Net Worth Week 41 – Washington Changes Edition

This change is hard. The new man openly talks about assaulting women. It’s a lot to take in. But I must keep trying to be the change I wish to see in the world. I can do that best from a place of financial wellness. This is my eighth week in a row of net worth increase. It’s a good start.
1/13/17 1/20/17
Joy 1103 1103
Travel 324 324
Down Payment 19 19
Retirement 21 21
Health 45 45
Moving 284 284
EF 310 310
Business 501 501
Bed 0.29 0.29
Life 1128  1716
IRA 11075 11020
Brokerage 666  663
CC (largest) -4210 -4265
CC (longest) 0 0
Rewards Card -999 -1365
SL 1 -103652 -103767
SL 2 -45646 -45698
Earnest -6519 -6532
Net Worth -145550 -145120  
Percentage Change .22% .29%

How are you handling the changes? I’ll be volunteering this weekend.

Net Worth Week 40 – Birthday Edition

This is now a 7 week streak of my net worth improving!
12/30/16 1/6/17 1/13/17
Joy 1102 1103 1103
Travel 324 324 324
Down Payment 19 19 19
Retirement 21 21 21
Health 45 45 45
Moving 284 284 284
EF 309 310 310
Business 501 501 501
Bed 0.29 0.29 0.29
Life 1889 1422  1128
IRA 10879 11055  11075
Brokerage 658 669  666
CC (largest) -4251 -4210  -4210
CC (longest) 0 0 0
Rewards Card -1534 -1406  -999
SL 1 -103680 -103795  -103652
SL 2 -45659 -45711  -45646
Earnest -6956 -6507  -6519
Net Worth -146049 -145876  -145550
Percentage Change .13% .12% .22%

How do you like to celebrate your birthday?

Net Worth Week 39

12/23/16 12/30/16 1/6/17
Joy 1102 1102 1103
Travel 324 324 324
Down Payment 19 19 19
Retirement 21 21 21
Health 45 45 45
Moving 284 284 284
EF 309 309 310
Business 1 501 501
Bed 0.29 0.29 0.29
Life 1912 1889  1422
IRA 10718 10879  11055
Brokerage 661 658  669
CC (largest) -4256 -4251  -4210
CC (longest) 0 0 0
Rewards Card -1274 -1534  -1406
SL 1 -103565 -103680  -103795
SL 2 -45606 -45659  -45711
Earnest -6942 -6956  -6507
Net Worth -146246 -146o49  -145876
Percentage Change .16% .13% .12%

Have you ever fired a client over ethics?

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 38 – The Year End Edition

I once again travel today, but this time to New England to begin the year with some of my favorite people. I love starting the year with them, but have not done it for a few years. Extra bonus, my girlfriend loves every time I visit this region because I come home so happy. Everybody wins.

My business had a major milestone. I paid myself out of the profits for the first time. It is a small amount, and does not begin to repay me the loan of my money and time over these years, but it is an incredible start. I’m quite happy to start small, because this gives me a chance to feel what paying self-employment taxes are like on a limited-scale. If I mess up, the error should be smaller, right? My current plan is to pay myself from the profits, but not spend the money. Just have it set aside into my “business” account. Once I get the hang of paying quarterly taxes, I can save it/invest it/use it like regular money.

Thirty-eight weeks of tracking my net worth and I’m doing slightly better than I was when I began. I had hoped to be in a much better position at the end of the year, but I had not anticipated the thousands of dollars in medical bills. I still know that I am doing better, but it is important to remember that life can come at you sideways.

12/16/16 12/23/16 12/30/16
Joy 1102 1102 1102
Travel 324 324 324
Down Payment 19 19 19
Retirement 21 21 21
Health 45 45 45
Moving 284 284 284
EF 309 309 309
Business 1 1 501
Bed 0.29 0.29 0.29
Life 636 1912  1889
IRA 10883 10718  10879
Brokerage 661 661  658
CC (largest) -4341 -4256  -4251
CC (longest) 0 0 0
Rewards Card -510 -1274  -1534
SL 1 -103449 -103565  -103680
SL 2 -45553 -45606  -45659
Earnest -6927 -6942  -6956
Net Worth -146494 -146246  -146049
Percentage Change .26% .16% .13%

Are you ready for a New Year?

Net Worth Week 37 – Happy Holidays!

Gentle Readers,

Travel begins tomorrow and will mark the first time I will actually get to be in the same state as my lovely girlfriend on Christmas Day. I’m not thrilled by the area of the country we’ll be in, but she’ll be with me and that’s a lot of joy for one woman.

There’ll be limited time with my family and away from my jobs, but I will get to hug someone I have not seen for a few years due to how far away they live. I’m so excited. Definitely worth the cost of our tickets. All of my siblings in the same space happens once every 2 or 3 years. It is not easy.

12/9/16 12/16/16 12/23/16
Joy 1102 1102 1102
Travel 324 324 324
Down Payment 19 19 19
Retirement 21 21 21
Health 45 45 45
Moving 284 284 284
EF 309 309 309
Business 1 1 1
Bed 0.29 0.29 0.29
Life 445 636  1912
IRA 10988 10883  10718
Brokerage 664 661  661
CC (largest) -4341 -4341  -4256
CC (longest) 0 0 0
Rewards Card -988 -510  -1274
SL 1 -103334 -103449  -103565
SL 2 -45501 -45553  -45606
Earnest -6915 -6927  -6942
Net Worth -146880 -146494  -146246
Percentage Change .27% .26% .16%

Have you traveled this holiday season?

Net Worth Week 29 – Halloween is Scary Edition

10/14/16 10/21/16 10/28/16
Joy 1101 1101 1101
Travel 323 323 323
Down Payment 19 19 19
Retirement 21 21 21
Health 45 45 45
Moving 284 284 284
EF 1005 1005 105
Business 1 1 1
Bed 0.29 0.29 0.29
Life 946 1942  2145
IRA 9914 10011  9917
Brokerage 400 399 391
CC (largest) -4559 -4559  -4499
CC (longest) 0 -62 0
Rewards Card 0 -383  -647
SL 1 -102929 -103044  -103159
SL 2 -45316 -45368  -45421
Earnest -7720 -7736  -7752
Net Worth -146463 -146000  -147122
Percentage Change .11% .31% -.76%

How are you celebrating Halloween?

Why I Still Give As I’m Getting Out of Debt

Gentle Readers,

It is true that I am pursuing financial independence, and that I am beginning far behind the starting line to the tune of negative $146,000. I am working my behind off and pursuing many strategies to change my situation. However, I still donate time and money to good causes. Some folks in the PF sphere will think me mad, and that’s okay by me. Everyone is allowed their own priorities.

I donate and give gifts to people and causes who do not directly benefit me. I do this for many reasons. The main one being that I want the world to be better. It would break my heart to know that I spent the next five years so focused on my own financial situation and ignored the world around me. If I can make the world even slightly better as I’m going, I will. Future me will be grateful, I’m sure.

When a young couple I know recently had a child, I checked in after the birth to see what they were missing now that they know what this baby in particular was lacking.  Then I mailed it to them. I also sent them a meal of their choice. They are growing accustomed to being parents and starting to learn some of the true costs. I am a practical woman and usually give practical gifts. I love adorable baby clothes and items, but babies need rash ointment. I can give that.

When I learned a friend had lost his job in a way that will preclude him getting similar employment, I stopped mowing my own lawn and paid him to do it instead. I also began asking around to see if I knew of any opportunities for him.

When people I admire and respect run for local office, I donate. Currently, a teacher from high school is running and so is a woman I met at a gala a few years ago. I do not live in their jurisdictions, but I care that they have excellent, respectable leadership. Neither of these people are running out of hubris. They are running because they have concrete ways they want to improve their community. Local politics matters so much to our daily lives. I give them money. I want America to be better.

I could get out of debt faster if I focused solely on my debt, but that is not how I want to live my life. I want to consistently work on improving the world while also improving my own financially life. I choose both. I’ll get there more slowly, but the view is worth it.

Do you make money choices that are financially irresponsible but right for you?

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 13

Gentle Reader,

Man, the violence in our world is a lot sometimes. It is hard to be hopeful, but then I see the image of the strangers in Dallas who immediately surrounded a baby in a stroller when the shots rang out.  They were willing to put their body in harm’s way to protect a small life. That crowd was diverse and, I assume, did not all personally know that baby. They did not know why the shots were happening or who was being targeted, but they decided to protect a defenseless child. That is my hope for the world. That crowd of strangers who chose danger for another.

I know that y’all noticed I was quiet on twitter this week, and thanks for checking on me. PF bloggers are a great community. I had family in town and they had shenanigans to put me through.  I’m still trying to win my way to FinCon – in large part to meet y’all. It is already an honor to know you and I can only suspect that honor will grow when I can shake your hand.

My net worth plucked along in the positive direction and that small victory is helping me remember the destination this journey is leading me to.

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

Date 6/17/16 6/25/2016 7/1/2016 7/8/2016
Joy 1098 1098 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 2597 2002 2002
Business  1 1 1 1
Bed  .29 0.29 0.29 0.29
Life  1839 1140 1929  863
IRA  8285 8765 9580  9653
Brokerage  221 315 324 329
CC (largest)  0 0 0 0
CC (longest)  0 0 0 0
Rewards Card  -5300 -5347 -5675  -5247
SL 1  -102268  -102284 -102482 -102258
SL 2  -45017  -45067 -45112 -45010
Earnest  -9286 -9306 -9328 -8878
-$147390 -$147748 -$147222 -$147006
  -1.0% change -.24% change .35% change  .14% change

Have you been encouraged by small progress?