What do you spend money on?

There is an article in the New York Times Today about how spending money on experiences makes you happier than spending money on stuff (including real estate).  I feel like I've known this instinctively all along. In my 20s, when I didn't save outside of my 401K, I spent all of my money on traveling and going out to dinner with my friends. I had no fancy clothes, purses, furniture or shoes.  Just a lot of fun. This used to depress me. In my early 30s I thought, "I spent all this money and I literally have nothing to show for it." But now I look back fondly on that time and I know I always will savor those memories of early adulthood freedom in NYC.

I've continued the trend (well, not spending all my money luckily) but spending on experiences.  I just took a look at my spending for the year so far. The top categories (outside of the mortgage) are Travel and Food and Dining, with Health Care in 3rd.  Health Care expenses for me are seeing a therapist I really love and learn from and my acupuncturist which makes me feel amazing and helps me keep a chronic illness under control. When I do buy stuff, it's mostly sporting goods I need to practice my favorite sports/hobbies with my friends.

So yay to not spending on stuff, but yay to spending on fun experiences with friends and family and really enjoying life.

How much do you save?

I've been reading Mr. Money Moustache a lot lately. I love his blog and feel like it's really the only PF blog where I am actually learning new things. Anyway, as his readers know, he advocates saving like 50% of your pay. Um, wow. And  I thought I was an aggressive saver!

I've never actually added up about how much I save each month, so I wanted to see what % I save. In various ways (pre-pay mortgage principal, cash direct deposited to my trading account, and cash deposited to my checking account) I save about 15-20% of my monthly income. It's not bad, but it's not great. The only thing that makes me a super saver is my bonus.  I usually get a bonus in December (praise be to the Gods) and it's a good chuck of my income. Last year 50% of my gross was paid out in that one check. And I save the whole thing (except when I spent it on my downpayment for the apartment last year). So in reality I save a lot more than 20%, but I want to try to get better at saving on the day-to-day level. I guess it's just more challenging because so much of my compensation is paid out at the end of the year. It's good practice though for if I ever had to take a lower-paying job. I know I can successfully live on half of my salary and still save 20%.

This month I've been traveling a ton for work which means I save a lot on food expenses. My monthly spending for June had been very low, until I booked an international vacation for December. But the saving wasn't for naught, because I was able to pay for it all out of my salary and not have to touch savings.

I'm curious about doing my networth update for Q2. The stock market was humming until about June. Unfortunately I think I'm going to end up down or flat on my investments for the quarter, and I haven't saved a ton of cash, so I think I'll be below average on my quarterly networth increase, but we'll see.

New Way of Looking at a Goal

So over the last week or so I've gotten really excited about a new strategy that I can use to reach my ultimate financial goal: to payoff the mortgage. When I first got my mortgage I thought I would pre-pay in order to shave years and interest off the mortgage. So I set up auto pre-pay of $500 a month, which essentially doubles my principal payment to about $1,000 a month. However, I also thought I would pre-pay a big lump sum each January post-bonus/end of year. The more I read and talked to my Learnvest adviser, the more I realized that pre-paying the mortgage is not actually the best strategy.  Instead, I should invest the money. I like this idea because it gives me liquidity in case of an emergency. That said, I hadn't found a way to track how much I would need to save over how long a time period to reach this goal. Then this week on Mint.com I was like "wow, what if I just create a mortgage-payoff goal" which I did. I input my mortgage balance as the amount of $ I want to save for the goal and then I linked all of my non-retirement savings accounts to the goal. I have a balance of about $200K in those accounts. I've got about $329K to payoff on the mortgage. Hence I need to save about $129 to pay this off. 

Then today I started thinking about the power of compounding, because this money is invested. Some in CDs, but some in my brokerage account. Sooooo this Mint goal isn't taking into account investment gains/interest. So with my planned monthly contributions and any investment gains/interest, I should be able to reach my goal a lot more quickly. I have a goal of 10 years right now, but when I play with savings calculators, I can possibly reach this goal in 5 years if I earn returns of 5%. Which is a little aggressive because some of this money is in CDs paying 2%.
Anyway, I just feel much more energized about my savings outside of retirement now, because I am saving for a purpose and each month I'll be able to see, thanks to Mint.com, exactly how much closer I am to reaching my goal.

Getting Serious about Saving

This year was about spending. A LOT of $. Some of that I feel okay about because it was in theory an investment (in my apt.) or at least I view it as prepayment of rent for the future.  The rest of  my spending I feel a little less okay about. I had many one  time expenses that I don't foresee having to replicate next year. The furniture and services that came along with the apt. purchase (although I would like to hire an electrician to install a ceiling fan), a $2600 wedding gift to my brother, new toys for my latest hobby/passion.

Next year, I want to get a lot more disciplined about saving and investing. While I track my budget diligently, I  realize I don't have a target for savings. I just hired LearnVest to help me develop a financial plan for saving and investing and I told my adviser I can commit to investing $500 a month. That is balanced with the $500 a month I prepay my mortgage. Ideally I would like to save another $500 a month in just straight savings. On top of my 401K which I max out, that would put me in a good place, regardless of bonus.

I am finally getting around to reading Your Money or Your Life, which I know has changed many people's lives. So I'm excited to see how that affects me. Maybe it will make me amp up my plan even more.

Financial Advisor

I am finally checking off a big to do on my financial housekeeping list: I hired a financial planner. I am actually working with LearnVest, which seems like a great value and I love that it's aimed at women.  I am speaking to my adviser for the first time tomorrow and can't wait to get started! I really want help trying to figure out if I should tackle the mortgage or invest, although my mom helpfully pointed out that I can do both at the same time. Again, everything in moderation. It's a hard lesson to learn, as I find I want to do something whole hog or not at all.

Net Worth Updated

I had no idea how this would be this quarter, based on adding a big new asset and liability (apt and mortgage) and all of the big expenses like the closing costs of about $17 or $18K.  It turns out I'm down about $19K. If I had done this update even last week it would have been even more, but the market has made a nice little jump over the last few days (at least my accounts have recovered a little of their losses). The stock market remains extremely frustrating. I think if I checked my account balances now versus a few years ago, they would pretty much be the same. Which makes me think, why am I holding these stocks? I've owned the same index funds (for the most part) since 2003. 10 years. Of doing NOTHING. Now that I have a mortgage it seems it would be better served putting the money against that. But I do need some liquidity and I guess I keep hoping against hope that someday my account balances will grow.

This net worth update will be a new baseline/normal. My first quarter as a homeowner. So next quarter I will be able to see how much I am saving/any gains I am making. I shouldn't have any big expenses, just continuing to furnish the apt. but that's basically coming out of my paycheck, not savings. I'm putting off any really big projects like the built in bookshelves I've been considering.

So here's to a fun, low-key, low-spend summer.

All Settled

Finally I am fully moved into my new home and have all of my new financial accounts set up. The home buying process took forever i.e. about 4 months. And then getting all of my new accounts set up like the mortgage (it got sold immediately to a new servicer), new credit cards I've opened to purchase home items, new utility accounts, etc. has taken this long. I just now, a month or so into living in my new place, feel like I finally have a handle on it.

Besides home furnishing expenses (I'm not going too crazy, but there's a lot of even small things that I need like garbage pails and area rugs not mention window treatments), I just today saw my electric bill. At my old place, they usually averaged around $30 which is VERY low I know. The new bill is $90. But now I have a dishwasher, central AC and a washer and dryer, so that's the difference. However, I barely have any lights in my new apt yet (everything I want seems like it is on back order) so I wonder if this will go up even more once I actually have some lights at night.

I've decided to make additional $500 a month pre-payments towards principal. I really feel like I want to chop down the mortgage balance ASAP! I have to balance this desire with the need to keep some cash on hand, should I ever need it. Luckily the developer is still making all repairs to my apt. I've already had a plumber here 2x, an appliance repair person and the developer. That's one benefit of buying new. The cost of buying new was the transfer and other taxes. My closing costs were about 17K. Yikes! NYC is crazy with the taxes, as usual.

So far I like being a homeowner, even thought I really feel like I am just renting from the bank. I guess I own about 26% of my apt. at this point. But I hope to own a lot more over the next few years!

Still Waiting

It's May, and I am still trying to close on a condo I had an accepted offer on in early Feb. The mortgage broker I used took my application to a big bank. That bank keeps demanding more and more documents from the condo developer. I also think the mortgage broker has not been on top of it. He certainly hasn't been good about updating me. Meanwhile, I feel like my life is on hold. I haven't given notice to my landlord yet, my house is half packed and I have no idea when I am moving. I found a new mortgage lender and he seems to be a total hustler (in a good way) and I'm hopeful I can close this puppy mid-month and move by the end of the month.

Homebuying Process

So since I spontaneously decided to buy an apartment and had my offer accepted at the end of January, I have been sitting around waiting to get a mortgage. I have a commitment letter from a bank now, but still no closing date. The property appraised last week at the asking price, so everything has been moving along smoothly, it's just been so slooooow. I'm happy though, as I locked in at 4% on my mortgage and a day or so later, rates went up above 4. yay!

I just updated my networth for Q1. I've almost reached by end of Q2 goal already, which is incredible. Of course next quarter my networth might go down, as I will be spending about $18K in closing costs. Ugh, everything in NY is so much more expensive than the rest of the country. However, prices tend to go up more as well in terms of real estate. The broker just put 6 more units identical to mine on the market at $50K more than I paid. No guarantee they will get what they are asking, but if they do in theory the value of my unit just went up by $50K as well.

In reality, I"m not counting on any appreciation in the real estate. I want to pay this puppy off, preferably in 10 years or less. Playing with the mortgage amortization calculators is so fun!

Moving to the darkside

For my whole (adult) life, I've been a renter. Basically, for 15 years. For the last 10 years I've looked at buying an apt. in the NYC area. I've focused on different boroughs (Manhattan, Queens, Brooklyn) states (NJ) and types of places (a place in the Catskills or somewhere rural, or somewhere in the city?). As of last Sunday, I think my loooong search is just about over!

Most of my friends and family are shocked, as they think this came "out of the blue" and while I haven't actively been looking recently, I feel confident in my decision because this apartment has most of the things I've been searching for: a one bedroom plus a little more space in the form of an alcove, low monthly maintenance, no fancy amenities, in a safe, quiet neighborhood with a cool vibe, on a great subway line and close to the subway stop, beautiful hardwood floors and a price that is totally affordable. I am planning to put down a 25% deposit. With the tax abatement, my total monthly spend should be comparable to my rent -- maybe a few hundred more depending on my interest rate on my mortgage, but if I get any kind of mortgage interest deduction, it might be even less than I pay now!

I actually feel relief. Having all that cash just sitting around and not invested was stressful. Now I certainly won't have that problem: I am currently shaking out the couch cushions to try to come up with more $! Actually, I am going to Coinstar today to cash in my change. Buying a condo in Brooklyn/NYC is not for the weak or the poor, that's for sure. The closing costs will probably be about $20K! Oy vey.