Net Worth Week 20

My pain keeps circling itself. I think that the steps I’m taking are having long-term effects, but they are shorter lived than I hoped.

I still love Earnest and credit them with my ability to conquer some of this debt.

Date 8/5/16 8/12/2016 8/19/2016 8/26/2016
Joy 1100 1100 1100  1100
Travel 323 323 323  323
Down Payment  19 19 19 19
retirement  21 21 21 21
health  45 45 45 45
Moving  31 31 31 31
EF  2003 2003 2003 2003
Business  1 1 1 1
Bed  .29 0.29 0.29 0.29
Life  1444 769 1844  2127
IRA  9984 10087 10127  10058
Brokerage  409 410 402  401
CC (largest)  -4791 -4791 -4791  -4791
CC (longest)  -273 -295 -319  -437
Rewards Card  0 -273 -564  -1022
SL 1  -102713  -102489 -102604 -102719
SL 2  -45217  -45115 -45167 -45220
Earnest  -8486 -8404 -8522 -8540
-$146099 -$146657 -$146050 -$146599
  .56% change -.38% change .41% change -.37% change

Have you seen growth in other areas of your lives lately? Have the hustles been paying off?

Net Worth Week 19 – Heatwave Edition

My pain is getting better. I am still spending money on this problem, but it seems possible that years of pain may actually be solvable. Yippee!

I still love Earnest and credit them with my ability to conquer some of this debt.

Date 7/29/16 8/5/2016 8/12/2016 8/12/2016
Joy 1099 1100 1100  1100
Travel 323 323 323  323
Down Payment  19 19 19 19
retirement  21 21 21 21
health  45 45 45 45
Moving  31 31 31 31
EF  2002 2003 2003 2003
Business  1 1 1 1
Bed  .29 0.29 0.29 0.29
Life  1796 1444 769  1844
IRA  9920 9984 10087 10127
Brokerage  407 409 410  402
CC (largest)  -4791 -4791 -4791  -4791
CC (longest)  -1095 -273 -295  -319
Rewards Card  0 0 -273  -564
SL 1  -102604  -102713 -102489 -102604
SL 2  -45168  -45217 -45115 -45167
Earnest  -8934 -8486 -8504 -8522
-$146927 -$146099 -$146657 -$146050
  .15% change .56% change -.38% change .41% change

How’s the weather in your area? Thinking of buying stocks in Popsicles, yet?

Net Worth Week 18 – IRA Milestone Edition

My IRA made it to the $10,000 mark for the first time this week! My net worth is slightly more negative than last week due to a plane ticket purchase, but important growth is happening. It definitely makes me feel good. I am supposed to be mentally preparing for a big correction, which I do think will happen, that will drastically change the current value of my portfolio. However, these little victories feel like a balm nevertheless. I’ll take them.

My business included two client meetings and word of a potential client on the horizon. I hope it comes to fruition soon. There are really big expenses due at the end of the month, and I don’t want to pay from my own emergency fund.

My pain is still present, but it is altered. Reflexology and massage are helping a lot. The former is doing the most for my bones, and is cheaper than the latter. I’m still trying to get to maintenance mode and out of What the Devil Is Wrong mode, but this is looking up.

I still love Earnest and credit them with my ability to conquer some of this debt.

Date 7/22/16 7/29/2016 8/5/2016 8/12/2016
Joy 1099 1099 1100  1100
Travel 323 323 323  323
Down Payment  19 19 19 19
retirement  21 21 21 21
health  45 45 45 45
Moving  31 31 31 31
EF  2002 2002 2003 2003
Business  1 1 1 1
Bed  .29 0.29 0.29 0.29
Life  897 1796 1444 769
IRA  9908 9920 9984  10087
Brokerage  337 407 409  410
CC (largest)  -4791 -4791 -4791  -4791
CC (longest)  -529 -1095 -273  -295
Rewards Card  0 0 0  -273
SL 1  -102489  -102604 -102713 -102489
SL 2  -45115  -45168 -45217 -45115
Earnest  -8915 -8934 -8486 -8504
-$147156 -$146927 -$146099 -$146657
  -.32% change .15% change .56% change -.38% change

How are your retirements doing?

What’s a Basis Point and How Will It Impact My Mortgage?

Gentle Readers,

You’ll recall that I want to buy a small place of my own, but that I have a lot of learning to do in the meantime. I understand how mortgages work in general, but a term I didn’t fully understand is Basis Point.

Mortgages are simple.

They are loans that are supported by collateral, ie the building you live in. You don’t make the proper payments, and your home can be returned to the mortgage lender. Your right to “your” home is conditional while there is a mortgage outstanding. Not a good look for you since you would prefer to remain living in the home. The lender makes money off of the loan itself through origination fees and interest payments. The lower the mortgage rate, the lower the cost of the loan for you. There are other parts of the mortgage, ie taxes and insurance, but I’m not going to write about those today.

There are a range of available down payments that are based on percentages of the total house and land value. It used to be standard for a buyer to pay in cash 20% of the value of the home. That standard is less likely these days. Some down payments are 3.5% of the home’s value or lower. I hope to do a 10% down payment for a home that is less than $170,000. My down payment would be $17,000 plus or minus some fees and my mortgage would be for $153,000. When I look at Bankrate’s Mortgage Calculator for those terms with today’s interest rates (3.39%), I would expect to pay $677.68 monthly for 360 months. Roughly equivalent to my current rent, which is why it is the top end of what I’d like to pay. I would actually prefer to pay much less.

Most lenders and buyers will agree to a 15 or 30 year term. That means, if you pay the stated amount every month for 30 years, the mortgage and associated payments will be completely paid off. You’ll actually own the home and not have the risk of a foreclosure from the lender. You will have satisfied the condition of the loan.

The interest rate on your mortgage determines how much you will pay in the long run. A higher interest rate means that the cost of borrowing that money will be greater for you. People with less than stellar credit are penalized by these higher interest rates, because lenders consider them less likely to fulfill their payment obligations. This means you have some control over how much you pay for your house. If you increase your credit score, you will look like less of a risk to lenders.  The less-risky version of you will have a lower interest rate and pay less.

All of that makes sense to me.

Basis Points are strange to me.

I know they exist, but I don’t understand what they have to do with my life. When I googled Basis Point, I got the following result:

“In addition to the interest rate, the lender could also charge you points and additional loan costs. Each point is one percent of the financed amount and is financed along with the principal.”

And also this definition:

“A basis point is a unit of measure used in finance to describe the percentage change  in the value or rate of a financial instrument . One basis point is equivalent to 0.01% (1/100th of a percent) or 0.0001 in decimal form. In most cases, it refers to changes in interest rates and bond yields.”

Why are mortgages stated this way? Why have an interest rate of 3.375% plus the ability to buy basis points? Why not just state the entire interest rate in one blow? It seems unnecessarily complicated to me.

One example I found explains that a way average consumers encounter basis points is during the lock-in period for a mortgage with your loan officer. She guarantees a certain rate at closing, which will be sometime in the near future, but not today. You are charged 50 basis points to lock in the rate. That is you are charged one-half of 1 percent of your mortgage loan balance to guarantee the interest rate you agreed upon. To me, it looks like an interest rate of 3.50% with fifty basis points ends up being a interest rate of 4.0.%. Am I wrong?

It also looks like a basis point can be known as a discount point. A discount point is a way to pay for a lower interest rate. I don’t really understand how this is different from a higher down payment, even with the following explanation.

“Discount points are a form of prepaid interest by which you pay the bank an upfront fee in exchange for it lowering the rate. The amount you can cut your loan’s rate will vary depending on how many points you pay and on how your bank underwrites it, but assuming that paying one point, or 1 percent of the loan’s balance, will lower the rate by 25 basis points.”

What do you wish you understood about basis points before securing your first mortgage? Is my understanding, or lack of understanding, off?

 

Net Worth Week 17

Gentle Readers,

This week was so busy, but there has been steady progress on many fronts. I did an all day training on Wednesday that will help my business both by what I learned and by whom I met and networked with. This was really excellent and gave my heart quite a boost. It definitely impacted my work week though. I got 37.5 hours in four days. I’m tired. I have an all day volunteer session on Saturday, too.

I tried reflexology as part of my attempts to get a handle on my pain, and there has been improvement and the hope for much more. I’m holding off on any pain management this weekend because it will just be too difficult to fit it in due to an all day volunteer engagement. I don’t want my pain relief to stress me out.

I still love Earnest and credit them with my ability to conquer some of this debt.

Date 7/15/16 7/22/2016 7/29/2016 8/5/2016
Joy 1099 1099 1099  1100
Travel 323 323 323  323
Down Payment  19 19 19 19
retirement  21 21 21 21
health  45 45 45 45
Moving  31 31 31 31
EF  2002 2002 2002 2003
Business  1 1 1 1
Bed  .29 0.29 0.29 0.29
Life  746 897 1796  1444
IRA  9894 9908 9920  9984
Brokerage  335 337 407  409
CC (largest)  0 -4791 -4791  -4791
CC (longest)  0 -529 -1095  -273
Rewards Card  -4862 0 0  0
SL 1  -102374  -102489 -102604 -102713
SL 2  -45062  -45115 -45168 -45217
Earnest  -8897 -8915 -8934 -8486
-$146678 -$147156 -$146927 -$146099
  .22% change -.32% change .15% change  .56% change

How is your August starting out?

Why I Started My Own Small Business

Gentle Readers,

There are many reasons I decided to start my own small business two years ago. These reasons are still compelling to me even though I have been working full-time on top of my business, and started the business in a niche I did not yet fully understand. I am a queer woman and the professional world wanted to wipe that off of me.

Like many young professional women, I don’t necessarily fit in many work settings. I have worked for small businesses, fast food, county government, local nonprofits, national nonprofits, retail, and a variety of temping opportunities, first as an admin and now as a professional. I fit in maybe one of those work environments, and that organization no longer exists.

A little over two years ago, the female editor in chief of the NY Times was fired for daring to ask why she was being paid less than the male editor who occupied the role before you. Fired for asking why.

Work environments were not designed with women in mind because sexism said they didn’t have to be.

Most women I know contort themselves to fit in to work environments. We ignore the subtle and not-so-subtle sexism. We ignore clients hitting on us when we are not free to leave their vicinity. We ignore that desks are built with the average-sized man in mind, and are not comfortable for our bodies. We beg to have office buildings not burn us in winter and freeze us in summer since we are more likely dressed for the actual weather and not insistent (conditioned into) on wearing a three-piece suit regardless of the appropriateness to the season.

We read the articles telling us that we are considered harsh if we act confidently. We read the articles that bemoan our poor negotiating skills right next to the articles that say we are not appropriately ladylike when we negotiate well.

We are chided for our very voices with new concepts like vocal fry and commanded to talk in masculine normative methods of expression. EVEN when it is proven that women’s general style is more collaborative and more effective.

We contort ourselves. Many of us have extra things to contort. Our colleagues ask about boyfriends we aren’t interested in having. Our preferred styles of dressing can be read as unprofessional on a body read as femme, but would be fine on a body read as masculine. Our bodies themselves are not read as belonging in public due to disability. Our relationship styles may not value marriage or monogamy the way the government and dominant culture would prefer.

We can contort all of these things and still not succeed. We can still be fired for daring to simply ask about our pay rate.

I opened my own small business to avoid these controls on my personality and dress-code.

Two years ago, I was fed up with my gig-centered work-life and my inability to get hired for a career-based job in my profession. I had applied for so many things. I had contorted. I was not getting what I wanted.

So I decided to create it.

I am creating a space that focuses on a niche in my profession and allows me to serve my community through it. I am creating a space where I own the keys to the door, and set the dress code. I am still a professional, but my fantastic dyke hair is fine with my supervisor as she is me. She still makes me wear the pearls when it is required, but she never tells me to grow my hair out. She never requires me to wear heals. She never tells me to dress like a lady. She knows that I am a human and that being a good human is the true goal.

I am creating a space where I do not have to say yes to potential clients that I find distasteful to work with. I can focus on serving the LGBT community. I can serve my community competently, because I know from personal experience some of what they are facing and I know where to research the specific problems that impact us.

I am creating an environment where I do not have to punch in. Eventually, I will not have to be there to “get my 40,” but rather must get the work done in a timely manner for my clients. I work better after 10 am, and can set most appointments after that. I adapt my work life to me. Should I decide to have a family in the future, I can schedule my life and career together far more easily. I am creating this because I am dissatisfied with the work environments available to me.

I don’t want to just show up. I want my work to reflect my values. I am creating that work.

What made you start your own business?

Net Worth Week 16

Gentle Readers,

I’m still spending a lot of money attempting to get a handle on my pain, but there has been some improvement and the hope for much more. It will take more money and will definitely impact my timing, but not as much as the new FHA mortgage guidance. I am getting lessons in patience and working harder towards goals.

I’ve been interested in dividend growth investing, but I find it intimidating. To see in more stark terms what it can be like, I bought one stock. That’s right, one. I’ve been reading a lot at http://www.suredividend.com/ and http://bamfmoney.com/. They’ve both taught me a lot, but there is so much value in seeing for yourself. Financially, it was silly to buy one. The fee will take a long time to pay for itself, but I think the opportunity to learn is worth it.

I was bummed to learn that I did not win the contest to make it to FinCon this year. I’ll keep learning and growing with y’all and we can see what next year is like.

I still love Earnest and credit them with my ability to conquer some of this debt.

Date 7/8/16 7/15/2016 7/22/2016 7/29/2016
Joy 1099 1099 1099  1099
Travel 323 323 323 323
Down Payment  19 19 19 19
retirement  21 21 21 21
health  45 45 45 45
Moving  31 31 31 31
EF  2002 2002 2002 2002
Business  1 1 1 1
Bed  .29 0.29 0.29 0.29
Life  863 746 897  1796
IRA  9653 9894 9908  9920
Brokerage  329 335 337  407
CC (largest)  0 0 -4791  -4791
CC (longest)  0 0 -529  -1095
Rewards Card  -5247 -4862 0  0
SL 1  -102258  -102374 -102489 -102604
SL 2  -45010  -450062 -45115 -45168
Earnest  -8878 -8897 -8915 -8934
-$147006 -$146678 -$147156 -$146927
  .14% change .22% change -.32% change  .15% change

Do you stick to one type of investment (indexing) or have more variety in your portfolios?

New FHA Mortgage Guidance Will Impact Borrowers With High Student Loan Debt

Gentle Readers,

I was having dinner with Mabel recently and she had some bad news for me. The federal government has issued new guidance for FHA loans. This guidance will make it far more difficult for people with high student loan debt to qualify for a mortgage. Me. It will make it far more difficult for me to qualify for a mortgage.

The Federal Housing Administration insures mortgage lenders as a way to encourage home ownership in the US. The FHA does not issue mortgages, but mortgage lenders use the insurance to stay in business in case too many people enter foreclosure. The FHA has guidance for the type of qualifications a person must meet when applying for a loan. If you are eligible for an FHA approved loan, your down payment can be as low as 3.5% which is far more attainable than the standard 20% necessary to avoid PMI. Not all mortgages meet the qualifications for an FHA loan.

Part of what the FHA measures when determining your loan eligibility is your debt-to-income (DTI) ratio.  Naturally, student debt counts as debt. However, it can be difficult to know exactly how to count this debt. Borrowers are allowed to pay back under a number of different terms and conditions. You may have a 10, 20, or 30 year schedule with or without some forgiveness of the debt itself. It’s complicated.

What concerns me today is the new rules for those of us who are paying back our student loans on an Income Based Repayment (IBR) Schedule. In IBR, you pay a percentage of your income towards your debt each month. This is not an amortizing payment. It is not intended to efficiently wipe out your debt. It is intended to give financial breathing room to people with student loan debt that is high in proportion to their income. I pay roughly $500 a month toward my student loan debt because of IBR. If I was paying an amortizing payment, I would pay closer to $1500 a month.

The FHA has new guidance for mortgages for people under IBR. If I want to use an FHA Loan, they will calculate my monthly debt obligation in a new way now. They no longer consider what my IBR obligation will be each month, which makes sense as the IBR changes yearly based on last year’s income.

The pertinent changes:

FHA 4000.1 Section II. A. 4. B. (H)

(4)  Calculation of Monthly Obligation
Regardless of the payment status, the Mortgagee must use either:

  • the greater of:
    • 1 percent of the outstanding balance on the loan; or
    • the monthly payment reported on the Borrower’s credit report; or
    • the actual documented payment, provided the payment will fully amortize the loan over its term.

What this means for me personally at my current student loan debt levels is that I will likely be ineligible for an FHA loan.

  • If my student debt obligation was calculated as it is now incurred, it would be $500/ month.
  • If my student debt obligation was calculated at 1% of the loan balance it would be $1450/month.
  • If my student debt obligation was calculated as if I were in the process of fully amortizing my loan over a 30 year term, it would be $936/month.

These are very different debt calculations and will absolutely impact my ability to get a loan. The difference between $500 and nearly $1500 will be a killer on my DTI ratio, which must be under 43% in order to qualify for any loan.

If I make $4000 a month, and have a $1500 a month student debt payment and $650 in other obligations, I would have a DTI of 2150:4000. Over 43%.

If I make $4000 a month, and have $500/m student debt payment and $650 in other obligations, my DTI would be 1150:4000. Under 43%

This change is literally the difference between getting a home and not.

With an income of $4000 per month, the highest my debt obligation could be and still leave me eligible for a mortgage is $1720.  After subtracting my other obligations, I would need my other student loan obligation to be less than $1070/m.

To get to $1000 a month in student loan debt obligation, I would need to reduce my student loans to $100,000 from their current high of roughly $145,000.  Alternatively, I could attempt to  increase my earnings to $5000/m and then my 2150:5000 DTI would be 43%.

So, plans must change. I have to kill my student debt.

Previously, my plan of action for when my income doubles was to increase my investment payments at a far greater rate than paying down my student loan debt since I wanted to get the magic of compounding going. My new plan must be to reduce my debt obligation significantly.

When the income doubles, if I make $8000/m, at least $5000 needs to go towards student debt. I have two student loans. One of them is roughly $45000 currently. I will focus all extra payments on that one. In nine months of focused payments, that debt will be almost wiped out.

I would still be left with a student loan obligation that is roughly $100K. 1% of 100,000 is $1000. If I had that $1000 plus $650 in other obligations against an income of $8000/m, my DTI would be 1650:8000. I would be eligible for a loan. With a doubled income, the highest DTI I could have and still be eligible for a loan would be 3440:8000.

Has governmental guidance ever changed your plans in a major way?