The first $100,000 is the hardest.

I’ve been feeling a little nostalgic as of late and have been rummaging through old files on my computer. That’s when I happened upon this gem of me back in my glory days….

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Look at those thunderous calves. Those luscious locks. Those chubby cheeks.

It’s no wonder Girl Ninja desperately wanted to bear my children.

After laughing at my baby pictures for a good 20 minutes, I started clicking through my old Excel spreadsheets.

These old spreadsheets taught me a very valuable lesson. A lesson that will be relevant for any of you who are in the early stages of getting your financial crap together. The lesson is this…

The first $100,000 is the hardest. 

I mean check out my net worth progression over the last seven years.

NW end of 2008: $18,617

NW end of 2009: $28,793

NW end of 2010: $63,714

NW end of 2011: $114,622 (first full year of dual income)

NW end of 2012: $168,878

NW end of 2013: $234,881

NW end of 2014: $288,180

As you can see it took me about four years to build up a net worth of $100,000. But then it only took two years to increase it another $100,000. And if my 2015 projections are close, these last two years will yield another $100,000 increase (which isn’t bad considering we gave up our dual income status).

The power of compounding is no joke. 

I mean think about it. If you have $10,000 invested for retirement and the market goes up 10% on the year, you’ve increased your net worth by $1,000.

Whoop-de-freakin-doo.

But if you have $100,000 invested, you see a $10,000 jump.

Or better yet, once you have a cool million invested, a 10% jump just means you earned yourself $100,000 without doing a darn thing.

The rich really do get richer… Because they let their money make money. And then they let the money, their money made, make money.

How confusing and awesome and wonderful and rad and bodacious is that!!!!

At 29 years old, I’m pumped I’ve gotten a taste of just how sweet building a nest egg can be.

Hopefully my story can motivate a few of you to keep on chugging, even if things seem like they are moving slower than you prefer, don’t give up. Your future you will thank you for it.

Cheers to your first (or next) $100,000!

It’s time for a calculated risk.

Here I am, seven years in to my personal finance journey, realizing my relatively disciplined approach to our finances has caused us financial harm.

Allow me to share with you one of the most recent examples of how “doing the right thing” came to bite us in the butt:

In 2010 Girl Ninja and I decided we wanted to buy a house one day. We knew said house would probably cost us around $400,000. We knew amassing a 20% down payment was the financially responsible thing to do.

So we did exactly that.

We spent three and a half years throwing tens of thousands of dollars in to our savings account (late 2010 to early 2014). In hindsight this was absolutely the wrong financial move for a few reasons.

1. Instead of banking nearly all of my discretionary income. I could have saved half and invested half. My savings account was only earning me 1%, meanwhile the stock market during this same time increased by 60%.

2. Because we were adamant on waiting to buy a house until we reached the $100,000 savings threshold, we missed the bottom of the real estate market. Had we bought 1.5 years earlier, when we had about $60,000 in the bank, we still could have put down 15%, but saved probably $30,000 on the purchase price of our home.

3. And just like we missed the bottom of the housing market as we tried to hoard cash, we also missed the bottom in regards to mortgage interest rates. We locked at 4.125%. Had we bought a year earlier, our rate would probably be about 3.4%, saving us $120/month… every month …for thirty years.

 

Ouch!

 

So yeah, I thought I was smart by waiting to have $100,000 banked to buy a home, but that clearly wasn’t in my best financial interest.

Now I know you might be thinking to yourself “Ninja, hindsight is always 20/20.” 

You’re right.

 

But my foresight was also 20/20. 

In 2010 I was saying the crappy market didn’t scare me because I knew over the long run it goes up.

Pretty much everyone knew by 2012 the real estate market had probably bottomed and was on its way up. Here’s a blurb from one of my late 2011 articles

The housing market bubble burst in 2007/2008. It dropped hard and fast for a long, long time. Over the last 12 months, however, it’s remained pretty steady  and in my opinion is probably pretty close to a bottom (if not already there).

We knew that a 3.4% interest rate was the lowest in history.

I mean it’s like the real estate gods had aligned the stars perfectly telling anyone with a stable career and a decent income “BUY A FREAKIN’ HOUSE NOW!!!!”

I wish I listened.

 

Never again friends. Never again.

It’s time I start taking calculated risks in an effort to further improve my financial situation.

In the next week or so Girl Ninja and I plan to head to a local credit union and apply for a Home Equity Line of Credit (HELOC).

“BUT NINJA YOU ARE SUPPOSED TO HATE DEBT! Why would you consider taking out a line of credit” – You guys.

Diversification my friends.

I’m sick of my cash earning 1% in our savings account. The time has come to seek higher returns.

 

Our new plan is as follows:

…Keep no more than $10,000 in our savings account (this is about 3 months of expenses at current spending levels).

…Move all remaining savings in to my taxable investment account where I will increase my market exposure.

…Open up a HELOC as a secondary emergency fund. Gaining access to about $50,000 if needed.

…Profit.

You might be wondering why I’ve decided to use the HELOC as a back-up emergency fund instead of my Roth IRA, or even a 401K loan.

 

Again, the answer is diversification.

Let’s pretend I have a $20,000 emergency. My roof caves in. Or maybe that Unicorn I’ve always wanted to buy comes up for sale. Or maybe Girl Ninja is kidnapped by some Canadians and a $20,000 ransom is requested.

I can cover half of this emergency by liquidating my $10,000 e-fund. I could pull another $10,000 from my Roth IRA, or taxable investment account, without penalty. Or I could borrow $10,000 from my 401k at 2.25% interest.

But what if the stock market has been having a really crappy go at it? Say the Dow is down 25% on the year like it has been in the past.

You think I’m going to want to sell these stocks and lock in a 25% loss?

HECK NO!!!!

This is where my HELOC could actually be a blessing. It allows me to mitigate potential crashes in the stock market. I’d simply transfer $10,000 from my HELOC to my checking account. I’d rather pay 4% on this loan, over 25% in market losses any day.

 

“But Ninja, what if the markets are up 25% like they were in 2013.” – You guys.

Well then I borrow the remaining $10,000 from my taxable investment account and lock in that sexy appreciation.

 

Duh.

 

Just because we will be opening a line of credit doesn’t mean I have to use it. Just like you don’t have to use that credit card sitting in your wallet.

Opening up a HELOC, and diversifying my cash flow options, seems like a no brainer. I’m super pumped to finally be at a place where Girl Ninja and I can decrease our cash reserves, and ramp up our investment portfolio.

Now quit wasting time and go get yourself a HELOC. <—joking

 

What do you think of my plan? (bring it on haters)

What do you think about HELOC’s in general?

Have you reached a point, like me, where you’ve realized that your conservative nature has cost you big bucks?

It takes a year to make your house a home.

Been awfully quiet around these parts lately, eh? Yeah. I’d apologize, but to be honest, I’m not sorry. Been keeping myself busy with lots of fun things, and as a result blogging has kind of sat on the back burner. Sorry not sorry? 

We moved in to our home September 2013. A month after move in, I gave you a tour of our new digs. And here we are, a little over a year later and I’m going to give you, yet again another tour of Casa De Ninja.

Why a second tour?

Well, because the tour I gave you in October 2013 included a modge-podgery of furniture items and decorations we had accumulated over the years, nor did that tour include many of the improvements we have made to the space since. Now that we know we will be staying put for a while, it was time to be a “big kid” and transition from cheap bargain furniture to a more mature taste (that’s not to say we still don’t appreciate an Ikea run every now and again).

I’ll start by showing you before pictures of each room. These before pics are from when we toured the home, before we took ownership. Hopefully you’ll appreciate the changes we’ve made.

Living room before and after:

Clearly the sellers had moved most of their furniture out and staged the space minimally and super impractically. Pretty sure it would be impossible to watch TV while sitting on the couch in that shot without giving your neck a serious workout. Also, the previous owners had a serious knack for green paint. Every room in the house had a different shade of green. Needless to say, there isn’t a green wall in the house anymore.

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Cosmetic changes to the room were pretty simple. We painted the walls a light grey and this last weekend I got out my miter saw and finish nail gun and replaced all our cheap-o window trim with something that fits better with our 85-year-old home’s bones. Our entertainment center used to be our coffee table, but with Baby Ninja, we decided to be coffee table-less and repurpose the furniture piece. No coffee table is one less thing for Baby Ninja to bonk his noggin on now that he is crawling.

Our living room isn’t large by any stretch of the imagination, but we sure do love the space. Oh and did you notice we got our San Diego roots up on one wall, and our Seattle roots blinging on the other. I have a lot of love for these two cities.

The Dining Room and Piano area (before):

Has now become the Piano area and Work Space area:

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We inherited the baby grand piano when my grandma passed away four years ago. We couldn’t fit it in our 600 sqft San Diego condo at the time so we put it in storage, where it would stay for years and years, until we bought this house. Girl Ninja grew up playing the piano and I believe she plans to FORCE teach Baby Ninja to play as well.

 

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How boss is that desk? I freaking love it. It’s sexy, sophisticated, and a heck of a lot more manly than the white chabby-chic desk we had before.

Fun fact on this desk.

I bought it and the chair for $250 on Craigslist this summer, and posted it the next day for $500. I had two people make full offers within a day of posting, but Girl Ninja got pissed and told me I wasn’t allowed to sell it. I’m always hustling.

The picture hanging on the wall to the right of the desk is a picture I took of Petco Park when we lived in San Diego. It’s probably the best picture I’ve ever taken, hence the reason it’s hanging up.

The breakfast nook is now our dining room:

– Sweet sun clock bro.

– Sweet track lighting bro.

– Sweet green walls bro.

 

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Replaced the light fixture. Painted the kitchen light blue. Added a chalkwall, because those are apparently all the rage? Baby Ninja has his own seat at the table now which is interesting. And that picture frame with the Seattle print is actually an original 85-year-old window that we salvaged from our upstairs remodel.

Kitchen Before and After:

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This is definitely where we made the most drastic changes. Changed out all the light fixtures. Painted the cabinets white. Added cabinet hardware. Updated to stainless steel appliances. Got rid of that awful pot rack that choked off the room. I added trim to the peninsula to make it look a little more craftsman-y. Ripped out the tile counters and added a sexy Quartz. And I took my first stab at tiling by adding a subway tile backsplash.

Fun fact: I got quoted $1,200 by our counter guy for the backsplash work. Guess how much the tile cost me? Sixty freaking dollars. Now you know why I did it myself. Booya for saving $1,100 by DIYing.

A few more kitchen before and afters:

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We are super happy with the way things have turned out, especially considering the only work we hired out was the counter install. Sweat equity is the best kind of equity to build and I’m hopeful our hard work will benefit us financially in the event we decide to sell.

We still have work to do in our bedroom, the basement, and outside, but hey…we aren’t going anywhere so what’s another couple years before we knock those projects out, right? Just don’t tell Girl Ninja it might take that long 😉

– Have you dabbled in some DIY projects?

– Learned a new trade or skill recently?

– Would you be interested in me posting simple and concise tutorials on how I taught myself to do trim work, tiling, electrical, and other random house stuff? (feel free to say no, my feelings wont be hurt) 

This marriage is NOT equal.

I’ve blogged many a times over the years about my Roth IRA and the quasi-obsession I have with making sure I always max it out. Since I love my Roth so much, you would think I would be just as eager to open one up for Girl Ninja. Not so much the case. Homegirl ain’t got no Roth. 

Why you ask?

– Is it because I hate her and want her to be poor when we’re old?

– Is it because I want her to be financially dependent on me so she doesn’t leave me for some other dude?

– Or is it that I’m lazy and just haven’t gotten around to it yet?

I pick option D…. None of the above. 

We, the Ninja household, personally believe starting a Roth IRA for Girl Ninja would be overkill. Yes, overkill. Here’s why…

1) I believe investing 15% of our gross investment for retirement is sufficient.

Could we invest 20%, 25%, or 30% of our income? Sure. But why do we need $10,000,000 waiting for us when we are 65? I’m a firm believer there is a such thing as OVER-investing. 15% diversified through a handful of Vanguard Mutual funds should do just fine over 40 years.

2) I believe historical averages will remain relatively consistent.

Sure the markets could tank and the returns we’ve seen the throughout history could go away. But if they do, guess what? My retirement portfolio is going to be the least of my worries. Having food, water, and ammunition would be top of my priority list.

I mean, most Americans don’t put away 3% let alone 15%. I should, by default, be better protected than the vast majority of my peers. If my 15% invested over 40 years can’t get me by in retirement, I don’t think 20% or 30% would have made me any better off. How you invest (diversifying, consistency, etc) is often more important than how much you invest.

3) We aren’t being reckless.

If anything, we are probably saving too much. If there is such a thing. Sure, we could always save more, but at the same time at what cost? We only get to be in our 20’s once. We only get to have Baby Ninja be a baby once. Occasionally we splurge and doing something nice, but for the most part we keep our nose down and grind. I’m not one of those PF bloggers that will make you feel horrible about driving a nice car, going on vacation, or choosing a career path with a modest salary.

I get that many of you worship your retirement accounts and contribute excessive amounts to them religiously. That’s great. You’ll be hella rich when you’re in the last few decades of your life.

That’ just not how we roll or what we want for ourselves.

Retirement is cool, but so is saving, investing for the short-term, and…GASP… enjoying some of our hard-earned money.

I’m in Ireland

For the rest of the week. Baby Ninja knows no different.

 

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Minimal risk, big reward.

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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 mortgage 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 in 2012 we’d have about 15% equity in the thing based on recent market appreciation. That’s a $75,000 gain in less than two years!!!

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 were 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.

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

No easy way around extra paychecks

For those of us that get paid every two weeks, we face a battle of epic proportions. Managing a budget is no easy task, especially when all months AREN’T created equal. Ten months a year we might bring home $4,000, but two months of the year we bring home $6,000. Why must such cruel things exist!?

Although an extra paycheck is definitely a good problem to have, there is no denying it adds a little hiccup to the budgeting process. Us “three paycheckers” really only have two options…

  1. We can mentally break up the two extra paychecks. Say for example you take home $2K every two weeks. Instead of budgeting your expenses around $4,000/month, you can pretend you make $4,333/month (since that is your average monthly income over the course of a year). In my opinion this method sucks. It takes a lot of work, discipline, and patience. It also causes you to spend money you don’t necessarily have yet. My first third paycheck month doesn’t come until March each year, so by this rule, I’d be spending money in January and February that I have not yet received. It would be like spending your tax return before you actually got it. Sure, you know it’s coming, but it’s best you wait for it to get deposited in to your bank account.
  2. I like to pretend the extra paycheck is a bonus. If you take home $2,000 every two weeks, I recommend you budget your expenses around a $4k per month income. When March and August roll around, you suddenly get an extra $2,000. Two thousand dollars that does not have a budgeted purpose. You can spend it on a vacation, a unicorn, or even be responsible and open a Roth IRA. Booyah for unicorns and responsibility!

If you haven’t noticed…it’s almos August, which means I’ll be getting an extra paycheck next month. Perhaps I will buy a few thousand McChickens from McDonalds, maybe I’ll give this extra paycheck to one of my lucky readers, but most likely I will be boring and throw it in the good ol’ savings account. Totally un-sexy… I know.

I know I’m not the only person that gets paid every two weeks. How do you manage? What works best for you!?