education. 

To post professional school Sam – good job on paying off that student loan debt and good job on keeping your student loan debt lowish during school. You rushed into your first house purchase, but it will turn out great. Now that you are making a good living you are making a lot of good choices, paying off the student loan debt, creating your first budget (2001), investing in your work 401k and paying off all credit cards in full each month. I sure wish I could tell you that even when you are paying off your credit cards in full each month you are still spending too much money. You should have listened to me when I told you to cut up those cards post college. 

A few years later Sam, just because everyone is investing in Florida real estate doesn’t make it a good investment, maybe you should do some more research before you buy that investment property in 2005, 8 years later it will be worth half of what you and soon to be Mr. Sam paid for it. Good thing its rented. 

To engaged Sam, good job on picking a spouse that is hard working, frugal and recognizes that even though he has the MBA he is terrible at budgeting and bill paying so he turns it over to you upon marriage. 

To married Sam, whoo-hoo, good job to you and Mr. Sam in paying off $55,000+ in just over a year during your first year of marriage. That first year of marriage in which you created your first annual spending plan (an update on the 2001 individual budget), finally cutting up the credit cards, creating an allowance system, prioritizing savings and making sure that you and Mr. Sam are on the same page when it comes to money, that will pay off big time. Seven years later and you guys have increased your net worth by $550,000. 

Now, stop eating out so much.  :)

Looking back at my own journey, I certainly have made some mistakes along the way.  It is hard not to, and many of those mistakes or detours have helped to make me a better person.

I think the most important ingredients to my financial success are as follows.  First, I invested in a good education which lead to a well paying, good, professional job.  I was able, both due to my parents and due to smart choices (savings/grants/working) in professional school, to avoid student loan debt until the very end of my education. Second, early on in my career I started utilizing a spending plan/budget and focused on paying off debt and having a plan for my money.  Third, I met and married a frugal man who, while horrible at paying bills and tracking spending, is fully on board with living a debt free life and prioritizing savings/investing rather than consuming.

How about you, what personal finance guidance would you give your younger self?

The Upside of the Real Estate Crash

I was on Zillow today, poking around looking at a home that was recently listed a couple of blocks away.

Of course, I had to look up our home as well.  As for the Zillow Zestimate, it has our home listed as worth $40,000 less than what we paid for it, almost 10 years ago now, which I would say is not too far off the mark.

More interesting to me, Zillow has property tax records listed going back to the year we bought the home.  And while I knew hour taxes had gone way down, whoo-hoo I was surprised by the actual numbers.  Our property taxes are down 54% from 2004.  And, since Florida has both a homestead law and a law called Save our Homes, our property taxes on our primary dwelling (does not apply to our investment properties) can only increase at the rate of inflation or 3% which ever is less.  As a result, it is going to take a very long time, assuming values continue to rise, to get back to that initial tax bill from 2004.

Time for 2014 Goal Planning

Since it is November, it is time to start thinking about our 2014 annual spending plan and our 2014 savings goals.

First on the list, 2014 IRA savings.  As I previously posted, I have already set up our 2014 IRA savings account at CapitalOne 360 (f/n/a ING).  The 2014 contribution limits for IRAs are holding steady, so we can each contribute $5,500 to our non-deductible IRAs.

Second, 2014 401k contributions, I will contribute $17,500 to my 401k at work (again the limits are not increasing next year).  We need to figure out if Mr. Sam will be eligible for a 401k at his new job in 2014.  If he is not eligible, then he may be able to contribute to a deductible IRA (see above) to get a bit of tax savings.  But, regardless of whether he is eligible for 401k we will sock away $17,500 anyways.  Yes it will be after tax money so we will lose out on that advantage but we will still put that money into the trading account.

Third, I assume we will put money into the emergency fund and for house projects.

We will need to decide whether it makes sense to continue to pay down the mortgage principal on our primary home.  While I continue to have the goal of being debt free and paying off the mortgage on our primary home could provide significant insurance savings, we really are not saving much interest by paying early because our mortgage interest rate is so low (2.75%).

I also think we need to start a savings account for a replacement car/truck.  I bought my car, a 2006, in 2008.  I just put about $3000 into it so, even though it is 7 years old, it should be good for quite some time.

But, Mr. Sam's truck, which we bought used in 2005, is more than 10 years old and not in the best condition these days.  He would prefer to keep it and have me buy a newer car and he would take my current car for his work car.  Then we would have the truck to use for house projects and the like when we need it.  But that means we would have 4 cars (we also have an antique weekend car) and that is a lot of insurance.  I'm also not keen on having 4 cars to store/park.  As such, I'm more inclined to replace Mr. Sam's truck with a newer and nicer truck (something with a bigger cab and shorter bed and a smoother ride.  

Progress on Debt

Updating our networthiq.com numbers today and I was pleased to see we have less than $540,000 in debt (all real estate debt).  We have paid off just under $35,000 in debt in the last twelve (12) months.

These types of round numbers make me happy.  Now to get under $500,000 in debt.

Investment Property Debt

Hit a milestone this month with our investment property debt, at present we owe less than $300,000 on our investment properties.  

Feels good.  

2013 Savings Goals - October Update

(1) Max out 401k(s) -        $24,981 (71%)  (goal is $35,000)
(2) Max out IRA(s) -         $10,631 (97%)    (goal is $11,000)
(3) Add to e/r fund -          $7,600 (76%)    (goal is $10,000)
(4) Pay down mortgage -   $3,320 (66%)    (goal is $5,000)
(5) Trading account fund - $50  (1%)           (goal is $5,000)
(6) House projects -          $1,900 (63%)     (goal is $3,000)

Total:  $48,482 (70%)  

Posting a few days early as I was working on our personal finances this morning.  We are still about $3200 behind on where we should be.  We also have some unexpected upcoming expenses for Rental #3 (more about that later).

While I feel like we are working hard to catch up, doubling up on our mortgage prepayments, throwing money at the 2013 IRA fund, we are still $3200 behind as were were last month.

We also have to work on our taxes this weekend (Ugh!, my least favorite thing to do) as we have our appointment next week with the CPA and the deadline to file, with our extension is October 15, 2013.

Have a great weekend everyone!!

2008 - 2013 The Great Recession Check Up - Part III

Okay, so far we are one and one.  While we are doing well on our savings/retirement plan, see Part II, our occupation based salary is flat/slightly down after five years, see Part I.

Real Estate

First the good news, we are making decent progress in paying down our primary mortgage.  Last year we refinanced into a 15 year term with a 2.75% interest rate which will save us (between the reduced term and the reduced interest) $180,000 over the life of the mortgage.

The other good news we have is that all three of rental properties are rented and paying for themselves.

So, now the bad news.  We live in South Florida and our rental properties are located in South Florida and if you know anything about the real estate bubble you know South Florida got hit hard.

In 2008 our primary home was valued at $465,000.  At present I have the value at $399,000 which is based on the very thorough appraisal we had done last year as part of our refinance.

In 2008, our three rental properties and our vacant land were valued at a total of $823,920.  At present, I have our investment properties valued at a total of $606,350.

So, in total, over five years we have lost, in equity, $283,550.  Actual lost equity is likely even higher in that I have no idea if we could sell any of our properties for the current value.

Refinance of Rental # 3

Gosh, I am so glad we got refinanced our primary home last year (into a 15 year loan at 2.75% rate) before Mr. Sam was laid off from his job.  Since we knew that the lay off was likely coming that was one of the reasons we pushed to get that REFI done, obviously better to have two stable salaries to show the bank.

Yesterday, I turned my attention to Rental #3 which is the only property/loan that we have not refinanced. And I did so because the mortgage company keeps sending my notices that this property qualifies for the HARP program or some other program and that they can do a cheap and quick REFI for us.  While we need to refinance this property since this is our only non-conventional loan, its on an ARM that resets on an annual basis, it really has not made sense to do so because (1) the current rate is 3.125% and (2) I really don't think it qualifies for a REFI.

I had a lovely chat, seriously, with a mortgage broker at my current loan servicing company.  She indicated that in fact the property is eligible regardless of the fact that it is not a primary dwelling.  It is eligible because its backed by Fannie Mae, it originated prior to 6/1/09, no late payments in the last year (no late payments ever) and we haven't used the HARP program before on this loan.

But, the rates she could offer me for an investment property were in the 5% range.  And, further we would likely be forced to refinance into another 30 year term, even though we would prefer a 15 year term, because under the HARP program the REFI cannot increase the mortgage payment by more than 20%.  It makes no sense to me to impose a 20% limit on an investment property when we have several good years of rental income well above that level.

As for the LTV ratio they keep citing in the advertisements, she indicated that is simply based on the original loan amount and the amount we currently owe.  She further agreed that the LTV ration quoted in the documents  likely has nothing to do with appraisal value (I seriously doubt this home would appraise for what we currently owe).  But, even if we are underwater we can still REFI.

Right now it really doesn't make sense to refinance this property, but I'm going to start watching rates again.  I'd like to lock in a rate under 5% with a decent term before the ARM adjusts above that level.

How Low Can You Limbo

In addition to our primary home mortgage, we have three other mortgages on our investment properties.  In working on updating our net worth numbers today  I realized that one of our investment property mortgages is now under $100,000 (specifically $97,061).  Something about getting that loan number under $100,000 makes me very happy!!

We are also just a month away from getting our investment mortgage totals under $300,000.  Which I will similarly celebrate next month.  Gotta look for those silver linings.

Remote Check Deposit - Follow Up

Earlier, I posted about Wells Fargo's new remote deposit feature which allows you to take a photo of your check and deposit it remotely.

Since its a new month, I used the remote deposit feature of our first two rental checks received in April.  I found the feature easy to use and saved me the 10 minutes of running to the bank to deposit the check at the ATM (times two, saved me 20 minutes).

My only complaint is that I'm limited to $1000.00 remote deposit per day.  However, I'm not clear if that limitation is per account (we have different accounts set up for our rental properties).  So, for the first two rental checks, just under $1000.00 each, I received the checks on separate days and was able to remotely deposit both.  But, the third rental checks is $1500.00 and it was rejected when I tried to deposit it using the remote deposit feature.  I'm going to call Wells Fargo and see if I can get my daily balance bumped up to $1500.00 per day.

You know its spring in Florida when . . .

You know its spring in Florida when you are at the Super Wal-Mart at 6:00 a.m. buying rat traps.

Now I'm not in charge of rat wrangling, rather Mr. Sam is takes care of this landlording task (thank goodness).  So, he was at Super Wal-Mart early this morning buying traps.

Here in Florida we have problems with roof rats due in large part to our climate and the abundance of fruit trees.  And, at one of our rental properties, we have a beautiful, big mango tree that produces tons of fruit.  This tree produces so much fruit that its more than our tenants or ourselves could ever eat.

I've heard about some food pantries that run back yard fruit drives so I'm looking for an agency that is local to us where we can donate these mangos.  In the meant time Mr. Sam is over at the property setting up traps.