Too conservative for my own good.

Screen shot 2013-01-16 at Jan 16, 2013, 11.56.18 PM
I was chatting with a close friend a few days ago about the housing market. Big surprise right? We know what the median household income is in Seattle ($66,000), and we also know the median sales price of a home in Seattle right now is $380,000. What we don’t know is how the crap people can afford a $380,000 house on a $66,000 annual income! There are only a few logical conclusions…

1. They inherited the property

2. They received a financial windfall

3. They are house poor. 

4. They are risk takers.

If they inherited the property, or received a financial windfall, good for them.

If they are house poor, I can’t say I’m jealous of them. Nothing about living paycheck to paycheck appeals to me. I would never want to be in a position where I have to sacrifice traveling, eating out, or skiing just so I can make a mortgage payment. No thank you.

But what about the people who are just willing to take a risk. Debt has a pretty bad rap. Heck, I even named my blog Punch Debt In The Face because I think it’s so dumb. But reality is, debt can be a powerful tool for building wealth; like when one takes out a line of credit to start a business, or when someone finances a rental property.

Sure it’s risky. If the business fails, or the real estate market crumbles, you could lose everything. But how bad is that really? It’s not like you have to worry about going to jail. Maybe you get sent to collections and settle your debt for less than you owe, maybe you walk away from your house and get foreclosed on. Maybe you have to consider filing bankruptcy. While none of these things are particularly enjoyable, they are solutions.

Maybe I’m too conservative for my own good?

I mean, if we bought a $500,000 house last year, we’d have about 15% equity in the thing based on recent market appreciation. That’s a $75,000 gain in 12 months!!!

What did I do? Oh that’s right. I decided to keep saving money so we could easily afford a 20% down payment on a house priced $150,000 under what we are qualified to borrow. At last check, my savings account earned a paltry 0.75%. 

Do you see what I’m saying friends? It seems to me that the risk/reward comparison of using debt to leverage one’s financial position often favors reward. Think about it.

We buy a $500,000 house and sell it a year later for a $50,000 profit (after commissions). Or we buy a $500,000 house, watch the markets tank, and walk away from the property and let the bank deal with it (Washington is a non-recourse state). The system is set up to protect one against their own stupid decisions, so much so, that these stupid decisions are no longer necessarily stupid.

Interest rates are low, and house prices are still lower than pre-bubble days. Why not use the depressed market, and government bailouts (quantitative easing), as an opportunity to make some extra dough?

Oh that’s right, because I’m a wuss.

Screen shot 2013-01-17 at Jan 17, 2013, 12.02.52 AM

Being conservative might not make me rich, but I guess it beats the possibility of being poor?

Life’s about to get more expensive.

We’re pregnant! Okay, that was mean. We aren’t pregnant at all. I really need to stop doing that, otherwise you probably won’t believe me when the time comes for a real baby announcement. While there aren’t any babies in our immediate future, our life is about to get a heck of a lot more expensive.

For the first time since I graduated high school, I am going to be in the Pacific Northwest for an entire ski season. I’m freaking pumped. I haven’t skied more than once or twice in a season in nine years. NINE YEARS!!!!

Obviously San Diego living isn’t the most ski-friendly environment. Sure, there is Big Bear, but who the heck wants to drive 4 hours to ski on man-made snow? Not I.

 

Last night, I hopped on the Stevens Pass website to see what a lift ticket is costing nowadays. The numbers aren’t pretty:

Ugh, sixty-five smackers to enjoy a day on the slopes? Is this a joke? I coulda swore in high school the tickets were like $35. And I think gas was $1.23/gallon too. My how the times have changed.

Frick it. 

I’m going skiing…a lot. Even if that means we’ll be $1,000 poorer this winter because of it. Sometimes ya just gotta spoil yourself, ya know? Now I just have to ask the other half if that’s cool with her. The Nordstrom sale is coming up soon, so my guess is she’s gonna negotiate an epic shopping spree in to this deal. Darn you Girl Ninja and your Jedi-mind tricks!

What are some of your “expensive” hobbies? Do you partake in that activity as much as you’d like (rock climbing, yoga, photography, etc) or do you cut back in the name of frugality? How the heck do you people in the midwest survive a cold winter, but no mountain to ski on?!

Here’s a picture of me getting nasty on some skiboards a few years back:

I can buy anything I want.

As I logged in to Mint to give the ‘ol bank accounts a quick check, I realized something. Girl Ninja and I can pay cash for virtually anything we could ever want (excluding a house). Too be honest, it’s kind of humbling. I don’t feel like we can buy a 2013 Porsche Cayenne, but the reality is we could buy two. When the crap did that happen?

I guess this isn’t too surprising because if you DON’T feel like you can buy a Porsche, you DON’T buy a Porsche. Not buying a Porsche leaves more money in my bank account. Simple stuff.

That my friends is called financial peace. It’s been a long journey. A journey that started with a negative net worth of $28,000 and an annual income that was only slightly more than that. There was no windfall or inheritance. My boss never doubled my salary overnight. It wasn’t always easy; I sold my motorcycle to buy GN’s engagement ring because I didn’t want to take money from my savings account.

Sometimes making good decisions hurts. Bad.  

We are impatient people. We selectively forget it took us four years to accumulate our student loans, yet we complain when they haven’t been paid off in six months.

Patience, grasshopper.

You didn’t get in to debt overnight, and you wont be getting out of it overnight. Stay the course. Make wise decisions. Live within your means. Then one day, you’ll be able to buy anything you want.

p.s. part of me wants to go buy a Porsche now. 

p.p.s. Come win $200 over at MANteresting.

Where is my money!

I’ve been a very naughty ninja lately. I’m breaking one of my most important PF rules: Manage your money. For the first time, in a long freaking time, I don’t have a handle on my financial situation. It’s a very odd/disturbing/uncomfortable feeling….but kind of freeing too. I just need to set aside a few hours to check my bank accounts, do a little Mint reconciling, and spend some time with my TI-83. Then I should be back to normal.

Typically, I’m totally obsessed with knowing where my money is going, and when it is going there. This means if I have $5,000 in my checking account and $2,000 in charges on my credit card bill, I would immediately transfer $2,000 to my online savings account so that money can start earning a higher yield than my checking account.  This would leave $3,000 in my checking. I’d eventually send $2,000 to my credit card, to pay that bill in full when it came due, which leaves me with my reserve $1,000 for emergencies.

But I’ve been a bad boy, and haven’t initiated any bank transfers lately. I know I have a redonkulous balance on my credit card (travel, travel, and more travel) and an even more redonkulous sum of money in my checking account (approaching $10,000 I think). I know that my checking exceeds my credit card statement, but I don’t know by how much.

Right now, I’m the perfect example of WHAT NOT TO DO when it comes to managing your money. Tomorrow, I’m buckling down and figuring all this mess out so I can ease the financial anxiety I’ve been feeling these last couple weeks.

Am I going to PF hell for letting my finances get away from me? Do even you BUDGET NAZIS get a little lazy sometimes? How do you keep your money moving, even when you don’t have the time to sit down and tell it where to go? What software/method do you use? Slap some sense in to me will ya?!

I know many of you will suggest establishing automatic payments, but auto payments are not my thing…they freak me out.

My favorite nail yesterday (be warned vegetarians): http://manteresting.com/nail/83980

Paper Money is for Monopoly

Screen shot 2009-12-03 at Dec 3, 2009, 10.10.43 PMHave you heard people say “Don’t use plastic because you tend to spend more money when you do.”? That is another piece of financial wisdom I have decided to ignore. I never carry cash on me, and when I do get some greenbacks, I take it straight to the bank to deposit. A lot of PFers, Dave Ramsey included, preach the wonders of being on a “cash only” system. Their main argument is this: People tend to spend less when they pay with cash because giving tangible money tends to ‘hurt’ more than swiping a card.

I am absolutely, positively, 102% against the ‘all cash’ plan. It just doesn’t work for me. I’m a pretty disciplined dude, but dollar bills are my kryptonite. They sit in my wallet, taunting me, whispering from my right butt-cheek “Hey Ninja, why don’t you put me to use and walk over to Rite Aid and buy a tub of  ice cream?” Seriously, cash is evil. If I have it on me, it will most likely be spent on unnecessary, unbudgeted, and unsmart things (I love making up words).

For me, it ‘hurts’ a zillion times more to put it on my credit card. I pay my CC balance in full each month. Do you know what that means? I get to watch the damage accumulate over my 30 day billing cycle. As the balance grows, I become more and more frugal. Paying between $1,000 to $1,500 each due date, totally motivates me to minimize my spending so I have to pay less on my CC balance. Seeing the damage in its entirety, as opposed to incrementally, influences wise spending choices.

I’ll be honest. I don’t have the discipline (or the desire) to work an envelope system. With the envelope system, you put X amount of cash in the “groceries” envelope and use that as your guide for the entire month. If you run out of grocery money, you starve (or borrow from another category envelope). If you have the discipline to stick to your budget ALL OF THE TIME, than the envelope system is definitely something you should consider. But if you haven’t noticed, I’m kind of a bada$$ and I sometimes like to spend outside of my budgeted parameters. Envelope system = good for people who have a lot of discipline. Envelope system = ineffective for 99% of the US population.

What about you all, Do you prefer using cash or a card? How much cash do you keep on you at any given time? Do you think you spend more when you swipe? Anyone out their like-minded and struggle to keep cash in their wallet?

Me vs You

Apparently I am the only person here that thinks there is more to life than saving, investing, and/or creating passive income streams. While those things are great and all, I hardly want to give up what are arguably the best years of my life because I’m chasing some “dream” I don’t really want.

I’m assuming that you all suggest I save more, invest more, and create multiple streams of income so that one day I can have the financial freedom to cut back on work, possibly even retire extremely early. Let me stop you right there. I don’t hate my job nor do I care to be wealthy.

Multiple income streams:

Girl Ninja and I don’t think to ourselves at night, “We need to make more money.” Actually, we are completely content with what we have. Contentment is a beautiful thing.

I understand multiple income streams help protect oneself in the event of a job loss, but she’s a teacher and I work for the fed. Fortunately, this means we have a good bit more job security than those in the private sector. If we don’t need more money coming in, and we both enjoy our rather stable jobs, I don’t see an advantage to an income property or a taxable investment account. In fact, all I see are potential headaches and emotional roller coasters.

Save more:

Could we keep saving until our bank account read $120,000, $150,000, or $200,000? Sure. But what’s the point? I’ve already chronicled why I would NEVER pay cash for a house, so that’s not really incentive (side note: you shouldn’t pay cash for a house either).

I hope you all remember that the only reason we save is so that one day we can spend (or give that money away). Why do we need $200,000 in cash? Seriously, I don’t get it. Part of me thinks people want me to save more cash because it sounds like the responsible thing to do. Let me turn the tables, How many of you have $150,000 in a savings account right now?

Invest More:

I got my job six months after I graduated college. Since day one, I’ve steadily contributed 15% or more to my retirement. Since I have absolutely no desire to retire with tens of millions of dollars in the bank, I don’t really see the need to go crazy. I said I’ll likely up my retirement contributions to 30% once we reach our $100,000 savings goal, but I don’t really see a reason why I should be putting more than that away? Unless of course I want my future dentures, wheelchair, and catheter to be made out of diamonds. Barring some major catastrophic event, I think a 15%-30% investing rate over the course of a 40 year career should be just fine.

Conclusion:

I do realize however, I was being dramatic in my last post and it’s very likely many of you took me literally; Thinking I was going to buy a new flat screen TV every month just for the sake of doing it. That’s hardly the case. That post was simply my way of acknowledging, that for the first time in my personal finance journey, I’m completely content. I’ve stressed about student loans, emergency funds, down payments, and retirement for far too long.

To be clear: We will still put our excess discretionary income in to a bank account (or taxable investment account). We will continue to save for our future house (and the unexpected headaches that come with homeownership). We will make sure we have enough cash on reserves to take care of our not-yet-conceived children. But mark my words, once we reach our $100,000 goal… you’ll see a whole new side of Ninja 🙂

I want to marry 68% of you.

An updated throwback that should piss half of you off…

I’ll never understand why some married couples keep their finances separate (yes, that is me quasi-judging some of you). Maybe it’s the traditionalist in me, but when I asked Girl Ninja to marry me, I asked her to marry ALL of me. This includes (but is not limited to) my sense of style, my obsessive compulsive behaviors, my smelly farts, my sucky artwork, and of course my finances.

Before our wedding, I wrote a about how Girl Ninja was not only marrying me, but also my student loan (I think at the time I still owed about $10,000 to Sallie Mae). Whether she liked it or not, my debt was now her debt. A handful of commenters, however, disagreed. They felt that since I had acquired my student loans before I even knew Girl Ninja existed, they were solely my responsibility to pay back. One comment read, “I agree also that GN should have no part of your student loan. That was contracted before your marriage and is solely your obligation.”

Alright commenter, I’ll play your game. Going in to the marriage I was making $63,000/year. Girl Ninja was hovering around the poverty line bringing in about $20,000/year. My income was over triple hers. It seems that if I followed the logic of the commenter above and kept our finances separate, I would then have three times as much influence in our financial decisions, or at the very least, should be allowed to spend three times as much on miscellaneous categories like entertainment and dining out. If she has no obligation to my pre-marriage debt, what right does she have to my pre-marriage income? You can’t have your cake and eat it to.

I know Girl Ninja had no legal obligation to my debt, but that doesn’t mean she didn’t have a marital obligation to it. The second she said “I do“, my debts became her debts. My income, became her income. And my love for California burritos, became her love for California burritos…oh wait…not so much on that last one, but you get the point.

I don’t even know how separating finances in a marriage would work. Do you literally say “Alright honey, you need to transfer $50 in to my checking account ’cause I just paid our cell phone bill”? Do rent payments get split right down the middle since you both share space equally or does the larger income earner have to pay a larger portion? How would it have even been possible for me to pay my debts back separately, since any money put towards that debt effects us equally regardless of whether it comes out of my account, her account, or a joint account? What is the point of separating accounts from your spouse?

Someone enlighten me? 

p.s. if you weren’t aware, I actually ended up paying off my student loans about a month before our wedding, so Girl Ninja never had to worry about Sallie Mae 🙂

p.p.s. I’m super pissed at Girl Ninja right now as she just committed the cardinal sin in the Ninja house. She put the toilet paper on the roll facing the WRONG way! Ugh, it ruined my night 🙁