A lot can happen in 12 months.


Yesterday, I went all “Who wants to be a millionaire” on you guys and asked the audience a question. It was a simple question:

How has your financial situation changed over the last 12 months?

Of the 333 of you that responded, 240 said things have gotten better. Only 44 readers said things have gotten worse. I wasn’t surprised by the results, considering anyone who voluntarily reads personal finance blogs in their free time, probably tends to care about their finances more than the average joe.

I liked my question because it was intentionally vague. I left it up to the respondent to decide what an improvement in one’s financial situation meant. Maybe that meant getting a fat raise, maybe it meant your retirement funds have appreciated, maybe you moved out of your parent’s basement, or maybe you’ve finally started knocking out that consumer debt that’s been hanging over your head. It was awesome to see the additional insight some of you provided in the comments section, so thanks for that.

While not much has changed in the Ninja household over the last year (expenses and income are pretty much the same), we’ve seen a pretty incredible increase in our net worth.

In fact, I just ran the numbers and it looks like we’ve shot up $55,454 in the last 12 months. In-FREAKING-sane. I honestly had no idea we made that much progress. That works out to a $4,621 increase each month… for twelve straight months.

What’s more, we dropped $12,000 cash on a car upgrade and another $7,500 on MANteresting during this time.

How the heck did we swing this?

I really don’t know. I mean, obviously the markets are responsible for a big chunk, but it really just comes down to boring ol discipline. Investing in our future, saving aggressively for a down payment, not being consumer whores, blah, blah, blah.

Being intentional and proactive with our finances in our 20’s will hopefully set us up for continued success in our 30’s, 40’s, and beyond. I’m taking the words of Spock seriously and doing my best to…

Live long and prosper

Did we buy a rental property?

If you saw my post on Friday, you know that Girl Ninja and I were seriously considering going 50/50 on a rental property with my best friend from high school who married one of Girl Ninja’s best friends from high school. Today, I tell if we wrote up an offer, but not until I drag things out a little more ūüôā

We viewed the property yesterday morning. It is due to list on Tuesday, so getting to see it pre-market was crucial. We completely expect it to go pending on the first day it lists for full (or above) asking price. Having the opportunity to write an offer, without having to compete with other interested parties, was a pivotal part of making the deal work.

The house appears to be in tip-top shape. It’s only a year old and the appliances, finishes, etc all still shine like they’re brand new. It was clear the owners took pride in their home. There were linoleum floors in the bathrooms and tile on the kitchen counter-tops. This bothered me because I would have preferred higher quality finishings, but at the same time, these are the perfect materials for rental wear-and-tear. The house shows really well and I could totally see a Microsoft employee (Microsoft is 20 minutes away) renting the house for his/her young family.

Okay, so now that you know we liked the place, it’s time to tell you if we wrote up an offer…

Drumroll please….

Nope. Here’s why:

If Girl Ninja and I co-bought this property, we wouldn’t be able to buy our own place for at least two years, since that is about how long banks need to verify stable rental income.

With any partnership there is risk. While I still believe that my friend and I would have been able to make this deal work, we know that everyone probably thinks the same thing. Neither of us could shake the potential issues that could arise when control is shared.

The time sensitive nature of the transaction. This was my biggest hesitation. I felt rushed. An offer had to be made last night in order to give the sellers enough time to respond before it goes to market on Tuesday. There were still a lot of questions I couldn’t yet answer, and while I believe the house is a good buy, I didn’t have enough time to really wrap my brain around all that encompasses being a landlord. Especially when that responsibility is shared with another person.

But ultimately, Girl Ninja and I did not go in on the house for one reason and one reason only. My friend decided to buy the house on his own. I’ve known this was a possibility for the last few days. He sees very little downside and a ton of upside potential. He can afford the risk and no longer has to worry about me dying divorcing, or forcing a sale. I went and viewed the house with him yesterday knowing he was probably going to be the only person writing an offer. It’s a little sad because I want our cash to be invested in something, but I know this is for the best. I’m super pumped for him and I hope his offer gets accepted.

Who knows, maybe Girl Ninja and I will rent from him once we have a kid or two ūüôā

p.s. for those that care, here is the spreadsheet that lays out the numbers (click to make images larger)…

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Putting my money where my mouth is…

You know how I keep saying Seattle real estate is in a bubble? Girl Ninja and I haven’t walked through a single house in over two months, we’ve virtually given up on the house hunting process. So we decided to do what any logical couple would do… buy a house.

Wait, what?

Allow me to explain.

If you’ve been reading along for a while now, you’ll know that I’m a big fan of short-term investing. Saving for retirement is great, but that only puts money in my pocket for when I’m old and wrinkly. If I want to have financial freedom before my 60’s I’m going to have to start investing outside of my 401k and Roth IRA. What better way to do that than to invest in an income producing asset.

A few weeks ago, I got a text from my long time best friend. He wanted to know if I would be interested in buying an investment property with him. I told him no. We chatted more about it. I told him no again. But after a few weeks of continued dialogue, and coming to the realization that Girl Ninja and I will probably not buy a house in the next year or two (because we love renting so much), I’m warming up to the idea.

We are going to look at a house on Sunday that hasn’t yet come on the market (it’s due to be listed on Tuesday, but through a connection were able to reach out to the sellers and get a viewing before it lists). It’s an 1,850sqft, 3b/2.5bth, that will list at $359,000. The house was built in 2012 and the owners are moving to cash out on the 20% YOY return on investment they’ve made. Well, that and they want to upgrade their home.

The house is in suburbia, which means it’s cookie-cutter, across the street from a large park, and in a solid performing school district. I personally wouldn’t buy this house for Girl Ninja and I, the layout isn’t my style, but it is shaping up to be the perfect candidate to make a rental property.

Here is how things would go down if we decided to move on the property.

  • My friend and I each put $55,000 in to a house fund ($110k total).
  • We buy the property for full list (we expect it will go pending the same day it lists due to the market).
  • We put 25% down, $90,000.
  • Another $5,000 each ($10k total) towards closing costs if necessary
  • And another $5,000 each ($10k total) for a maintenance/reserve fund.
  • Exact models of this house in the area are renting for around $2,300/mo, but we budget for $2,100/mo.
  • Our PITI payment would be $1,700/month.
  • Take discretionary rent income and build house reserve fund.
  • Let someone else pay off our mortgage.

Seems like a pretty good plan, eh? Obviously the scenario above seems pretty legit, but of course there are some concerns as well. Such as…

  • Finding tenants that don’t suck.
  • Knowing the market will cool off at some point and the house might not appreciate much above current price point for a few years.
  • Partnerships, by nature, bring an element of risk.

Still, no matter what way my buddy and I run the numbers (and believe me they’ve been ran), it seems that this house is smart buy. I don’t say that lightly, my friend is an investment banker who makes a crapload more than me, and knows Excel like Lindsay Lohan knows the inside of a courtroom. I trust the dude more than I trust myself (he’s actually the guy that got me to sign up for a Roth IRA 6 years ago!).

It seems like Girl Ninja and I are in the perfect position to take something like this on. Here is the way I see things:

  • We have had a ton of money sitting in a bank account for years now, earning virtually nothing.
  • We have no desire to buy a personal residence in the next 12 months, possibly longer (possibly ever).
  • I know that short-term investing is important to me, and at some point I have to stop talking about it, and start doing it.
  • I know all investments come with risk.
  • Having someone else pay off a house I partially own would be sweet.
  • Girl Ninja and I could always move in to the property if needed.
  • We aren’t buying for the short-term, minimum 10 year hold.
  • Never have to put another penny in to the house after the initial investment.

Who knows what will actually happen after we look at the house Sunday morning, but it should be an eventful weekend nonetheless. I’ll let y’all know how things went on Monday ūüôā

p.s. I’m obviously leaving out a lot of information, if I didn’t, this post would have been triple the length. If you have more questions about the property or our assumptions don’t hesitate to ask. We want to be very diligent in the process and think of all the potential benefits and concerns.

Stalking the stock market.

I take a slightly more aggressive approach to saving for retirement than most. For now, 100% of my retirement contributions are invested in various mutual funds. These mutual funds give me partial ownership of thousands of different domestic and foreign companies. At this stage in my life, I don’t see much of a reason to not focus exclusively on stocks. As I hit my 30’s, in a few short years, I’ll probably begin dabbling in the world of bonds.

Seeing that I have some kind of affinity for the stock market, you’d think I’d be pretty market savvy. I’m not. I picked a few solid performing mutual funds and never looked back. So far this seems to have worked out for me.

What scares the crap out of me is investing in individual stocks.

It’s like going to Vegas and betting it all on black. Okay, not really. One can chart, look at P/E ratios, and spend hours on Morningstar to get a better idea of what is going on with a specific company. But I still feel like this…


Since I know nothing about how to properly build a portfolio of individual stocks, I’m going to turn the soap box over and give you an opportunity to educate me by answering the following questions.

1. Do you own any individual stocks? (If no, why not)

2. Which ones (or how many)? 

3, What’s a good source to learn the basics of dabbling in the stock market?¬†

4. Have ya made a bad buy before? (WaMu, Blockbuster, etc?)


Eating my words

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Remember the controversial post I wrote a month or two ago titled “Screw my Roth IRA” where I blew the whistle on why Roths suck? Many of you wanted to burn me at the stake; accusing me of financial blasphemy. The comments section of that post got a little heated, but with the help of some fellow PDITF readers, my point was actually getting through to those who originally opposed it. I was vindicated.¬†I had written an article that forced people to think about the Roth differently. I concluded that post with the following statement:

I don’t hate my Roth. I’ll continue to let what money is in there grow tax-free, but I’ll probably never contribute to it again.

Now comes the part where I eat my words…

I’m going to contribute to my Roth IRA this year.

I’m horrible I know. I say one thing, but do another. I¬†reek¬†of hypocrisy and Dr. Pepper (side note: I LOVE Dr Pepper).

I use to think the Roth was the sexiest thing ever, but the facts prove that’s simply not true.¬†So what gives? Why am I continuing on with Roth contributions when I think Roths kinda suck?

Check it…

We will soon have more cash than we want/need.

We should hit our $100,000 savings goal in the next few months. That’s where I’m drawing the line. I’m a big believer that there is a such thing as saving too much. Even though 80% of this will probably go towards our down payment, I’ve already told you I don’t really want more than $10,000 in the bank at any given time.

Once we’ve hit our six-figure goal, we will have to be more creative with our discretionary income. This is why we’ll be having our first-ever No Save Month in¬†November. To keep our cash reserves in check, I’ll¬†likely¬†throw another $5,500 in to my Roth, start contributing to my taxable investment account, and if we still have some leftover cash, I’ll try to max out my 401k. Meeting our savings goal affords us the opportunity to maximize our investment potential.

The Roth acts as a secondary emergency fund. 

This is the only significant advantage the Roth has over a traditional 401k, in my opinion. With a Roth, one can withdraw their contributions at any time, for any reason, without having to pay any penalties or taxes on that withdrawal. For example, I have a little over $37,500 in my Roth, of which $29,000 was contributed by me. That means, at any point, I can withdraw $29,000 from my Roth and do with it what I please.

I allowed my frustration with the Roth to cloud my judgement. Yes, the Roth IRA is nowhere near as tax-advantageous as people like to pretend it is, but its ability to be both an investment vehicle and a quasi-emergency fund Рat the same time Рmake it a worthwhile option.

In conclusion, I still think Roth IRAs suck, but for now it will remain in my personal finance arsenal. Here’s to second chances ūüėČ

I apparently have really crappy timing.

I called our agent the other morning to express interest in a house that ¬†was newly listed¬†(click here to see the listing). After a few back and forth emails, we decided we would look at it that evening (the same day it came on the market). A couple of hours later, my agent called to inform me we wouldn’t be looking at the house. Our appointment was for 5pm, but the listing agent had already received four cash offers, well above asking price, and had five more offers expected. What’s more, they were accepting one of these offers by 4pm, an hour before our appointment to see it.

I was frustrated. 

Not because I didn’t have a chance to even compete for the house – we probably wouldn’t have put in an offer – but because of the timing of our house hunting journey. Seriously annoying.

As I started thinking about it I just got more and more depressed. So depressed I compiled a list of other frustrating things that have happened during my, relatively short, 5-year PF journey:

I graduated college in 2007 with $28,000 of student loan debt. My sister, who graduated just a few years before me had a similar amount. But between her college graduation and mine, student loan interest rates nearly¬†quadrupled.¬† Her $20,000+ student loan had a 2% interest rate, mine a 7% rate. There was nothing I could do about it. You can’t refinance student loans like you can a mortgage when rates drop. For no other reason than graduating in 2007, I had to pay four times as much interest as those who finished up just a couple of years before me. Did you know I actually considered NOT paying these loans off early, because part of my thinks when the student loan bubble bursts (which it surely will), student loans will get special treatments…possibly forgiven altogether.¬†

I graduated college in 2007. Wait. Didn’t I just say that? Yeah I did. I was fortunate to get a job right out of school, but many of my peers weren’t. I got my degree just in time to watch America take a dump on itself. I finally had an income and an ability to contribute to my retirement accounts. Too bad that virtually every dollar I invested during my first few years working, dropped in value. I get that investments will go up and down over time, but having my first¬†exposure¬†to Wall Street be during the Great Recession wasn’t exactly ideal.

I also decided to be a good Ninja and save up 20% for a down payment. Girl Ninja and I reached that threshold in January, right in time to kiss the buyers market goodbye. Inventory is at an all time low. House prices are up a stupid 18% year-over-year. And interest rates are ticking up. Had we just been irresponsible and bought a place last year (with only 10% down), we would have gotten waaaaaaayyyyy more bang for our buck.

We have a ton of money in a savings account. Why is this a bad thing you ask? Well, when I had just a few thousand in my high-yield savings account, I was earning 3% or more on my money. Now that we finally have a¬†substantial¬†amount of liquidity, my high-yield (can you even call it that anymore?)¬†savings account pays a paltry 0.75% APY…FOUR TIMES LESS!!!!¬†There’s nothing quite like having money in the bank, when the bank is arguably the worst place for it to be right now.

Ugh, I could keep going, but I can only wallow in my own self pity for so long. As frustrating as some of these circumstances can be, I gotta keep my head up and fight the good fight. Hindsight is always 20/20 and some of these things I really had no control over. ¬†You can’t let an unfortunate thing, like a recession, totally rock your world and keep you from doing what you know is right.

I’d love to hear some of the frustrating things you’ve experienced during your financial journey. Share them below!

Screw my Roth (yeah I just said that)

When I graduated college in 2007 I promised myself I would fully fund my Roth IRA every single year. We are in 2012 now, and so far, I’ve stayed true to my word. BUT NOT FOR LONG. One of my resolutions for 2013 is to STOP contributing to my Roth IRA.

That’s right, I’ll probably never contribute to my Roth IRA again. Like ever.

If you’ve read my blog for a while you’ll have seen many a posts where I confess my undying love for Roth IRA’s, like this one six weeks ago. The more I think about it, however, the less convinced I am that it’s the right place for my money.

Girl Ninja and I are in the 25% tax bracket. Looking at historical averages, we will likely remain in the 25% tax bracket for a very long time, likely our entire working lives. I could nearly double my already decent salary, and we would still be in the 25% tax bracket.

What’s more, I don’t necessarily think the government will attack the middle class anytime soon. Politicians argue about the richest and poorest people in America, not us middle-classers. Republicans want to cut entitlement programs, and Democrats want to tax the wealthy. That’s the way it’s been, and the way it will continue to be. When’s the last time you heard someone run for president say “I want to stick it to the middle class”?

Let’s say the government does get greedy though. My taxes could theoretically go up at some point in the future, but guess what, Roth IRAs could also be taxed at some point in the future. Roth IRA’s were made for the middle class. Literally. (A single person making more than $125K and a married couple earning more than $183k aren’t even allowed to contribute to a Roth because, by the government’s standard, they make too much.)

So if the government would wage war on the middle class by increasing their income tax obligation, why wouldn’t they wage war against the middle class by taxing Roth IRAs? Heck, they’d likely go after the Roth first since that would only piss off a portion of Americans (those who actually have a Roth) as opposed to enraging the entire middle class. (note: I don’t think the Roth will be taxed at any point, FOR THE SAME REASON I don’t think middle-class taxes will increase, it would be political suicide).

If taxes aren’t likely to increase for the middle class, and I have no reason to believe I’ll be in a higher tax bracket come retirement, I see no benefit to a Roth IRA.

Why give the government more than I have to?

Last night, I logged in to my 401k plan and upped my contributions by exactly $6,667 annually (this pretax amount is equivalent to $5,000 after taxes…the amount I would have put in my Roth). This increased my 401k contributions from 8% to 16%. Who knows, if I’m feeling crazy I might even try to max it out to a full $17,000 annual contribution.

I don’t hate my Roth. I’ll continue to let what money is in there grow tax-free, but I’ll probably never contribute to it again.

And regardless of the things I’ve said in the past, you might want to consider kicking your Roth IRA to the curb as well.

To further prove the point here was a blurb from a comment below:

“If you are in the 25% tax bracket and contributed $100 to a Roth IRA and it grew 10% you would be able to withdraw $110 tax free (let‚Äôs ignore the 5 year rule etc). For the 401k if you contributed $133.33 (which works out to $100 pretax: $100 / 0.75) and it also grew 10% you would have $146.67, and after paying 25% taxes it would give you $110, which is the exact same as the Roth IRA.”

p.s. If you want to disagree with me, or call this decision stupid, use MATH to back your claims up. If my tax bracket is not higher in retirement, the Roth benefits are significantly diminished.