HELOC on hold. Refinance here I come.

refinance

Last Friday I shared my grandiose plans to take out a home equity line of credit (HELOC) in an attempt to diversify the liquidity available to me.

That HELOC stuff is soooooooooo 1995 last week.

I’m on to bigger and better things now. And by “bigger and better” I mean, it’s time for me to play the refinance game.

 

Some Background

We put in our offer on our house in June 2013. It was accepted the day Ben Bernanke spoke publicly, for the first time, about the reserves plan to slow down Quantitative Easing. Which, in turn, resulted in mortgage interest rates taking a dramatic turn for the more expensive.

May 2013 rates were around 3.5%. By June they had jumped half a percent to 4.07%. And by July 2013 (the month we closed on our home) they were at 4.37%.

We quite literally missed some of the best interest rates in history by 24 hours, locking in at 4.125% instead of 3.5%.

Rates hadn’t moved much over the course of 2014 so refinancing was never really an option, but after my post about taking out a HELOC, some of you suggested I look in to it.

 

So I did.

 

I called a handful of banks to get an idea of what rates they were offering on a 30-year fixed refinance. Most of the large institutions (Chase, Wells, Citibank, etc) came back with a rate somewhere around 3.85% and closing costs of about $4,000 to $6,000.

I then used Zillow’s handy dandy refinance calculator to see what the break-even was on that deal. Here’s the graph…

refinance

As you can see, I would save $44 per month by taking advantage of one of the big banks rates.

But that’s only half the story.

The break-even point was really what I was concerned with. Remember, I’d have to pay about $5,000 in closing costs to get that new rate. That makes saving $44 per month significantly less exciting. According to math, it would take me 9.5 years to earn that $5,000 back. I was hoping for a break-even somewhere around 2 years or less.

Bah humbug. 

Big banks were out of the question.

 

Next up, online lenders. 

After doing some research I stumbled upon, AmeriSave, a direct lender out of Atlanta.

For my situation (credit score, loan balance, etc) they offered the most competitive rate I could find. In fact, AmeriSave blew the big banks out of the water.

They were offering a rate of 3.75% and THEY would cover all of the closing costs. Ummm excuse me?

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Do you want to know what the break even is on the loan AmeriSave was offering? Check out the graph…

 

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That’s right. The break even point starts the day I get my new loan. I get to save $60 per month at no cost to me.

 

Is this too good to be true? 

Maybe. I read some online reviews. Some positive. Some negative.

Fortunately, Girl Ninja and I have excellent credit, all of our financials easily at hand (W2’s, pay stubs, account balances, etc), and a favorable debt to income ratio. I’m hopeful this will help our new loan close with few (if any) hiccups.

I spent quite a bit of time on Friday talking on the phone, and emailing, with my AmeriSave loan officer and so far everything has been running smooth.

side note: I may or may not have mentioned to him that I am a Personal Finance blogger who will be writing about my experience. Thinking that might scare him in to taking good care of me.

The only real risk for Girl Ninja and I is having the deal fall apart, but since we have no out-of-pocket expenses associated with the loan, if things go south we will just walk away and go find a new lender.

I’ve never gone through the refinance process before, but so far it’s been pretty painless.

Here’s to hoping it stays that way for the next 45 or so days.

Standby for more.

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?

Our 2015 budget

New Year. New Budget.

Things are about to get a whole lot less exciting with this year’s budget. We’ve been growing our net worth by $50,000+ per year over the last four years, but with Girl Ninja no longer working, we’re definitely gonna be slowing things down in the “getting filthy rich” category. What else would we expect when we voluntarily walk away from an extra $35,000/year.

Fortunately, we value family over finances, so although we might not make as much this year, I have a smokin’ hot wife and an awesome kid.

 

 

Below you’ll find a screenshot of our 2015 budget coupled with our 2015 financial goals/predictions.

 

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If you want to view the spreadsheet at normal resolution just give it a little click.

Before Tax Income:

I still think it’s stupid we have our gross income included in our budget. But yet again, I leave it anyways.

It’s only purpose in my budget seems to be to remind me how much of “my” money I don’t get to keep thanks to taxes and other deductions.

You’ll notice below my gross income, I have a section titled Side Hustle. This is money I think I’ll make from random opportunities (puppysitting, odd job, etc). As you can see, at $100/mo I’m not expecting anything too crazy. A few years back I sold my PF soul and brought in five figures per year from this site, but I decided to bring it back to my roots and say “no thanks” to advertisers.

I hate when other bloggers host “guest posts” that are clearly articles they got paid to publish. Or when they mention some product or service and include a billion affiliate links to said service.

Investments:

Still planning to throw 10% of my income towards my 401k. As a government employee I have access to some of the cheapest funds in existence so it would be silly for me to not take advantage of the virtually non-existent expense ratios.

I’m planning to make our annual Roth IRA contribution here in the coming days. It’s always painful parting with $5,500 from my bank account, but then I have to remind myself that $5,500 is going to be worth a heck of a lot more down the road. I

Retirement isn’t going to pay for itself and there’s no better time to start investing for the future than yesterday now.

Expenses:

Pretty self-explanatory. I include a 10% “other” category at the bottom of the expenses section as it seems most months have unexpected or non-budgeted things come up (household stuff, a weekend trip, birthday parties, etc). Instead of making random guesses how much we spend on cleaning products or clothes each month; we just try to keep all those miscellaneous expenses less than 10% of our net income.

We also tithe/donate to charity monthly, but didn’t think it was necessary/appropriate to put those numbers in the spreadsheet.

Left Over:

This is the most important part of the budget, the green box titled Total Cash Savings Ability (to the right of the expenses section) is how much I anticipate we will be able to add to our cash reserves on top of our retirement contributions. Some years we increased our cash position by $30k or more. Nowadays we’re hoping to add just a smidge over $10,000 to our liquidity. It’s a good thing we don’t use our Net Worth to measure our actual worth.

Goals:

In the top right of the spreadsheet you will see a section for my annual financial predictions. In 2015 I’m hoping our overall Net Worth will increase to about $315,000. This would be a $27,000 increase from our current position. For my retirement accounts I’m estimating 7% growth over the year (2013 had like 25% growth while 2014 had 6.5%) and a 3% appreciation on our house. Obviously, if the markets do way better (or worse) these figures will be off. All I can do is guess.

We’re going on six years of solid improvement and as long as the Big Man upstairs continues to grant us a generous income, we’ll do our best to be responsible (and generous) with it. That’s really our only goal after all.

How do you budget? You do budget right? Anything I do with mine that you think is weird? What’s your preferred budgeting tool (Mint, Quicken, Excel, Paper/pencil)?

Oh and check out this awesome video of Baby Ninja and I beatboxing together…

 

 

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.

Net Worth update: Xmas card edition

Christmas Card

I haven’t updated my Net Worth since May. I was under the impression random internet strangers (you) stopped caring about my net worth because, well, why the crap would you care about my net worth? That said, at least one of my frequent commenters (Bob), has requested numerous times I post an update on the Ninja household finances. So this one’s for you, and only you, Bob…

 

A$$ets:

Cash: $27,623; +$5,330

Nothing to write home about here. Five thousand dollars more cash seems nice up front, but spread that out over 8 months and it becomes significantly less impressive. We are three months in to navigating life as a one income household, which obviously will limit our ability to save mega cash like before. It would be silly to think a $32,000 pay cut wouldn’t sting a little.

Roth IRA: $59,384; +$3,188

Haven’t contributed a dime myself, but the improvement in the market over the year has yielded us an extra $3,000. Not complaining 😉

401Ks, Traditional IRAs, etc: $104,338; +$14,255

Feels so good to finally break six figures in this category, it’s only taken me…what… seven years… haha. I throw 10% in to my 401k and my agency matches 5%, for a total monthly contribution of 15% of my gross salary.

Taxable investment account: $16,835; +$2,740

Even though this represents my smallest financial gain in terms of actual dollars of my various assets, it’s the one I am most proud of. In March I opened up my first short-term investment account with a $14,000 one-time contribution. I added another $2,000 a few months later, for a total of $16k in contributions. Basically this account has earned me $100/mo since I opened it. How sexy is that? Answer: SUPER SEXY!!!!

Home equity: $80,000

Once a year I ask my real estate agent to appraise our house at what he thinks we could reasonably sell our property for (not some inflated number that makes me feel good). If he’s right, Girl Ninja and I have about $80,000 in equity in our house. If he’s wrong, well, I guess I wouldn’t know since I’m not planning on selling my house anytime soon.

Obligations:

Credit Card: $2,973 (change not reflected since balance is paid off each month)

Nothing too fun here. Just standard household expenses and a ton of gifts for Christmas. Love this season, even if it can be quite expensive. Money well spent in my books.

Taking all the above in to account, this makes our current net worth $285,207. Which is about $30,000 more than last update. I’m not mad at all considering we again, lost one income, gutted our entire upstairs to the studs, and got some pretty quartz counters in our kitchen. 

Oh and as an added bonus for making it this far, here is a sneak-peak of the Christmas card I’m sending out to friends this year (the picture at the top of this post is Girl Ninja’s doing and clearly inferior)…


Christmas Card

You can see all of my net worth updates here.

I joined a gym.

I’ve always scoffed at the idea of joining a gym. All too often people join their local gym with the best of intentions only to find themselves, six months later, realizing they haven’t been to the gym for six months.

HA!

You wouldn’t pay for cable if you didn’t own a TV would you? So why the crap would you pay for a gym membership that you derive no benefit from? It just doesn’t make sense.

Seeing that my natural body type is long and lanky, I’ve never really been that in to the idea of working out for the sake of working out. I’d much rather go play tennis with a friend, go on a hike, or hit the slopes in the winter. Why pay some company a pretty penny, when mother nature offers plenty of free (or relatively cheap) options?

I’ll tell you why…

  1. I live in Seattle. It’s freakin’ beautiful here and there is no shortage of free outdoor activities. Unfortunately, the rumors about Seattle are true… it really does rain a good nine months of the year. Could I go hike on a drizzly weekend morning? Sure. Will I? No.
  2. I didn’t just join a gym, I joined an “athletic club”. This basically means that in addition to a ton of free weights and machines, members have access to 8 tennis courts, a pickleball court, five racquetball courts, four basketball courts, a pool, a hot tub, a sauna, and about 10 daily classes (yoga, pilates, spin, barre, insanity, etc).
  3. One of my good friends/neighbors joined the same gym. We’ve booked Wednesday and Sunday nights in our calendar as Pickleball or racquetball nights. Having a set schedule and someone to be accountable to, will keep me consistent. I can’t tell you how many times I’ve thought to myself “I should go for a run”, but never actually did it.
  4. Childcare is dirt cheap. For $3/hr Girl Ninja and I can drop off Baby Ninja at the clubs day-care facility and be baby-free for two hours. THREE DOLLARS AN HOUR!!!! If I had to hire one of our high school friends to come babysit they’d charge me $10/hr minimum. The below market child care virtually covers the cost of the membership. Instead of joining a gym, I like to think I joined an elite babysitting club that just so happens to provide their members plenty of fitness options.
  5. I’m turning 30 in July. Call this a quarter life crisis if you will (yes, that means I plan to live to 120), but I want to be in the best shape of my life when my 30th comes. It’s not that I’m unhappy with myself (remember I’m relatively lean), but more a challenge to myself. How fit can I get? I have no metrics by which I’ll be gauging my success. I don’t care if I gain or lose weight over the next 8 months. I have no goal to bench X amount or do Y number of pushups by July. I simply want to be proactive in being healthy and push my body in a way I never have before.

If you care to know my general plan over the next 8 months it will look kind of like this: 

  • Sunday Night: Play pickleball or racquetball with friend, followed by 10min ab workout
  • Monday: Off (maybe pool or sauna)
  • Tuesday: High Intensity Interval Training. 20 minute workout that is way more efficient than going for a run.
  • Wednesday: Play pickleball or racquetball with friend, followed by 45min arm workout.
  • Thursday: Work out back and shoulders; 1hr.
  • Friday: Another  20min High intensity interval training sesh.
  • Saturday: Do whatever I feel like and my body is up to.

So yeah, although I still kind of hate the idea of paying $50/mo for a gym membership, it’s worth it to me right now.

My goal is to hit cardio hard twice a week with the interval training to lower body fat percentage, and then lift relatively heavy (4-6 reps in a set) to encourage muscle growth and definition. I have no idea what the results will be, but there’s no way I’ll be worse off for trying, right?

And yes, in case you were wondering I took a bunch of “before” photos the other day so that, come July, I can hopefully see some significant progress. I had to put them in a hidden computer folder so no one comes across my awkward body shots. Haha.

Have you ever joined a gym? Did you/do you feel like you are getting your monies worth?