Author Topic: Just Bought a House - Any Advice?  (Read 10695 times)

debtfreejess

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Just Bought a House - Any Advice?
« on: November 10, 2018, 12:23:19 PM »
Life Situation: My fiance and I are 28 and 24, respectively, and just purchased our first home in the suburbs around Los Angeles, CA. We’re feeling typically “house poor”, but are doing okay generally. However, we have a lot of things coming up in the next couple years and I want to be saving for retirement/FIRE, so turning to the Mustachians for advice to further economize and strategize.

Gross Income:

Me:
$60,000 - base salary (promotion in the next couple weeks - will increase to about $60-65k)
$4,000 - bonuses
$1,000 - YouTube channel and minor side hustles
Total: $65,000

Him:
$58,000 - base pay (hourly at $29/hour)
$4,000 - estimated OT
$1,000 - minor side hustles
Total: $63,000

Total for both: $128,000

Deductions:

Me:
401k: $9,000/year (15% of gross - about $350 every two weeks)
Health/dental insurance: None (under 26, still on parents’)

Him:
Pension: Unsure of the amount, I think it’s maybe 6-8%
403b: $100/month
Health/dental insurance: $0 (fully employer paid)

Monthly Snapshot

Monthly take home: $6000 (this is absolute minimum with no bonuses, OT, etc.)

Mortgage + PMI: $2166.06
Taxes & Home Insurance: $600
Electric/Water/Sewer/Trash: $200 (estimated - haven’t lived here long enough for a full bill)
Gas for house: $25
Internet: $105 (work from home, need best internet we can get)
Cell Phone: $100
Car Insurance: $80 (one car, two drivers, liability only)
Netflix/Hulu: $25
Apple Music/Spotify: $25
Groceries/Toiletries/Pet Food: $300
Entertainment/Eating Out: $200
Gas for Car: $100
Misc (Car Maintenance, Haircuts, etc): $200

Total Expenses: ~$4125.00/mo

Total Savings: $1875/mo

Assets:

House: $505,000 (this is purchase price, but Zillow says its worth $550,000. More details below)
EF/Cash: $10,200
My 401k: $17,500
My Roth IRA: $11,000
His 403b: $2500
His Roth IRA: $5000

Total: $551,200

Liabilities:

Mortgage: $405,000 @ 4.625%
Credit Card: $5,250 (unsure of interest rate - probably 10-15%)

Total: $410,250

Net Worth: $140,950

Immediate Goals:

Paying off the stupid credit card. Fiance and I are on the same page about this. I stopped contributing to my Roth to focus on this. With Christmas bonus for me and lots of holiday overtime for him, we expect to wipe it out by January ($2500 end of this month, $2000+ in Dec, $1000+ in Jan)

Short to Medium Term Goals:

House

We bought a fixer upper, but with good bones. 1500 sf, 3 bed, 2 bath with a den and a workshop behind the garage and a small but nice backyard. It is also 4 miles from fiance’s work, so he bikes to work when it makes sense. We purchased for $505,000 but Zillow and comps in the area are around $540-550k and updated homes are selling for $585-600k.

We are planning to renovate this house, doing as much of the work ourselves as possible. Plans include replacing electrical, expanding/renovating kitchen, replacing paneling with drywalls, new light fixtures, renovating bathrooms, etc. Also, we’re missing key furniture, including a couch and dining room table.

I work from home, so one of the extra bedrooms serves as my office + filming for YouTube videos. However, we are thinking about renting out the third bedroom - we’re a couple miles from a large state university and could probably get $500-750/mo.

Wedding

Been together 6 years. Wedding will be simple - backyard wedding, borrow stuff from friends and family, etc. Our budget is $3500, most of which is food and drinks for 50-75 people. Family have offered about $500-800 in cash gifts and services as well. Wedding is scheduled for July of 2019.

College

Work is paying for me to get a Masters in accounting, which is great, but depresses my salary slightly and will take up to 20 hours/week for the next two years.

Fiance is looking to finish his Bachelor’s degree - he has two years left and estimated total costs are $22,000.

The Plan

  • Pay off credit card
  • Increase EF to $15,000
  • Start contributing to Roth IRAs again (about $900/mo)
  • Save for wedding (about $500/mo - this will stop after July)
  • Split remaining cash flow between renovations and saving for school

I don’t necessarily have a specific questions beyond seeing if this makes sense, where we can improve, and if the order/priorities make sense. Thanks for reading and any advice provided!

[Edit: Changes made to salary and take home pay to account for promotion that occurred shortly after posting]
« Last Edit: November 20, 2018, 07:47:56 PM by debtfreejess »

WheresMyMule

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Re: Just Bought a House - Any Advice?
« Reply #1 on: November 10, 2018, 12:43:13 PM »
You feel house poor because you are house poor. Mortgage + PMI + utilities is half your income and you don't have a maintenance fund or a line to save for maintenance in your budget.

Your EF could be wiped out in a week if your furnace goes or some other home maintenance pops up. I'd focus on getting another $10k in short term savings as a preliminary maintenance fund and try to add about 1% per year to it for both minor and major things your home will need. This is separate from any savings for improvements.

Do you track spending currently? There seems to be quite a bit missing from your expenses.  $200/mo isn't much to cover car maintenance, clothes, shoes, gifts, household needs, hair cuts, subscriptions, etc

Sent from my Pixel 2 using Tapatalk

« Last Edit: November 12, 2018, 10:32:50 AM by WheresMyMule »

Linea_Norway

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Re: Just Bought a House - Any Advice?
« Reply #2 on: November 10, 2018, 01:05:33 PM »
I see that you have a post for pet food. Do you have additional pet costs? Like vet visits, taxes or dog hotel during vacations?

Does one of you work from home fulltime? Do you really need two cars?
Why do you have double entertainment for TV and music?

You could cash in the house and the increase in price, and rent a place if that is cheaper than owning. Check out the owning versus renting calculator.

debtfreejess

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Re: Just Bought a House - Any Advice?
« Reply #3 on: November 10, 2018, 06:03:08 PM »
You feel house poor because you are house poor. Mortgage + PMI + utilities is glad you're income and you don't have a maintenance fund or a line to save for maintenance in your budget.

Your EF could be wiped out in a week if your furnace goes or some other home maintenance pops up. I'd focus on getting another $10k in short term savings as a preliminary maintenance fund and try to add about 1% per year to it for both minor and major things your home will need. This is separate from any savings for improvements.

Do you track spending currently? There seems to be quite a bit missing from your expenses.  $200/mo isn't much to cover car maintenance, clothes, shoes, gifts, household needs, hair cuts, subscriptions, etc

Sent from my Pixel 2 using Tapatalk

Thanks for the feedback! We're definitely looking to up our EF. While our housing is a little high, everything else is a little low and I feel like we have enough room in the monthly cash flow ($1500-$2000/mo) to handle smaller issues like a broken window or faucet without dipping into the savings at all.

Regarding misc spending and tracking, I do currently track our expenses. I'm not great about turning the very occasional hiccup (e.g. car repair or vet visit) into a line item in the budget since its usually easily covered by the remaining cash flow. However, our more regular "misc" spending is pretty low. I make most of our toiletries and all our cleaning products, I cut my own hair, we buy clothes from thrift shops, do our own oil changes, and "gifts" in our family are usually taking someone out for dinner or drinks, so we incorporate it into our entertainment budget for the month.

debtfreejess

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Re: Just Bought a House - Any Advice?
« Reply #4 on: November 10, 2018, 06:10:27 PM »
I see that you have a post for pet food. Do you have additional pet costs? Like vet visits, taxes or dog hotel during vacations?

Does one of you work from home fulltime? Do you really need two cars?
Why do you have double entertainment for TV and music?

You could cash in the house and the increase in price, and rent a place if that is cheaper than owning. Check out the owning versus renting calculator.

Thanks for the comment Linda! Additional pet costs are pretty low - no taxes, we swap petsitting with my fiance's mother, and we've only had to take the dog to the vet once since his initial round of shots and puppyhood appointments. He's only 5 now and will likely develop health problems as he gets older, so we'll definitely keep that in mind for future planning and budgeting.

I do work from home full-time. We only have one car that we share - a 2012 Hyundai Accent. I'm sorry if my original post was confusing.

The rent on a similar sized home in the area is $3000-$3500/mo. A two-bedroom apartment is $2200/mo (thanks LA!) - fortunately, since we got this home so under market value, it's damn near a toss up between renting and owning, but we get to build equity in this house. Down the road, we're considering moving out of the area to a cheaper part of the country, but likely not until we have kids and they're a little older (we want our kids to be close with their grandparents, who are all settled nearby).

Ben Kurtz

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Re: Just Bought a House - Any Advice?
« Reply #5 on: November 10, 2018, 07:57:33 PM »
After paying off the credit card balance, the one worthwhile tweak I can think of is to increase your tax-free 401k / 403b contributions. With relatively high state income taxes in CA that will be worth a lot on your tax returns. In fact, it is probably worth holding off on the credit card repayment and put in extra savings this year, while you are each filing taxes as single people and probably in higher tax brackets, and not lose the tax-advantaged space. Pay off the card in January. And next year have higher contributions all year.

It's hard to criticize most of your other choices. But earning only a middling salary in a HCOL metro means FIRE will take some time. Stay strong!
« Last Edit: November 12, 2018, 12:44:56 PM by Ben Kurtz »

affordablehousing

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Re: Just Bought a House - Any Advice?
« Reply #6 on: November 12, 2018, 10:11:07 AM »
Only advice is to make sure you finish the renovation before you have kids!

debtfreejess

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Re: Just Bought a House - Any Advice?
« Reply #7 on: November 12, 2018, 07:49:04 PM »
After paying off the credit card balance, the one worthwhile tweak I can think of is to increase your tax-free 401k / 403b contributions. With relatively high state income taxes in CA that will be worth a lot on your tax returns. In fact, it is probably worth holding off on the credit card repayment and put in extra savings this year, while you are each filing taxes as single people and probably in higher tax brackets, and not lose the tax-advantaged space. Pay off the card in January. And next year have higher contributions all year.

It's hard to criticize most of your other choices. But earning only a middling salary in a HCOL metro means FIRE will take some time. Stay strong!

Thanks Ben! We definitely need to increase our contributions, particularly his.

Tuskalusa

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Re: Just Bought a House - Any Advice?
« Reply #8 on: November 12, 2018, 10:51:03 PM »
In your case study, you mention “Mortgage + PMI.”  If you’re paying PMI on your Mortgage, I’d recommend looking at paying down enough of your Mortgage to drop PMI (after increasing your emergency fund). 

debtfreejess

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Re: Just Bought a House - Any Advice?
« Reply #9 on: November 13, 2018, 07:50:33 AM »
You need to figure out what it is going to cost you to be added to his health insurance sooner rather than later so that you can plan accordingly -- it will probably be more than you think/want.

Yes to renting out one or more of your extra bedrooms (can you use the "den" as your office/video space to free up a second bedroom?), even temporarily as the occasional Air BnB.  That would help offset your high housing costs.  Even a couple hundred bucks a month would help.  Or rent out the whole house while you travel/visit nearby family.

Netflix or Hulu -- pick one, you don't need both

Apple music or spotify -- pick one, you don't need both

Since your fast internet is needed for work, can they pay at least part of the cost?


$100/month for gas seems REALLY high to me if you WFH and he bikes to work a lot.  We are a one-car family with no commute (though I do sometimes give the kids rides to school) and typically spend around $30-50/month on gas (hybrid that gets 41 mpg).

Thanks lhamo! I'm having my fiance double check the premium to add me in a year or two - he's understood it to be that his employer covers the whole premium for spouses and dependents, but I definitely want that confirmed. [Edit: He just confirmed with HR that his work will cover 100% of my premium - yay!]

We hadn't thought about putting my office in the den. I'll definitely float it by him and see what he thinks. We're definitely planning to rent out that extra bedroom as soon as possible.

My work pays me a $25/mo reimbursement for the business portion of my personal phone and internet. It's low, but it's something.

The $100 for gas is an estimate, as we've only lived in this house for a month or so. Part of it is the cost of seeing our family - they're spread over four different corners of LA, which is the definition of sprawling metropolis. My fiance is also hesitant to bike to work during the Santa Ana winds, which is a complainypants excuse, but I have gotten him to walk for most of our errands, so that's something. Also, so far we've only spent about $30 on gas this month and still have at least half a tank in the car, so I'm confident that the $100/mo will be coming down. :)
« Last Edit: November 13, 2018, 07:57:19 AM by debtfreejess »

debtfreejess

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Re: Just Bought a House - Any Advice?
« Reply #10 on: November 13, 2018, 07:54:10 AM »
In your case study, you mention “Mortgage + PMI.”  If you’re paying PMI on your Mortgage, I’d recommend looking at paying down enough of your Mortgage to drop PMI (after increasing your emergency fund).

Good point Tuskalusa! Right now, our PMI is 0.2% or $58.08/mo. I think the automatic drop-off date is April 2022 at 22% equity, but we can get the house re-appraised at 20% equity and have it drop off then. We do want to put extra on the principal and see that PMI disappear faster, just aren't sure how to balance it with the other short term goals.

debtfreejess

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Re: Just Bought a House - Any Advice?
« Reply #11 on: November 13, 2018, 08:33:22 AM »
Yes, he should definitely look into the insurance thing -- call me old-fashioned, but I find it a bit odd that a married working professional is still on their parents insurance.  Nice thing for your parents to do if your budget is really stretched and you don't have a cheap option, but if it is free to join your DH's plan?  Switch.

Now that you have a house maybe more of your family visits can be at your place. That would save on gas, too. Though a roommate situation might make that more awkward.

Agreed. We don't get married until July of 2019 and last we looked into it, they won't let me on his plan until we have filed taxes together, so likely won't be able to join his insurance until 2020. I definitely appreciate my parents for letting me stay on, though it doesn't cost them extra - my brother has an autoimmune disease and has to be on their insurance and once you have one dependent, the second dependent doesn't cost more.

I agree, we've been trying to get them to visit us more. It's worked some of the time, so we're happy about that :)

CalBal

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Re: Just Bought a House - Any Advice?
« Reply #12 on: November 13, 2018, 08:39:53 AM »
Just a note about insurance - getting married should be a qualifying life event (AFAIK), so you should be able to join his insurance immediately after that happens and not have to wait until the next open enrollment.

debtfreejess

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Re: Just Bought a House - Any Advice?
« Reply #13 on: November 18, 2018, 09:59:00 AM »
Listen to @Ben Kurtz.  Also, you don't mention where in your tight budget the renovation budget will come from (that I saw), which also needs to be accounted for.

My #1 tip: get a much, much larger emergency fund.  With a house, more things can go wrong.  Listen to @WheresMyMule and put up $10k + 1% (of house value) per year or so, especially right now, when it'll hurt you the most. 

I know someone who recently bought a very nice house - with everything almost new - but within year 1 had spent over 2% of home value on things as the 2-3 things that weren't new broke down almost simultaneously.  It can and does happen, and year 1 is when you find out what all really needs to be done. 

My #2 tip: your house now stands in the way of your other long-term financial goals, because you are invested so heavily in only your house (including as a flip), while your goal to live where you are may not line up time-wise -- you want to stay until your kids are old enough.  Find a way to balance those things while being honest about the large financial trade-offs involved, i.e., exactly *what* you're paying for various lifestyle-goal decisions.

All else equal, once you get PMI paid off, you would benefit significantly if you stash more savings in places other than your house, even if that means delaying renovations.  You're not flipping soon anyway.

For instance, you're planning to put money into the house as a flip, but you aren't actually flipping for a good while, per your goals, which means that the money you spend renovating lies dormant and unproductive rather than being productive and making you money (until you're ready to sell).  What's $10k worth to you over eight to ten years compounded (i.e. 20k+) versus $10k cash in that final year? 

Besides, you want to diversify investments in general: have some money stashed in other accounts (especially tax-advantaged ones) where you may be able to keep them more easily if something goes strangely wrong with the house/property.  Or the local real estate market.  Etc. 

--

Bottom line: Personally, I would drop all renovation saving and simply do school or invest that right now.  Revisit renovations when you're closer to actually selling, rather than ten years ahead of time, which sounds to me more like a choice to consume (yet more) house. 

Besides, doing school might push your SO's career further faster anyway, and the last thing you want to pile on here is some form of student debt.  Plus, you could put the reno money towards equity at least until you kill PMI - some instant savings. 

--

If, as implied above, you're actually renovating because you want the house that way, that's more of a consumption now than an investment, especially if you're putting off education for it (too).  If that's the real goal, you should be honest with yourself about the tradeoff: that would be letting that money sit useless while you're living there rather than investing it.  And putting more money into the house after all the money you're already in it for.  I would apply the "first rule of holes," which is when you're in one: stop digging. 

You may want to do dig further, though I wouldn't recommend it financially, especially right now, and especially until you're less "house poor."  And lest this sound negative, I assume you're in a position you will likely climb out of as careers progress and so on, and all the more so if you tighten the belts now, and in the future you'll appreciate the renovations and other things more anyway.

Hi Finances_With_Purpose. Thank you so much for your thoughts and advice - I really do appreciate it. I want to start with a quick clarification - while we're looking to stay in this area for next several years, we're not necessarily committed to this particular house the entire time. However, we actually don't have a long term plan for how long we'll be here, so I think you're right - non-functional renovations should definitely wait until we've gotten the rest of our ~financial~ house in order. There are a few things we need to do to make our house functional (e.g. we have no floors in our dining room, missing light fixtures in half the house, and the electrical needs an upgrade in the next year or so), but those are relatively inexpensive and we'll be doing most of those ourselves. Our current plan is to not do any work on the house that requires money until the credit card is paid off and we start filling the EF up some more. After the wedding is over, I want to majorly increase his 403b requirements. We're looking at some big jumps in pay once we both finish schooling, so it makes sense to focus on getting through that, then re-visit the home renovations when our income has increased and we don't have other big looming expenses. Thank you again for the time you took to read my case study and your thoughtful advice. :)

former player

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Re: Just Bought a House - Any Advice?
« Reply #14 on: November 18, 2018, 11:12:31 AM »
Cleaning and painting and keeping the yard tidy make a big difference to the appearance of a house for not much money.  Anything else that's not strictly functional can wait - which has the advantage that it will all be much more up to date by the time you sell/have kids/etc.

The one thing that does concern me is your reference to the house needing electrical work.  Is it currently safe? Do you have functioning smoke alarms, fire extinguishers and agreed escape plans for daytime and nighttime fires?

Considering your ages, having $36k in tax-advantaged accounts and no student loans is a good start.  Other than that, yes you are overhoused, and adding even a backyard wedding in your first year of homeownership will stretch things further.  But if you can get through the first two years without any major disasters things will start to feel a lot easier.

debtfreejess

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Re: Just Bought a House - Any Advice?
« Reply #15 on: November 19, 2018, 03:05:14 PM »
Cleaning and painting and keeping the yard tidy make a big difference to the appearance of a house for not much money.  Anything else that's not strictly functional can wait - which has the advantage that it will all be much more up to date by the time you sell/have kids/etc.

The one thing that does concern me is your reference to the house needing electrical work.  Is it currently safe? Do you have functioning smoke alarms, fire extinguishers and agreed escape plans for daytime and nighttime fires?

Considering your ages, having $36k in tax-advantaged accounts and no student loans is a good start.  Other than that, yes you are overhoused, and adding even a backyard wedding in your first year of homeownership will stretch things further.  But if you can get through the first two years without any major disasters things will start to feel a lot easier.

Thanks for your concern @former player. Most of the electrical is original to the house (built in 1953) with a pretty small panel (100 amps). The previous owner was also a DIYer that had little regard to for code or safety, so lots of wires all over the place. However, we removed a lot of the wires of concern and we keep our energy usage low to minimize demand on the system (e.g. LED lights in every room, don't use clothes dryer or dishwasher, etc.) The home inspector said it is safe for now, but should be upgraded sooner rather than later. We do have functioning smoke alarms and a large window in every room of the house that we can get out of in the event of an emergency.

Thank you also for the well wishes. We didn't anticipate buying a house before we got married, but we jumped on the opportunity when it presented itself. It'll definitely be a hectic 2019, but I know we can handle it. 

debtfreejess

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Re: Just Bought a House - Any Advice?
« Reply #16 on: January 09, 2019, 09:09:44 AM »
Update!

We've taken a few steps in the right direction - I'll probably add this every few months to keep myself on track.

  • As mentioned, I got a promotion, so my base salary is now $60,000 with an anticipated 10% in bonuses throughout the year
  • Fiance has increased his 403b contribution to $400/mo (up from $100/mo and in addition to his pension contributions)
  • Credit card is less than $1000 now - should be paid off in a couple weeks!
  • Convinced my CEO to start doing a 401k match at planning meeting, so now getting 4% matched going forward
  • Everyone gave us Home Depot gift cards for Christmas, so we'll be able to do some immediate repairs and renovations without using savings

Looking forward to even more improvements next time.

Villanelle

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Re: Just Bought a House - Any Advice?
« Reply #17 on: January 10, 2019, 10:47:50 PM »
What is your fiancee studying?  Is it something that is likely to get him a significantly higher salary?  It may well not be worth it to finish the degree.  If it is or if he's doing this for emotional reasons, spend some hours looking for scholarships.  If you put in 5 hours and come up with even a $250 scholarship, that's a pretty good return. 

And don't buy any new furniture.  Scour free cycle or *maybe* thrift stores.  You can't afford anything else.  Also let everyone know you are looking.  Often people have stuff they are going to donate and are happy to give it to a young couple starting out.

Dicey

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Re: Just Bought a House - Any Advice?
« Reply #18 on: January 11, 2019, 05:32:02 AM »
And don't buy any new furniture.  Scour free cycle or *maybe* thrift stores.  You can't afford anything else.  Also let everyone know you are looking.  Often people have stuff they are going to donate and are happy to give it to a young couple starting out.
Great advice from Villanelle!' I don't do FB Marketplace, but I do NextDoor. I'm furnishing a flip house on a shoestring budget. ND is great. The sellers are nearby. I thrift a lot, but rarely see furniture worth buying. Craigslist is another option that beats the stuffing out of thrift stores.

debtfreejess

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Re: Just Bought a House - Any Advice?
« Reply #19 on: January 12, 2019, 10:01:50 AM »
@Villanelle My fiancee is studying Information Technology. He currently works in the field, but only got the job after working at the company PT for 2-3 years in a different role and we're worried that without some formal education or certs, he would have a harder time finding a similar position with another employer that he didn't have a history with. We are planning to apply for scholarships, but since his current job is stable, he's taking a year off from school until we increase the emergency fund, pay off the card, and get married. Want to avoid too many balls in the air!

@Dicey We've spent maybe $200 on furniture since we moved in, pretty much all of it from Next Door, thrift stores, donations from family, and stuff left by the home sellers themselves. The only thing we're a little dicey about getting secondhand is a couch, because upholstered items can be a mixed bag when it comes to bed bugs, fluids, pet hair, etc. However, we've agreed to hold off on buying a couch until after the immediate goals of (1) paying off card; (2) increasing emergency fund; (3) getting married; (4) doing semi-urgent home repairs and updates, such as flooring in dining room (currently just sub-flooring) and new electrical (current is not to code). In the mean time, I'm really enjoying the hunt - I've gotten some really nice things for little to no money and the fiance has finally stopped teasing me about it since it's worked out so well ;)

frugal_c

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Re: Just Bought a House - Any Advice?
« Reply #20 on: January 12, 2019, 11:56:02 AM »
I agree that you want to postpone much of the house upgrade but then again there are quite a few upgrades which are very cheap but labor intensive.  I would focus on those.  You had mentioned electrical, if you can do it yourself and just get an inspection it costs so little.  A few hundred dollars will go a long ways on the electrical work I have done.   Painting, drywall, some plumbing, some flooring can be very reasonable if you DIY but can be very time consuming.  There are probably other things I am forgetting.  I would focus on those areas where you get the most bang for your buck.  Try to avoid windows, cabinets, countertops and other expensive items for now.

Brother Esau

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Re: Just Bought a House - Any Advice?
« Reply #21 on: January 13, 2019, 08:22:51 AM »
Watch the movie "The Money Pit".

debtfreejess

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Re: Just Bought a House - Any Advice?
« Reply #22 on: February 10, 2019, 08:52:36 AM »
New updates!

  • Credit card is paid off! Whoo!
  • Thanks to birthday money and a large tax refund (his - I prefer not loan money to the government, but at least he puts it towards savings now), our emergency fund is headed in the right direction
  • No major issues with house have popped up yet. Water heater went out in October, but that repair was covered by seller-paid home warranty, and re-wiring has been a b*tch, but nothing that has caused us to dip into our emergency fund yet
  • At this rate, I think we'll be able to cash flow costs of the wedding. Since it's pretty simple, most costs are going to be in the week before, purchasing food and alcohol. Not using any vendors so no deposits to put down

Gross Income:

Me:
$60,000 - base salary
$6,000 - bonuses
$1,000 - YouTube channel and minor side hustles
Total: $67,000

Him:
$58,000 - base pay (hourly at $29/hour)
$4,000 - estimated OT
$1,000 - minor side hustles
Total: $63,000

Total for both: $130,000

Deductions:

Me:
401k: $10,000/year (15% of gross - about $350 every two weeks) + $1500/year (2% match from employer)
Health/dental insurance: None (under 26, currently on parents', switching to DH's once we're married)

Him:
Pension: Unsure of the amount, I think it’s maybe 6-8%
403b: $400/month (+$300 since October)
Health/dental insurance: $0 (fully employer paid)

Monthly Snapshot

Monthly take home: $6000 (this is absolute minimum with no bonuses, OT, etc.) (Hasn't changed much)

Total Expenses: ~$4125.00/mo

Total Cash Flow: $1875/mo

With credit card paid off, the current cash flow priority is this:

  • $1000/mo towards both of our Roths
  • Remainder to EF until $15,000
  • Remainder to cash flow wedding until wedding complete
  • Remainder to EF until $18,000
  • Remainder to cash flow some renovations (new electrical and panel, insulation in attic, flooring and drywall in living room)

Assets:

House: $505,000 (this is purchase price, but Zillow says it's worth $550,000. More details below)
EF/Cash: $12,750 (+$2200 since October, + $2600 with refund)
My 401k: $20,500 (+$3000 since October)
My Roth IRA: $12,000 (+$1,000 since October - I had paused to pay off debt)
His 403b: $3500 (+$1,000 since October)
His Roth IRA: $5000

Total: $558,750 (+$7,500 since October)

Liabilities:

Mortgage: $409,000 @ 4.625%
Credit Card: $5,250 (unsure of interest rate - probably 10-15%)

Total: $409,000 (-$5000 since October - had accidentally listed mortgage at $405k instead of $410 in original post)

Net Worth: $149,750 (+$12,500 since October)

marty998

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Re: Just Bought a House - Any Advice?
« Reply #23 on: February 10, 2019, 01:10:06 PM »
Good update, looks like you are making progress on all line items :)

You'll be amazed by the changes in a years time. Keep it up!

Dicey

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Re: Just Bought a House - Any Advice?
« Reply #24 on: February 11, 2019, 12:52:54 AM »
4.625% seems a little high. Keep watching rates and be ready to re-fi if rates continue to drift downward. Forget about accelerating payments to kill the PMI. I'm far more worried that you're not filling up your Roths. You have until April 15th 2019 to top off Roth 2018. Focus hard on that. Once you miss a year, it can't be regained.

And congratulations on convincing your employer to match! Free money for all! If I was your coworker, I'd be kissing the ground you walk on, or at least bringing you delicious homemade lunches! If you have to choose, save in the 401k only to get the full match, and top off your Roths.

Finally, I am a homeowner in both SoCal and NorCal. I have been in the situation where my mortgage payment was  half of my take-home pay. Mustachian frugality skills make it possible to do and still save a healthy amount toward FIRE. You can do this!

Finally, I suppose it's too late to suggest you elope? Maybe get married at the courthouse and then throw a big party afterward? Weddings are cray-cray expensive and over in a blink of an eye.

JGS1980

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Re: Just Bought a House - Any Advice?
« Reply #25 on: February 11, 2019, 10:09:11 AM »
I agree with Dicey. You should fill up those Roths!!! Future you will give you a high-five and a big wet kiss if you do this yearly.

How I would list your priorities:
-$1000/mo towards both of our Roths
-Remainder to EF until $15,000
-Remainder to cash flow wedding until wedding complete
-FUND THE ROTHS!!!
-Remainder to EF until $18,000
-Remainder to cash flow some renovations (new electrical and panel, insulation in attic, flooring and drywall in living room)

The house will always be there, remodels can wait. ALSO, you can prioritize more time consuming but cheaper work like drywall instead of the more expensive stuff for a while.

debtfreejess

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Re: Just Bought a House - Any Advice?
« Reply #26 on: February 11, 2019, 02:52:27 PM »
@marty998 Thank you for the kind words!

@Dicey Thank you for the encouraging words! Unfortunately, everyone works virtually, so no homemade lunches for me but glad everyone's getting a little something more now. Also, too late to elope - date has been picked and people have already booked flights. We're looking at a total budget of $3500 - backyard wedding, lots of free help from family, no silly extras like wedding favors or clothes we don't already own. Most of the cost is the food and drink to feed 75 ravenous eaters and drinkers, haha.

Regarding Roths, I was maybe $700 shy of maxing out my Roth last year, but my fiance and I are both committed to maxing them out this year. That's the first priority with our monthly cash flow is putting $500 each in our Roths.

@JGS1980 Agreed! Funding the Roths is the first priority for our monthly cash flow :) We have been working on those labor intensive items at the moment. For example, we bought a bunch of molding at 30% off and have been cutting and installing ourselves. My fiance has also been installing our light fixtures and doing all the rewiring himself. We've also been tearing out all the overgrown plants and doing our own landscaping with free plants we get off Next Door or from seeds we have lying around.

Linea_Norway

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Re: Just Bought a House - Any Advice?
« Reply #27 on: February 12, 2019, 04:51:40 AM »
Is it very weird to ask whether guests voluntarily want to contribute with some booze and maybe some food? On so many people, that would make a difference.
Maybe you can buy your drinks under a condition that you can bring the unopened bottles back to the shop for a refund.

CanuckExpat

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Re: Just Bought a House - Any Advice?
« Reply #28 on: March 08, 2019, 12:24:24 AM »
Couple questions: do you file as single or married filing jointly?
Is there a reason you choose to not contribute more towards your 401k, and that you prioritize a Roth

Your incomes are right on the border, but you can contribute to traditional IRAs if you wanted correct?
What is/are your marginal tax rate(s) ?

debtfreejess

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Re: Just Bought a House - Any Advice?
« Reply #29 on: March 08, 2019, 06:55:46 PM »
@CanuckExpat We filed as single for 2018, since we aren't married yet. We'll file MFJ for 2019 next year.

Not necessarily a math reason - I wanted to have some money in both and was uncomfortable with lowering my tax home so much.

I honestly have no idea what my marginal tax rate is.

debtfreejess

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Re: Just Bought a House - Any Advice?
« Reply #30 on: December 03, 2019, 07:37:25 AM »
Hello all! It's been a little over a year since my first post and we've made lots of changes, mostly in the right direction. I wanted to share our progress with everyone that offered such great advice.

Life Updates!

Wedding

We got married in July and spent about $4000 on the wedding. We received about $10,000 in various cash gifts + gift cards (we requested Home Depot specifically), almost all of which has gone into the house.

School

I switched to a new (better) company in April, so I got a $10k pay bump but company no longer paying for a Masters. I determined that a Masters degree wasn’t necessary for where I want to go in my career and the degree was not worth taking a significantly lower salary. If I change my mind, I can go back, but I was essentially paying $50k in reduced income (5-year commitment to old company at $10k under market salary) for a degree that only cost $25k.

Husband has also decided not to get his degree. The winds are changing in tech and it’s clear that a degree is less and less necessary and he just has no interest in going back to school at this point.

House

We have been doing a lot of work on the house. We ripped out all our grass in the front yard and put in a vegetable garden with drip irrigation. It’s been a lot of fun and water costs are minimal, but even with DIYing it all ourselves, it still cost $3-4k in materials and equipment rental.

Currently, we are in the middle of a remodel of our living room. When we first moved in, we had removed the popcorn ceiling ourselves, only to discover how sorry the plasterwork underneath looked from different additions. There were also no hardwood floors in part of the area we removed carpet, just pieces of plywood. We hired a GC to do the work we were not comfortable with (adding new floorboards and sanding/staining the whole living room to match, removing plaster and putting in new drywall, some detailed repair work, removing and replacing old insulation, installing solar and grounding our new electrical panel). The rest we are doing ourselves (re-wiring the whole house and moving to a new panel, installing recessed lighting, painting, base boards).

Future renovations include: tankless water heater (replace a 10 year old tank heater), stucco repair, new kitchen (big overhaul – mix of cosmetic and functional, but focus on less expensive finishes/cabinets and focus on functional improvements), bathroom cosmetic refreshes (resurface tub/shower, re-grout shower tile, new paint and light fixture, rearrange towel rack and hardware placements to make space more functional.). Anticipating $40k in additional renovations over the next 3-4 years. Definitely want most major issues fixed before kids.

We also plan to refi this or next month after renovations – house will be re-appraised, hopefully to at least $530k, which means no PMI and we’ll be at 75% LTV which will give better pricing. We expect new mortgage payment to be $1850/mo and we’ll still be paying $2275 since we’re used to it + a 13th payment each year.

Family/Future Housing

We plan to start trying for kids in about 5 years when I turn 30. Our moms have offered to help with child care, so we will be staying in this area for the foreseeable future. We like our neighborhood more and more and plan to be here for a very long time; it has plenty of space for a couple tots and the schools/amenities nearby are fine.

We found out recently that we will be inheriting my husband’s family home when his aunt passes away. So we’ve decided to stay put in this house for next 10-20 years until that point. Husband would very much like to pay off the house before then, so we are looking at a 15 year pay off. I know there is a big discussion in this forum about not paying off mortgage, but husband is naturally spendy, so any savings that motivates him is good in my book, especially since we’re still saving $2850/mo towards retirement. If we play our cards right, we can move into paid for family home, sell this home and invest the equity with our retirement savings, and FIRE in our 40s/early 50s.


Gross Income:

Me:
$70,000 - base salary
$5,000 - bonus
$2,000 - YouTube channel
Total: $77,000 (+$18k since last November)

Him:
$70,000 - base pay (hourly at $33/hour)
$5,000 - estimated OT
$3,000 - minor side hustles
Total: $78,000 (+$15k since last November)

Rental income:
$7500 – (was renting bedroom to a friend for $500/mo, she just moved out in November. We’ll be renting again in January for $650-700/mo)

Total for both: $162,500 (+$40k since last November)

Deductions (Pre and Post Tax):

Me:
401k: $875/mo (16% of gross)
Roth IRA: $500/mo (maxed)
Health/dental insurance: $0 (on partner’s)

Him:
Pension: $350-450/mo
403b: $600/month (+$500 since last November)
Roth IRA: $500/mo (maxed)
Health/dental insurance: $0 (fully employer paid)

Monthly retirement savings: $2875/mo ($34,500/year)

Monthly Snapshot

Monthly take home: $7500-$8500 (variable based on husband’s OT and whether we have renter in room)

Mortgage + PMI: $2275.00 ($275 is extra on principal, $2000 for P+I+PMI)
Taxes & Home Insurance: $600
Electric/Water/Sewer/Trash: $150 (Paid every 2 months, varies based on season. Will go down when solar kicks in)
Solar loan: $100
Gas for house: $25 (average)
Internet: $130 (promotion period ended, in an ISP monopoly area)
Cell Phone: $100
Car Insurance: $70 (one car, two drivers, liability only. Rates went up since last year, but we got a marriage discount)
Netflix/Hulu: $25
Apple Music/Spotify: $25
Groceries/Toiletries/Pet Food: $300
Entertainment/Eating Out: $400 (increased – husband was unhappy and was causing too many fights. Not worth the headache)
Gas for Car: $100
Misc (Car Maintenance, Haircuts, etc): $400 (increased)
Travel: $300 (started saving for this explicitly – we do a big 10 day international trip every year)
Renovations/Solar Loan payoff: $1200 (currently putting aside for renovations, switch to solar loan pay off in January, switch back to renovations when loan is paid off)

Total Expenses: ~$6100.00/mo + $1000/mo in Roth IRA. Any remainder is thrown into emergency fund for most immediate upcoming goal.

Assets:

House: $505,000 (this is Oct 2018 purchase price)
EF/Cash: $24,250 (this holds several mini “funds” - $17,250 for e-fund, $1,750 for travel, $500 for dental work for husband, $4800 for renovations)
My 401k: $31,850
My Roth IRA: $18,000
His retirement accounts (combo of Roth, 403b, pension cash value): $44,000

Total: $623,100 (+$72k since last November)


Liabilities:

Mortgage: $397,000 @ 4.125% (refi’d to lower interest rate, will refi again in Dec/Jan to hopefully 3.5-3.625%)
Solar loan: $21,450 @ 5% (will get about $8200 in solar tax credit + insulation credit that will get thrown at this. Plan to pay off remainder by summer)
Remaining due to contractor: $7700

Total: $425,700 (+$15k since last November)

Net Worth: $197,400 (+$55k since last November, but includes cash value of pension that I hadn't previously included)

The 2020 Plan
  • Get new renter at $650-700/mo
  • Do our 13th mortgage payment for the year
  • Pay off solar loan
  • Increase EF to $20,000
  • Save and pay cash for smaller home updates (replace 10 year old water heater with tankless, repair stucco, cosmetic refresh of bathrooms) – approx. $6000
  • Husband gets annual raise in July, I will likely get one in next year or two. We’ve agreed to split increase evenly between increasing 401k contributions and adding to mortgage payoff to avoid lifestyle creep.

Nick_Miller

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Re: Just Bought a House - Any Advice?
« Reply #31 on: December 03, 2019, 12:33:02 PM »
Great moves, especially the higher incomes, renting out a room, and closing in on $100K in retirement accounts.

You two are so young; you're really setting a path for long-term success. I hope you're proud of yourselves.

My only advice is to not rely on the free childcare or the free house. Yes, those things may come to pass, but they're both years away, and people change their minds. It's a LOT of work for a mother/mother-in-law to furnish FT or even close to FT child care all week, and from what I've seen from other families in those situations, it can change the dynamics.

Nickel

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Re: Just Bought a House - Any Advice?
« Reply #32 on: December 03, 2019, 01:04:03 PM »
I agree with Dicey. You should fill up those Roths!!! Future you will give you a high-five and a big wet kiss if you do this yearly.

How I would list your priorities:
-$1000/mo towards both of our Roths
-Remainder to EF until $15,000
-Remainder to cash flow wedding until wedding complete
-FUND THE ROTHS!!!
-Remainder to EF until $18,000
-Remainder to cash flow some renovations (new electrical and panel, insulation in attic, flooring and drywall in living room)


The house will always be there, remodels can wait. ALSO, you can prioritize more time consuming but cheaper work like drywall instead of the more expensive stuff for a while.

I have a different point of view. 

The Roths should be lower on the list.  Roth is funded with after tax money (state and federal).  You have too much debt to start funding Roths. 

Credit card debt?  Hair on fire.  Pay it off.  You don't get "taxed" on the money you "save" by paying off debt. 

PMI and high interest rate?  Hair on fire.  Pay down your loan so that you have a 20% equity, refinance to a lower rate and eliminate PMI.  I wouldn't put any money into any optional home improvements until you get rid of PMI.  This is the time in your life to live like a pauper.

Having said that, you should have some emergency fund built up, unless you have ready access to cheap credit (apparently not).  It is expensive to be "poor" and to have to borrow money at high interest rates to cover needs.

You might be able to use Roth as your emergency fund, since you can withdraw contributions (not gains) at any time without penalty. 




Bernard

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Re: Just Bought a House - Any Advice?
« Reply #33 on: December 03, 2019, 02:27:04 PM »
My wife and I too bought somewhat of an outdated house, call it fixer upper if you will, with good bones in SoCal back in 2017. We paid $555K ($10K cash back for "issues") and the lender appraised it at $591K before loan approval.

We did all new wood floors throughout the house ($9,501.58), some electrical ($2,126.98), an unexpected $8,807.59 for ceiling work in the family room, and new California Hardy siding to the tune of $14,143.93. Add to this landscaping ($2,485.14) and a gazillion hours of unpaid labor, and you see that I can relate to your case.

I understand that the threshold to get into the market in a HCOL area is substantial, but you did very well. What strikes me is your initially rather high mortgage rate, but you refinanced already and solved that. With some luck, rates may decline again in the near future.

I would not go for a tankless water heater. Ours died while under the 1-year home warranty, and I researched that thoroughly. The only reason to go waterless is if you have space issues. It make zero financial sense, if you add installation cost to the equation.

In regard to retirement investing, I would go all Traditional IRA to reduce your tax burden, not Roth.

Looks like you are well on track to a prosperous future. Congratulations.

debtfreejess

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Re: Just Bought a House - Any Advice?
« Reply #34 on: January 03, 2021, 09:10:39 AM »
Another year, another dollar. I've been feeling really good about our financial progress in 2020, despite it being a giant dumpster fire of a year in all other ways. But like most of us I'm sure, family/friends would be vaguely happy for us if I told them, but not really understand and probably get the wrong idea bout what we can/will spend. So I wanted to update here again to celebrate with like minded brethren.

Life Updates!

House

We refi'd twice in 2020 to reduce our interest rate. House was re-appraised for $570k in the first refi, so PMI was dropped. Some of our property taxes were also covered during these refis :) We're currently at a 2.851% interest rate, considering another refi in February/March when our six months are up. Hoping we'll re-appraise for at least $630k to get a 60% LTV ratio.

We still have quite a few renovations planned. We did a minor refresh in our "granny" bathroom (remove wallpaper, refinish the tub, replace the shower door, mirror, and light, paint, etc.), replaced our water heater with a tankless (+ rebate!), minor updates in our garage and workshop to replace broken doors/redo wiring, etc., wrapping up living room renovation. We're replacing a crumbling wall with a new privacy fence in February, then saving for our kitchen reno, which will likely take another 3 years.

General Comments

In September, husband and I got our first joint credit card. It has made managing expenses much easier so I can see what he's spending without asking for updates. Husband is a (mostly) reformed spender and we've been walking that line of increasing communications without feeling like he's putting together reports for the family CFO.

Our spending is pretty luxurious, especially for a couple of DINKs, but it appears to be our happy place between his spending and my frugality. There was definitely a period of time where I was white knuckling my spreadsheets and melting down over every extra expense and he had a period of hiding spending in an attempt to avoid said meltdown. This seems to be where we're both comfortable and have basically no more money fights and very open communication on everything.

My favorite change overall is when he storms into my office to stare at the net worth tracker on the wall. I think realizing that we will have $500k+ in net worth before we try for kids has been very motivating for him.

FIRE Plans?

Previously, husband was very anti-FIRE. He couldn't imagine a scenario where he wouldn't be working until 65+ and thought I wanted to lie around the house all day for 40+ years. However, he has been more open to the idea as he's watched our net worth grow so much. I think we've landed at CoastFIRE - by the time I hit 40 (in 14 years), the house should be paid off, any kids we have should be well out of day-care, and we should have $1M+ in investments. At that point, I want to downshift to part-time work or work a less lucrative job that is much more fun. He sees himself still at his current job or similar since the health insurance is hard to give up, but likes the idea of being able to take much more time off/having that flexibility. Without the mortgage, our yearly spending will probably be around $60k as we'll still be doing travel/increased expenses from kids. That could fairly easily be covered with part time work or less lucrative careers as we slow down retirement savings.

Gross Income:

Me:
$72,450 - base salary
$5,000 - bonus
Total: $77,450

Him:
$75,000 - base pay (hourly at $36/hour)
$5,000 - estimated OT (OT mostly gone with COVID)
$3,000 - minor side hustles (Side hustle has totally dried up with COVID)
Total: $75,000

Rental income:
$8,400 – (renting extra bedroom for $700/mo)

Total for both: $160,850 (Basically unchanged since last December)

Deductions (Pre and Post Tax):

Me:
401k: $1290/mo (16% + 4% employer contribution on bimonthly pay + bonus)
Roth IRA: $500/mo (maxed)
Health/dental insurance: $0 (on partner’s)

Him:
Pension: $350-450/mo
403b: $700/month
Roth IRA: $500/mo (maxed)
Health/dental insurance: $0 (fully employer paid)

Monthly retirement savings: $2990/mo ($35,880/year - doesn't include pension)

2020 Monthly Spending/Saving (Actual numbers averaged over 12 months)

Monthly take home: $8000

Mortgage + PMI: $2275.83 (Currently at $1605 monthly payment, pay $895 extra towards principal)
Taxes & Home Insurance: $241.67 (Currently put aside $600/mo - property taxes covered by refi previously)
Electric/Water/Sewer/Trash: $119.61 (Paid every 2 months)
Solar loan: $1779.50 (Total paid $21,354.05 - paid off in March with rebate, bonus check, etc.)
Gas for house: $23.81
Internet: $130 (promotion period ended, in an ISP monopoly area - buy the fastest internet with everyone working from home)
Cell Phone: $116.19 (two cellphones, data for husband's apple watch)
Car Insurance: $52.92 (one car, two drivers, liability only. Rates are very high in CA. COVID discounts included, usually $65/mo)
Streaming: $34.35
Music: $11.24
Groceries/Alcohol/Pet Food: $338.89
Entertainment/Eating Out: $322.92
Transportation (Gas for local driving, Lyfts, Car Maintenance and Repairs, etc.): $498.39 (Paid $3000ish in January to replace the transmission after a car accident)
Health (Doctor's appointments, prescriptions): $42.33
Misc (Clothing, Haircuts, Non-food stuff for dog, furniture, gardening stuff, household goods/replacements): $622.09
Gifts (Birthdays, Anniversaries, Christmas): $81.50 (Saving $50 a month to take off the edge for Christmas)
Travel: $341.97 (Saving $500 a month towards this)
Renovations: $897.84 (Saving $1000-1200 a month towards this)

Total Monthly Expenses: $7944.85 with solar loan payments, $6165.34 without solar loan payments

Assets:

House: $570,000 (Appraised value in Feb 2020)
EF/Cash: $20,000 (also have approx. $7800 in savings for property taxes, travel, gifts, renovations, etc.)
My 401k: $53,325
My Roth IRA: $28,000
His retirement accounts (combo of Roth, 403b, pension cash value): $73,800

Total: $745,125 (+$122k since last December, $65k attributable to increased home value)


Liabilities:

Mortgage: $384,800 @ 2.851% (refi’d to lower interest rate, may refi again in Feb/Mar to under 2.5%)

Total: $384,800 (-$41k since last December)

Net Worth: $360,325 (+$163k since last December)

The 2021 Plan
Do our 13th mortgage payment for the year
Save and pay cash for kitchen remodel (aiming to save $50k over three years)
Husband gets annual raise in July, I may get a small one in April. We’ve agreed to split increase evenly between increasing 401k contributions and adding to mortgage payoff to avoid lifestyle creep.