Net Worth Week 65

Gentle Readers,
Work finally took away our OT. Slow and steady must win the race now.  My tutoring begins next week and I’m very excited. I’ll probably have less time for interacting with folks because I need to focus really hard on my lessons to make sure they sink in appropriately. A little focus should go a long way, I think. The plan is to devote most of July to this and then potentially find a gig in it. Such a gig would definitely change my money situation quickly.
I should have noted it before, but I am over halfway done on repaying my Earnest Loan! Huzzah!

This week’s net worth numbers

6/30/2017 7/7/2017
 Joy 1107 1107
 Travel 1  1
 Down Payment 19 19
 Retirement 21 21
 Health 45 46
 Moving 285 285
 EF 11 11
Business 1004 1004
Life 1439  500
 IRA  13134  13085
 Brokerage 704  700
 Rewards Card 2 -2902 -2121
 CC (largest) 0  0
 CC (longest) 0  0
 Rewards Card 0  0
SL 1 -105090 -105242
SL 2 -46306 -46372
 Earnest -4465 -4008
 Net Worth -140992 -140964
 Percentage Change -.35% .02%

Do you still invest in your skill-building?

Goals 2017 – Accountability and Chutzpah!

Gentle Readers,

I am not typically into resolutions, but I think that financial ones could be helpful in focusing me and so I will try them this year. Last year at this time, I did not have this blog or the goals the blog has led me to pursuing. I was ignoring my money and figuring that student debt would constrain my choices for life.  That’s unpleasant to consider.

In April of 2016 I began this blog, and I was in debt to the tune of -$151,728. Focusing on my money had my debt diminish to -$146,049 by year end. That’s an increase of 3.74%. I had hoped to do better than that, but was not anticipating so many medical expenses. Explicit goals are said to be helpful. Let’s give it a go.

2017 Achievable Financial Goals for ZJ Thorne

  1. Pay myself from my business at least a nominal amount every month. If I get one client a month to cash-flow properly, I could pay myself $500/m before taxes.
  2. Finish contributing to my 2016 IRA ($1340 to go)
  3. Increase my Emergency Fund to $1000. ($691 to go)
  4. Pay off Credit Cards ($5785).
  5. Fully fund 2017 IRA ($5500 to go)

This is $13,316.  That is $256.07 a week or $1109 a month for all of these goals. I have until April 15 to finish contributing to my 2016 IRA. It and the emergency fund will be my first priority. Then I will shift to paying down my credit card. The 0% balance transfer ends in July. If I cease spending on my credit cards and pay them off in 6 months, that would be $964.17 monthly. Perhaps this is attainable. If July through December is dedicated to funding my 2017 IRA, that is $916.67 a month in contributions.

My current gig is scheduled to last until mid-February, and we are supposed to continue with unlimited overtime until then. It is possible they will extend beyond February. We won’t know for some time. Our industry shifts rapidly. It is not uncommon to be told at 2 pm that your gig ends that day. Staying gainfully employed is helpful to achieving these goals.

The big goals are even grander and dependent upon finding a gig utilizing the skill I’ve been mastering. If I do that, I can double my pay for some gigs. If I do that, my goals can become enormous depending on how long a gig at that rate could last. These goals are too big for one year, but they are in my mind. Luring me.

2017 Stretch Goals for ZJ Thorne

  1. Get my Emergency Fund up to $5000-$10000 ($4691-$9691 to go).
  2. Save up a down-payment of $15000-$30000 ($14981-$29981 to go).
  3. Spend $5000 on my brokerage account.
  4. Pay off the smaller student loan in a fell-swoop $45000.

What are your goals for 2017?

Net Worth Week 23 – Pain Abatement Edition

9/2/16 9/9/16 9/16/16
Joy 1100 1100 1100
Travel 323 323 323
Down Payment 19 19 19
Retirement 21 21 21
Health 45 45 45
Moving 31 31 283
EF 1004 1004 1004
Business 1 1 1
Bed 0.29 0.29 0.29
Life 1775 747  871
IRA 10118 10186  9854
Brokerage 402 403  395
CC (largest) -4755 -4699  -4699
CC (longest) -0 0 0
Rewards Card -644 -0  0
SL 1 -102835 -102594  -102726
SL 2 -45273 -45163  -45223
Earnest -8094 -8109  -8126
Net Worth -146761 -146532  -146867
Percentage Change -0.11% .15%  -0.22%

Have are your Septembers going? Is learning happening in your lives and professions?

The Downsides of Co-ops

Gentle Readers,

While I am nowhere near ready to begin my home-search in earnest, since my current net worth has been hovering around the -$146,500 mark for the summer, I did check out my first open-house this weekend. It’s a cooperative I’ve been watching on Zillow and I had the time for a small trek.

I walked the 20 minutes from my current home, which also gave me another look at the neighborhood I’m considering. Before I was in such pain, I used to be a marathon runner and would run through that neighborhood as part of my training. Walking a neighborhood is very different from running in a neighborhood. As a woman in a city, I expect street harassment in both scenarios, but it is different when you are in running clothes. During that time of day, the walk felt safe. Good perk to feel first hand.

The building was a little more run-down than the photos showed. That was not a surprise. It’s also a bit off the beaten path, which is why it is going for $135,000 for all of its 700 square feet. I live in a group house now and could not really visualize what 700 SF meant and this was a good learning opportunity. It’s a lot of space for one person, but not overwhelming. I am hoping to buy something around that size, because I want the opportunity to live with someone comfortably if that is a possibility in the future. I definitely don’t want a studio, because I want the ability to host people without us all looking at one another’s pajamas.

The layout was a little strange. The kitchen is a good size, but it is currently situated so that you cannot fully open the oven or fridge because they face one another. This seems to be an issue of old outlets, but the room to move the oven over is available. There’ll be a whole in the cabinetry, but you could work with it. Overall, the place was cute and had nice windows and a bathroom of one’s own plus some good closet space.

Not bad as an incentive to keep me working toward my home-buying goal.

What distinguishes a co-op different from a condo?

Co-ops are different from condominiums in very important ways. With a condo, you are buying the unit you live in. With a co-op, you are buying a share of the building’s corporation. This is a huge difference with enormous impacts on you for as long as you own. The corporation/board has a lot of power. You do not.

Co-ops almost always require higher down payments and have higher monthly fees. I cannot find a co-op in my city that requires less than a 10% down payment. FHA loans are a no-go here, which would make it hard on first-time home-buyers.  Co-op and condo buildings both prefer to have relatively high owner-occupancy, which prevents owners from renting their homes out easily or at all. Co-op boards have the power to block potential buyers, which means closing on a co-op is hard when you are buying in and when you are trying to sell. It’s a lot of hassle that could keep you paying on a space you do not want anymore.

Co-ops often have high association fees. Partially, this is because the co-op fee may cover an underlying mortgage on the building and property taxes on top of maintenance and utility costs. The share you live in may sell for lower than a similarly sized condo, but the co-op fee can more than offset that. In some buildings, the fees include all utilities up to wi-fi. It may be a wash. You must look at the bylaws closely.

You also have the problem of finding a real estate agent and mortgage broker who knows what co-ops mean for buyers. At the place I checked out near me on Saturday the agent could not answer any of my questions. She eventually told me that she does not normally do co-ops, and it showed.  A big problem in some cities is the dearth of banks that offer co-op mortgages. Shopping around rates will be hard.

There is one major perk for those of us who would like the safety of stealth-wealth. Co-ops offer privacy. You own a share in a corporation, which does not include a public record of ownership. You can hide your address to people not in the building. This is helpful for folks fleeing abuse or famous people who’d like to be left alone.

The more I learn about co-ops, the less I want them. They feel less free than I’d like in my major purchase, but I am intrigued by the privacy option.

Would you consider a co-op over a condo?

 

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?

 

 

Net Worth Week 15 – Dental Pain Edition

Gentle Readers,

There’s been a slight setback in my finances due to some pain issues I’m trying to take care of.  It’s been a physically painful week in my house. I had my semi-annual dental cleaning and learned the reason for some of my jaw pain – I have a new wisdom tooth that is stuck inside for the next six months at least. My chronic, undiagosed back pain also grew much worse. My physician won’t even look at the body parts I complain about so I’ve been pursuing some alternative healing methods. I have an acupuncture and massage appointment this weekend to try to help with this pain until I can find a new doctor. This will cost me roughly $100 because I’ve found places I trust that give really good deals. Hopefully my back approves. I miss being able to run. My girlfriend misses me not being in constant pain.

I initiated a balance transfer on the 15th and it went through today. My old Barclay Card missed me and offered me zero percent financing until next July. I intend to pay it off before then, and it will be a lot easier when it is not earning interest. Thank you, to YETInvesting for talking me through the process and encouraging me. Hopefully this will help my debt reduction process.

I would be delighted if you read my entry to win a trip to FinCon. I’d love to meet y’all.

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

Date 7/1/16 7/8/2016 7/15/2016 7/22/2016
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  1929 863 746  897
IRA  9580 9653 9894  9908
Brokerage  324 329 335  337
CC (largest)  0 0 0  -4791
CC (longest)  0 0 0  -529
Rewards Card  -5675 -5247 -4862  0
SL 1  -102482  -102258 -102374 -102489
SL 2  -45112  -45010 -45062 -45115
Earnest  -9328 -8878 -8897 -8915
-$147222 -$147006 -$146678 -$147156
  .35% change .14% change .22% change  -.32% change

Have medical issues ever set you back financially?

Net Worth Week 14

Gentle Readers,

There is still steady progress in my net worth. It’s a turtle’s pace, but the turtle will get there.

If you want to know more about my life philosophy, read this piece on empathy and curiosity that I wrote as an entry for a contest to win a trip to FinCon.

Hearing about the attack in Nice and feeling like this violence won’t end. Be good to yourself, friends. Hug your people.

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

Date 6/25/16 7/1/2016 7/8/2016 7/15/2016
Joy 1098 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  2597 2002 2002 2002
Business  1 1 1 1
Bed  .29 0.29 0.29 0.29
Life  1140 1929 863  746
IRA  8765 9580 9653  9894
Brokerage  315 324 329  335
CC (largest)  0 0 0 0
CC (longest)  0 0 0 0
Rewards Card  -5347 -5675 -5247  -4862
SL 1  -102284  -102482 -102258 -102374
SL 2  -45067  -45112 -45010 -45062
Earnest  -9306 -9328 -8878 -8897
-$147748 -$147222 -$147006 -$146678
  -.24% change .35% change .14% change  .22% change

How did you acclimate to slow and steady progress when you have a hare’s heart?

What Financial Health Means to Me – Fincon 2016

Gentle Readers,
I want to travel to FinCon this year, but it will be hard on my budget. I live on the East Coast. I’ve never even been to California at all. You know that I am working my behind off to get out of debt. My goal is to end my credit card debt by November. A cross-country flight and a few days in a hotel would definitely impact that goal negatively.  I’m trying to win my way to FinCon instead.
The brilliant planners at FinCon partnered with The Center for Financial Services Innovation for an essay contest and some lucky bloggers will receive support for traveling to San Diego if their piece on Financial Health is excellent. #FinHealthMatters!

For me, financial health is the freedom to pursue empathy and curiosity in equal measures.

I believe that radical empathy is one of the greatest traits available to humans. It increases resilience and takes you down unplanned paths. It is incredible. Even if you only ever get to the point where you can practice radical empathy on yourself, you will have gained the world.

Empathy teaches you. It grows you. It allows you to make peace and joy with the previous versions of yourself. It allows you room to grow into many new selves as you change in time with new data and situations.

Having empathy for others means that you can learn from them, too. You do not have to contain all knowledge, nor do you have to make all mistakes in order to learn and grow. Empathy for others will reveal what choices, financial and otherwise, are better for the world. Empathy will have you shoveling your elderly neighbor’s sidewalk and sit down for tea and conversation as payment. Empathy will give you a glimpse into other sides of your community. Empathy will reveal whole new worlds to you.

My other favorite character trait is curiosity. Curiosity will give you so many opportunities. You will open and walk through so many doors that you cannot imagine right now. Curiosity unbounded taught Galileo realms of science that had not yet been discovered. Curiosity led Elon Musk to create the Tesla because he wanted an option that did not require fossil fuels. Curiosity led Picasso to deconstruct the lines of the body to see deeper into color and meaning than most artists before him. Curiosity told e.e. cummings to destroy syntax to create some of the most moving poetry in the English language.

When I’m truly financially healthy, I have the time and energy to grow both of these traits. I am able to understand other perspectives and add to my knowledge and wholeness. I am able to create things that the world has never seen before. Financial health allows my mind to play and frees me to create new solutions to old problems. When I’m financially healthy, I can afford the time and money to support other people with my time and money. We all grow more whole as a result.

What does financial health mean to you?

 

Net Worth Week 11 – Brexit Begins Edition

Gentle Reader,

This week has seen a lot of change. Some hopeful for progressives, and some not.  Brexit definitely impacted my retirement accounts. I’m personally on the right track, but am worried for the world in the next few years.

My gig told us that our project is now expected to last an additional four months at least. This stability will make it far easier to meet some goals I have for my money. This should keep me on track to pay off my credit card debt by late October, which will free up my money to save for a down payment. I will do a happy dance.

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

Date 6/3/16 6/10/2016 6/17/2016 6/25/2016
Joy 1098 1098 1098  1098
Travel 322 323 323 323
Down Payment  19 19 19 19
retirement  21 21 21 21
health  45 45 45 45
Moving  31 31 31 31
EF  2597 2597 2597 2597
Business  1 1 1 1
Bed  .29 0.29 0.29 0.29
Life  2344 1729 1839  1140
IRA  8378 8516 8285  8765
Brokerage  224 226 221  315
CC (largest)  0 0 0 0
CC (longest)  0 0 0 0
Rewards Card  -4481 -5434 -5300  -5347
SL 1  -102360  -102120 -102268 -102384
SL 2  -45095  -44971 -45017 -45067
Earnest  -9247 -9258 -9286 -9306
-$146101 -$147176 -$147390 -$147748
  -1.0% change -1.0% change -1.0% change  -.24% change

How are you feeling about your financial progress?