Have I mentioned how difficult it is to deal with my mortgage company? My mortgage was sold to Washington Mutual, and let me just say their services leave a little to be desired. I always send a bit extra with each payment via my online bill payment service, and I always have the note "apply additional payment to principle" in the memo field. Just last week I sent an extra, extra large payment, and rather than apply the additional payment to principle, they made it count as future payments- principle, interest, escrow, etc. I just have to say it's so nice of them to charge me for interest I don't owe yet! Yesterday I called to get this straightened out, and they tell me the request is being processed, and it will be completed by today and the updated info will be available online. Yeah, it's not fixed yet. I call again, this guy tells me it will take ten days to process, and is scheduled to be completed by January 5th. I told him I was concerned about my IRS 1098 form being messed up due to this, and he said they would correct it if there was a problem. My guess is that having my 1098 fixed will be at least a half dozen calls and will probably result in filing an extension with the IRS. I hope I'm wrong.
Looking back, I'm wondering if it would have been worth it to pay the additional quarter of a percent interest on my mortgage to have it serviced by my credit union. I've always been very adverse to paying interest (a policy which has served me well this far), but I'm wondering if the trade-off for better service wouldn't have been worth it.
12.29.2004
Home equity... the hard way
I've spent the last two days doing some back-breaking work (ok, maybe nail-breaking is more like it) on my house. I'm always amazed when people say they "invested in a new kitchen" or "finishing the basement is a good investment". Unless they do the work themselves, I would hardly consider it an investment. This article from MSN.com tells how much money a homeowner can expect to recoup from various home improvement project when they sell their house. Notice, very few of them are above 90%, and only one has the possibility of going over 100%. I don't know about you, but I would never invest in a stock of fund that advertised an 80% return.
Anyways, back on track here. Since last May, I've been working on refinishing the floors in the upstairs of my house (three bedrooms, hallway, and staircase). It's almost 1,000 square feet, and Fiancee and I are trying to do it all ourselves. We did need a pro to come in to install some replacement flooring on a small platform we built, which increased the cost of the project by about $900, but we've still managed to keep our costs fairly low by renting and borrowing the heavy-duty equipment. All-in-all, I think the grand total will be considerably less than $1,500 and we've learned a lot. Not only is this a LOT cheaper than putting down new carpet, but we get to keep all the cool tools we bought in the process.
Yesterday, I finished pulling staples and tacks up off the floor of the final bedroom, painted the closet walls and ceiling, and have been pulling staples and tacks, as well as scraping gunk off of, the stairs. The stairs are by far our biggest challenge, since they had some type of black rubber adhesive on them, and had a gazillion of these tiny (1/8th inch wide), copper staples all over them. I doubt my project is going to add a whole lot to the appraised value of my home, but I do think that it makes my home more salable. I'm doing it more because I really love wood floors and they are amazingly beautiful and durable, not to mention really easy to clean.
The home improvement market is huge, and I find it difficult to go into Lowe's or Menard's and not want to buy a ton of organizing things, or tools, or cute house or garden decorations. I hate walking away from them, but it helps me to think that I'll probably be able to buy these cute things at next spring's garage sales for a quarter, but then I won't want them anymore.
Anyways, back on track here. Since last May, I've been working on refinishing the floors in the upstairs of my house (three bedrooms, hallway, and staircase). It's almost 1,000 square feet, and Fiancee and I are trying to do it all ourselves. We did need a pro to come in to install some replacement flooring on a small platform we built, which increased the cost of the project by about $900, but we've still managed to keep our costs fairly low by renting and borrowing the heavy-duty equipment. All-in-all, I think the grand total will be considerably less than $1,500 and we've learned a lot. Not only is this a LOT cheaper than putting down new carpet, but we get to keep all the cool tools we bought in the process.
Yesterday, I finished pulling staples and tacks up off the floor of the final bedroom, painted the closet walls and ceiling, and have been pulling staples and tacks, as well as scraping gunk off of, the stairs. The stairs are by far our biggest challenge, since they had some type of black rubber adhesive on them, and had a gazillion of these tiny (1/8th inch wide), copper staples all over them. I doubt my project is going to add a whole lot to the appraised value of my home, but I do think that it makes my home more salable. I'm doing it more because I really love wood floors and they are amazingly beautiful and durable, not to mention really easy to clean.
The home improvement market is huge, and I find it difficult to go into Lowe's or Menard's and not want to buy a ton of organizing things, or tools, or cute house or garden decorations. I hate walking away from them, but it helps me to think that I'll probably be able to buy these cute things at next spring's garage sales for a quarter, but then I won't want them anymore.
Young investors- make the most of what you have
Since I started my career approx 3 1/2 years ago, I have been religiously contributing the maximum allowed by my employer to my 401(k). The company match kicked in after my first year on the job, and adds an additional .75% of the first 6% of my contributions. I am very happy that I did this right off the bat- I don't even miss the money since I never had it in the first place.
I currently have over $40,000 in my account, and I use a tool to help me balance my portfolio. I also contribute a small (very small) amount to a Roth IRA that I hold at Fidelity, which has a balance of a little over $3,000. These balances don't look like much, but when I think that I just turned 26 a couple days ago, I think that I might be ahead of the game, especially considering I was able to pay my student loans off within weeks of finishing school (signing bonus and interest-free loan - the joys of graduating back when companies actually had to recruit).
There are multiple aspects to investing, two of which are time and money. I don't have a lot of money to invest, but since I'm still young, I have an abundance of time. By investing early, I will be able to take advantage of compound dividends and interest. The key is making the most of what I have.
I currently have over $40,000 in my account, and I use a tool to help me balance my portfolio. I also contribute a small (very small) amount to a Roth IRA that I hold at Fidelity, which has a balance of a little over $3,000. These balances don't look like much, but when I think that I just turned 26 a couple days ago, I think that I might be ahead of the game, especially considering I was able to pay my student loans off within weeks of finishing school (signing bonus and interest-free loan - the joys of graduating back when companies actually had to recruit).
There are multiple aspects to investing, two of which are time and money. I don't have a lot of money to invest, but since I'm still young, I have an abundance of time. By investing early, I will be able to take advantage of compound dividends and interest. The key is making the most of what I have.
12.14.2004
PMI and how to avoid it
I bought my house almost two years ago. At the time, I put 5% down, and had a 6% rate on a 30-year-fixed loan. Almost immediately after purchasing my house, interest rates dropped, and I seized an opportunity to refinance to a 30-year-fixed at 5.375%.
Fast forward about a year, and you will come to my long, drawn-out battle with Washington Mutual over the purchase price of my house. You see, after refinance, my mortgage was sold to WAMU. WAMU recorded my mortgage as a 100% financing for my refinance amount, rather than recording that I already had a small amount of equity. Why would this matter, you might ask? Well, because I didn't put the standard 20% down on my house, I was subject to Private Mortgage Insurance, also known as PMI. I pay $55/month for something that provides no benefit to me, nor is it tax deductible. The "insurance" part of the name is misleading, atleast to the person paying it. PMI benefits only the lender, not the borrower. It took no fewer than five phone calls and three emails from me, and seven letters from WAMU to clear up the debt/equity fiasco, but finally I was able to speak with someone who understood my problem (I also had to threaten to call my lawyer, not something I would normally do, but I think it was warranted in this case).
Currently, I'm in the process of securing a second mortgage with a 60-month term and an interest rate of 6.5% that will allow me to pay my principle down on my first mortgage to a level where I will no longer have PMI. It might sound weird to borrow additional money to pay off a loan at a lower interest rate, but after taking into account tax, interest, and PMI expenses it ends up being a money-saving move. It will mean I have an additional $330/month in mortgage expenses for the next five years, but it will be worth it. On top of eliminating PMI, I will also get a headstart in paying off my mortgage!
Fast forward about a year, and you will come to my long, drawn-out battle with Washington Mutual over the purchase price of my house. You see, after refinance, my mortgage was sold to WAMU. WAMU recorded my mortgage as a 100% financing for my refinance amount, rather than recording that I already had a small amount of equity. Why would this matter, you might ask? Well, because I didn't put the standard 20% down on my house, I was subject to Private Mortgage Insurance, also known as PMI. I pay $55/month for something that provides no benefit to me, nor is it tax deductible. The "insurance" part of the name is misleading, atleast to the person paying it. PMI benefits only the lender, not the borrower. It took no fewer than five phone calls and three emails from me, and seven letters from WAMU to clear up the debt/equity fiasco, but finally I was able to speak with someone who understood my problem (I also had to threaten to call my lawyer, not something I would normally do, but I think it was warranted in this case).
Currently, I'm in the process of securing a second mortgage with a 60-month term and an interest rate of 6.5% that will allow me to pay my principle down on my first mortgage to a level where I will no longer have PMI. It might sound weird to borrow additional money to pay off a loan at a lower interest rate, but after taking into account tax, interest, and PMI expenses it ends up being a money-saving move. It will mean I have an additional $330/month in mortgage expenses for the next five years, but it will be worth it. On top of eliminating PMI, I will also get a headstart in paying off my mortgage!
12.13.2004
Strategy - being frugal
Earlier I described my "pay myself first" strategy, which works great because I'm not able to spend what I don't have, but how do I make what's left stretch? This is where being frugal comes in....
I try to live frugally. I shop at thrift stores for many things, I cut costs on home cleaning products by making my own or by using household items like vinegar, baking soda, and borax. I cook with dried beans and lentils and don't use a lot of processed food. I live better by shopping smart, I can usually find some really nice things at estate sales. For example, I love Le Creuset enamel-on-castiron cookware. I even have a couple pieces, and they were expensive. I had my eye on a soup pot for a couple years now, but at $150, I haven't been able to part with the cash. Low-and-behold, I found a NEVER USED Copco enamel-on-castiron soup pot at an estate sale for $1.50. No scratches, no wear. It's a funky green color, but I really don't mind it since my dishes are Fiestaware. Funky green fits right in.
I buy my furniture at antique stores and estate sales. You might be wondering how buying antiques is considered living frugally, so hear me out... Dollar for dollar, if you shop smart, you can purchase better quality furniture for your money if you go antique. On top of that, classically styled antiques hold their value better than contemporary furniture. An example... I bought an antique shaker-style buffet (circa 1910) for my dining room. It's solid oak, dovetailed, very cool looking, and in beautiful shape. I paid $500 including tax. Had I gone to a furniture store, I could have probably bought something for around $500, but it would have been made with wood composites and probably stapled together. I probably would have had to spend closer to $1,500-$2,000, maybe more, to get solid wood with dovetailed drawers. So that's frugal, right? It gets better.... if I were to get sick of my beautiful buffet, I could most likely sell it and get my $500 back out of it, maybe more depending on how long I have it. The piece from the furniture store? I'd be lucky to get half of what I paid. Well cared for antique furniture keeps its value, and might even appreciate. Very little of today's mass-produced furniture will do that.
The best part of shopping at thrift stores, garages sales, consignment shops, and estate sales, is that I can shop all day and buy tons of really useful stuff, but spend very little money. It's much more satisfying than a trip to the mall where I can easily drop $50 on a sweater that I will probably only wear half a dozen times.
I try to live frugally. I shop at thrift stores for many things, I cut costs on home cleaning products by making my own or by using household items like vinegar, baking soda, and borax. I cook with dried beans and lentils and don't use a lot of processed food. I live better by shopping smart, I can usually find some really nice things at estate sales. For example, I love Le Creuset enamel-on-castiron cookware. I even have a couple pieces, and they were expensive. I had my eye on a soup pot for a couple years now, but at $150, I haven't been able to part with the cash. Low-and-behold, I found a NEVER USED Copco enamel-on-castiron soup pot at an estate sale for $1.50. No scratches, no wear. It's a funky green color, but I really don't mind it since my dishes are Fiestaware. Funky green fits right in.
I buy my furniture at antique stores and estate sales. You might be wondering how buying antiques is considered living frugally, so hear me out... Dollar for dollar, if you shop smart, you can purchase better quality furniture for your money if you go antique. On top of that, classically styled antiques hold their value better than contemporary furniture. An example... I bought an antique shaker-style buffet (circa 1910) for my dining room. It's solid oak, dovetailed, very cool looking, and in beautiful shape. I paid $500 including tax. Had I gone to a furniture store, I could have probably bought something for around $500, but it would have been made with wood composites and probably stapled together. I probably would have had to spend closer to $1,500-$2,000, maybe more, to get solid wood with dovetailed drawers. So that's frugal, right? It gets better.... if I were to get sick of my beautiful buffet, I could most likely sell it and get my $500 back out of it, maybe more depending on how long I have it. The piece from the furniture store? I'd be lucky to get half of what I paid. Well cared for antique furniture keeps its value, and might even appreciate. Very little of today's mass-produced furniture will do that.
The best part of shopping at thrift stores, garages sales, consignment shops, and estate sales, is that I can shop all day and buy tons of really useful stuff, but spend very little money. It's much more satisfying than a trip to the mall where I can easily drop $50 on a sweater that I will probably only wear half a dozen times.
12.11.2004
Strategy - pay yourself first
My strategy for financial freedom is a bit different in that it doesn't involve budgets. I've tried budgets multiple times before, with the conclusion that I have neither the discipline nor the time to stick to it. For the past couple years I've been paying myself first. You can get books on the subject of paying yourself first, but you probably don't need a book to explain how it works. I simply automate my investing and saving by having the money removed from my paycheck before I ever see it. You can't spend what you don't know you have! I use this method for retirement savings, as well as general savings. Right now I'm focusing on increasing my amount of cash savings, as well as pay down some debt, all while maintaining my level of retirement savings. It can be a bit overwhelming at times, that's why I thought it would be useful to write about it.
I bought a house two years ago, a couple weeks after my 24th birthday. It was a life-changing experience. I've since realized the value of having three-six months of living expenses in cash. If I were to lose my job, I would need to be able to make house payments or risk losing my investment. Back in the apartments days, I figured if I lost my job I'd move back in with my parents :)
hmmm... I think I just figured out why they were so willing to lend me the money for a downpayment....
I bought a house two years ago, a couple weeks after my 24th birthday. It was a life-changing experience. I've since realized the value of having three-six months of living expenses in cash. If I were to lose my job, I would need to be able to make house payments or risk losing my investment. Back in the apartments days, I figured if I lost my job I'd move back in with my parents :)
hmmm... I think I just figured out why they were so willing to lend me the money for a downpayment....
12.09.2004
Welcome!
Well, this is my first post so I probably should introduce myself. I'm a almost-26-year-old, almost-not-single, woman (25 and cohabitating/engaged for those that care) that is working to achieve financial security. In the last couple months I've started tracking my financial progress with a personal finance tool and I thought a blog would be a good way to journal about my learnings and occasionally rant.
I work in IS for a manufacturing company and I'm currently working towards my MBA (anticipated graduation date-sometime before I'm 30??). I have a fiancee and a dog, a really old house (90+ years), and I love of antiques. I try to by both frugal and financially savvy, keeping and saving as much money as possible, without sacrificing any of the things that make life fun.
I work in IS for a manufacturing company and I'm currently working towards my MBA (anticipated graduation date-sometime before I'm 30??). I have a fiancee and a dog, a really old house (90+ years), and I love of antiques. I try to by both frugal and financially savvy, keeping and saving as much money as possible, without sacrificing any of the things that make life fun.
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