Saturday, February 17, 2018

Here's What Our Financial Recalibration Looks Like

One thing we've realized over the past 10 months is that budgets and debt repayment plans require periodic recalibration. Emergencies happen. Cars break down. Jobs come and go. Living situations change. Financial situations fluctuate, meaning that the achievement of our long-term goals depend in part on our ability to adapt and be flexible.

When we started this process in April of 2017, we were working with the following constraints:
  • One of us had a somewhat unpredictable contract job
  • One of us had a regular but low-paying job
  • We were repaying three credit cards, two student loans, and a car loan
At that time, we were able to allocate a total of $1600/month to our debts and had calculated a Debt Freedom Date of March of 2022.

By last September, our situation had changed:
So we decided to ramp up our debt allocation to $2200/month, giving us a modified Debt Freedom Date of November 2020.

Now our plan and budget are changing again, and for several reasons:

  • We paid off Credit Card #2, which leaves us with one more credit card and two student loans
  • We broke our lease (via our tax refund) so that we can move from our raucous, sleep-inhibiting apartment building into a quieter but more expensive duplex 
  • My new job pays more...
  • ...but my health insurance is more expensive...
  • ...and we're putting slightly more money into both retirement and an HSA

So what does all of this mean in terms of actual numbers? 

Here's our totally transparent breakdown of the old budget versus the new one:

In sum: rent and health insurance are going up. We'll be contributing slightly more to long-term savings. Our debt repayment allocation is going down. 

Sidenote: We are well aware that the rental is expensive, though for our ridiculously-priced city and given its ideal location (right by a trail and within walking distance of school and work), it's considered reasonable. I'll write another post in a few days that explains our decision to keep renting instead of taking the leap into buying.

Here's what all of this means for the big-picture debt repayment plan:

This new plan is only a couple of months off from the old one in terms of the projected payoff date.

Of course I'm hoping that we'll be able to pay it all off sooner than that, and I think we will, especially if we receive work bonuses. But regardless, this new plan seems reasonable to me because it reflects goals and values that have become increasingly important to us over the past year:
  • Even though it's expensive, we love our community, and we're willing to pay the price to live here.
  • Our home is our haven. We value a quiet place where we can truly relax.
  • We want to become more dedicated to saving for the future.
  • We're determined to pay off this debt.
No doubt all of this will change again at some point. It's probably inevitable - because life - and that's okay. We can be flexible. We can adjust. Our pace of debt reduction might fluctuate, but we're moving forward nonetheless.

What about you? Have you recalibrated your finances lately, and if so, what prompted you to do so?

Friday, February 9, 2018

The Biggest Monster Debt Payment Yet

Yesterday was a big day in $76K Land, and here's why:

The above graph is a Personal Capital-generated visual of our credit card debt (y axis) versus time (x axis). Actually, it's incomplete: it shows our consumer debt load since November 2017. In reality, we started paying off the credit cards last April, back when the total balance was more like $23K.

Here's a more complete (though no less awkward) graph. This one starts in June 2017:

The arrows indicate where we just made a monster debt payment of $3000 (thanks to a big side hustle for which I finally received my check, and yes, we put every single dime of it towards debt), bringing our balance from $14,700 to $11,700! We've made some big payments before - when we paid off our car, for instance, and when we ditched Credit Card #1 - but this is the largest one to date.

Here's where our credit card balances stand now:

CC #2: $1,524
CC #3: $10,218

We should be able to pay off CC #2 within the next few weeks via our normal repayment schedule. As for CC#3, we're waiting on a tax refund that should dispatch a major chunk of it. The goal is to bring our total credit card balance to zero by the end of April. 

Sidenote: I feel compelled to point out that the first phase (i.e., nearly a year) of debt repayment was painfully slow and uneventful. The balance has decreased so incrementally that it's sometimes been hard to celebrate the small victories. Only after we assessed and stabilized our financial situation, established a workable budget, took advantage of some side hustle income, and built up some snowball-y momentum did we start seeing some real progress. It feels amazing.

With our student loans, we still have a long way to go... but the journey seems doable now.

Tuesday, February 6, 2018

Anatomy of Our Current Housing Dilemma

If you're following us on Twitter, you know that we're currently dealing with loud, inconsiderate neighbors in the apartment below ours. They blare music at night, hold thunderous conversations, interrupt our sleep, and basically make our home feel like a place we want to avoid. Our lease ends in June, so we're looking at another five months of living on edge.

If you've ever gone through something similar, please accept my sympathies. Having your space besieged by noise, especially when you're thisclose to drifting into dreamland, is both physically and emotionally exhausting. 

I have little control over what my neighbors decide to do: we've talked to them, we've contacted management repeatedly, and we've filed a complaint with the police, so we've kind of exhausted our options. Thus, I'm trying to focus instead on what we can do and what our options are.

The first thing we're trying to figure out is whether we want to stick out our lease or break it early. 

If we stay, I will probably continue to have nightly heart palpitations as the music starts blasting through my floor just as I've closed my eyes (or - probably a better choice - I will force myself to take up yoga and meditation). Money-wise, though, it's a strong option, and lately I've been surprised at just how motivated I am by our financial goals. So sticking it out is certainly not out of the question.

If we break it early, we'll have to pay rent until the landlord finds a new tenant. We're fairly certain he'd be able to do so within a few months at most. Our apartment is in an excellent location, has some gorgeous views of the surrounding hills, and is reasonably priced (all huge reasons we decided to lease this abode in the first place, and all reasons we were hoping to stick around for several years). But we'd be on the hook for up to $7000 in rental payments, and that's... a lot of money.

Regardless, we know we'll be out of here by June, so the question at that point is whether we should rent elsewhere or purchase a house.

The argument for purchasing is that we're committed to living in this town: we're not going anywhere. It's likely that a mortgage would be equivalent to (or possibly even less than) what we'd be paying in rent. The problem is that the housing market here is limited, expensive, and exceedingly competitive. The average price of a single family home is around $400K, and many folks offer to pay in cash to sweeten their bids (that is so far outside the realm of my own experience and abilities that I can't really wrap my mind around it). Our credit scores are excellent, our income is solid, and we're eligible for a VA loan, but we don't have a lot of money for a down payment. If we do decide to buy, we're likely looking at months of searching, multiple offers, and multiple rejections.

The whole thing sounds like a complete circus, and not in a good way. Part of me is so annoyed with the current housing market that I don't want to deal with it at all.

If we opt to rent again, we'll definitely be looking at townhouses or single-family homes. No more shared walls on all sides for us. Rent for such properties is expensive, and for what we need, it's likely to exceed a mortgage payment. There's no doubt that rent would increase on a yearly basis. On the other hand, we won't have to deal with maintaining or fixing up a new home, and we can find something that comes with all necessary appliances. 

Sometimes I wish we weren't so invested in such an expensive community, but here we are. We love our town. These are the choices.

If you have advice for us, I'd love to hear from you. Have you ever been in a similar situation? What was your course of action?

Here's What Our Financial Recalibration Looks Like

One thing we've realized over the past 10 months is that budgets and debt repayment plans require periodic recalibration. Emergencies ha...