Some big changes in numbers last month. A little to do with the volatility of the markets; a bit to do with a sizeable debt we took on. I’m a little surprised that our net worth remained over a million dollars!
We bought a new car at the end of August, the details of which only appear on September’s column. Out of door price was $32,150. We put down $8,500 (basically what we got after we sold our last car) and the rest we put on a 0% interest loan for 5 years.
Let me state that again: 0% loan. For 5 years.
That is, we don’t pay a single cent in interest.
If there is a need and given an opportunity, I will ALWAYS take on loans at 0%. With inflation, that is effectively getting paid to have a loan.
We are yet to make a payment on the loan. The first payment due is October. We’ve never had a 0% loan before (closest was 0.9%). We’re in no hurry to pay off the loan and will not be making any extra payments (as we have done/doing for all any loans that is over 0%). Also, as evidenced by the numbers above, we could have very well paid for the car in cash, but then again, 0% loan.
The details of the vehicle purchase is as follows.
School is in full swing. We’re having an extended end-of-summer here. Temperatures have been a glorious 60-70 during the days and 40-50 at nights. Almost perfect. Scheduled outdoor sports and activities are winding down though just hanging around the yard, neighborhood kids playing around, neighbors joining around a fire pit in evening (socially distanced, of course) – all simple things are on.
Another month, another $50k+ rise in net worth …you know, the usual 😀
Actually last month was pretty crazy …in terms of what we did with our vehicles.
At the beginning of August we had 2 vehicles for our personal use. One was paid off. One had a 0.9% loan. The balance on that loan stood at $5,797. We decided to pay that off and did exactly that on August 17th. The decision was kind of derived from the fact that Ally Bank lowered their rate to 0.8% and it made little sense to pay more in interest than what we could get if we just kept the cash in a savings account.
I will repeat this again – if you can get a guaranteed rate of return on your cash greater than the rate of interest on your loan, it is best to keep the loan as long as possible to take advantage of that interest arbitrage.
On August 24th, we sold our other car for $8,600 – the one which had been paid off for a while.
On August 29th, we went and bought another car! 😲 I know, horror of horrors!
I’ll leave the details of the car buying transaction for another post, or club with September’s post, as the financial details only appeared on Sep 2.
This was the 4th time we’ve sold a vehicle that we’ve owned to a private party. Every time we’ve got significantly more than what dealers have offered us. This time, to further validate this idea, we took it in to 2 dealerships and one offered $4.75k and another $5k. I listed the vehicle in Craigslist for $9.4k knowing very well I would take $8.5k. KBB for “excellent” condition for the year, make, model, trim, and options for our vehicle was $9k. The first buyer that came to see the car negotiated it to $8.7k. But they were such a nice young couple – planning for the extension of their family – that I knocked $100 off it. We sold for $8.6k.
Increase in our cash holding is the difference of paying off our car and proceeds from selling the other car.
On thing I might have missed to mention about our retirement accounts is that M is not contributing to the 401(k) any more (hasn’t since January). All movement is just market valuation fluctuations of underlying investments. M still contributes $50 to Roth IRA every month.
W continues to contribute to 401(k) but at a lower rate than last year. W is on pace to hit the Roth IRA contributions limits for this year ($6k).
We also sock aside $100 every month for D’s college in the 529 account.
That’s it. Summer is drawing to close and schools are reopening to a new reality – distance learning and hybrid models. The markets seems to be in the mood for some wild swings. The pandemic is still raging. The elections are less than 2 months away. New examples of systematic racial injustices keep on rearing their ugly heads. Football starts next week.
July 2020 has carved out a niche little space in our FIRE journey.
Our net worth, for the first time ever, crossed the million dollar mark.
A few things happened in July, some on a macro scale and some just pertinent to us.
The stock markets continued its remarkable upward trajectory. The dip in February/March seems to be but a minor glitch. I’m still waiting for the another dip. Not complaining though …but it’s staggering how seemingly decoupled the markets are from the overall economy.
This generator of wealth – the stock markets – to which a sizeable chunk of our are assets are directly linked to, catapulted us over the our January highs.
As mentioned in last month’s post, we refinanced our old 30-year mortgage at 3.875% to 15-year at 2.625. We made the first payment towards the new loan in July. Couple of things to note on the mortgage:
The new mortgage amount went UP to $176,250
Why? Some of the closing costs are baked into the new loan
After closing, we got checks from
the closing/title company – $972.52 (Excess cash to closing. Though we did not have to bring actual cash to closing, the closing costs that are baked into the new mortgage were estimated higher)
the old mortgage – $2,037.93 (escrow and accumulated interest)
If we add back the amounts of the checks to the old balance of $172,262.85 (June balance) and then subtract from the new loan, we arrive at $976.70 – which is effectively what we paid as closing costs for the refinance.
We also made the payment for August in July, so currently the outstanding amount of the mortgage is $175,335.55
We also increased the valuation of our home – from $300k to $325k. In June when we almost put our home on the market, the list price that we had talked to our agent was around the $350k mark. Based on the market assessment our realtor did, we would have likely ended up with an offer more than the list price. BUT, we didn’t actually list it and consequently didn’t receive any offer or had an official appraisal done. So, being very conservative, we decided that the base value of the home should be $325k for the purpose of calculating our net worth.
Second big thing to happen in July: We filed our taxes for 2019 and paid what we owed. This time it was a whopping $5,682!! Old readers will know that we have always owed money to the IRS when we have filed taxes. But not as much $5k+. No sweat though. We had the funds in an saving account marked specifically for “Tax” and paid it.
That’s it for the numbers for the month.
We took one road trip in July. We went on a boat. Socially distanced, of course. Summer is going good.
After toying with the idea of selling our current home and moving to new place, we finally decided on staying put. Frankly, “toying” doesn’t do justice to how involved we were 🙂 We put in offers for 3 different places – 2 of which were outbid by other buyers; the third one we cancelled after the inspection.
Instead, we refinanced into a 15-year mortgage. Locked and closed at 2.625%.
Our monthly payments remain almost exactly same but we will be paying down principal way faster. For May, $620 went towards principal reduction from the monthly payment. For the new mortgage, from the first payment, which isn’t due till August, $800 will be applied to the principal. With this new mortgage, we decoupled the taxes from the mortgage payments – eliminated escrow – and will pay our property taxes directly to the county going forward.
You will notice that our mortgage liability hasn’t gone down from last month. Because we haven’t made any payments.
Also, astute readers might notice that our cash balance has decreased by almost ten grand. Well, this was an anticipated “expenses”.
When M left the corporate job last January, we knew we had to return a part of the sign-on bonus received when M started on that job. There was option to pay back the amount in 6 monthly installments or lump sum. We decided to pay out lump sum at the end of 6 months, and collect interest on the saved up amount held in a high yield saving account. That’s $12,698.13 gone.
We received $900 from our closing. This is was from the estimate they had based on the new mortgage loan amount and closing costs, and the costs came in lower. We are also slated to received a sizeable amount from the closed mortgage loan, but that hasn’t yet hit our accounts.
Other than that, the usual. Summer is in full swing. We made our first two road trips of this summer in June. There’s another one planned for August though we might take one in July.
The stock markets giveth; and the stock market taketh away; and they giveth …
You get the idea 😀
We recorded an increase of $46k in net worth in May, bringing us close to where we were in December of 2019.
Nothing much has changed from April to May, in terms of how the stay-at-home situation that we are in. School has been distance learning. D’s handwriting is getting much better due to daily writing of letters – school work.
As the school year draws to a close, we’re thinking of how to keep D engaged amid the pandemic. Our state is lifting some restrictions on June 1. Some camps and summer day care centers will open in limited capacities. Since M can be at home, we are quite a bit less concerned if this would have happened a year ago.
Can’t have a post for May and not mention what happenings of the last week of the month that has ripped major cities up in the US. George Floyd. Black Lives Matter.
The markets clawed back some of the losses last month. We gained ~$60k from the lows of March. I still believe that we have yet to test the very low of this bear market before we got onto another bull run.
Stay-at-home orders are in effect in our state. We’re mostly hunkered down at home. And living a good life.
First things first. Let’s acknowledge the extraordinary times we are living through right now. We are in the 4th week of school closure. Stay-at-home orders have been in place in our state for 3 weeks. Over 10 million Americans have filed for unemployment in the last 2 weeks. The markets have dipped about 30% from their all-time high, hit just under a month ago. The end, or a glimmer of an end, of this ordeal is not in sight.
In spite of all the calamitous numbers from above, life has been pretty good for us.
D’s distance learning started 2 weeks ago. M’s mornings and afternoons are spent assisting D with school work. W gets to sit in the comfy home office and work in peace. I can’t put in words how difficult it would have been for us if both W & M had to work from home AND had to make sure D is getting all the school work done. We get to take long walks in the afternoon, keeping lot of distance between other walkers. We watch a movie or a show almost everyday. We workout in the house with minimal equipment. We work on puzzles and play board games. We play in the yard. Cooking at home has been on the rise with fresh, delicious, and healthy meals on the table. We still order in food about once or twice a week to a) help out local restaurants, b) to have something different.
Right, March numbers. Carnage really. Our net worth is down about $75k for the month and $122k down from the all-time high reached in Jan ’20. I was actually surprised that we’re just $122k down and not the close to $200k I was anticipating. Strongly feel we are still quite a bit from the real low. Q1 earnings will start pouring in and those won’t bring any sort of reassurance to this already hammered market. The overriding health situation will only get worse before it gets better.
But …all is good 🙂
In a few years time, we’ll look back at this as a necessary – the market correction, not the virus! Things will be back up again.
In the meantime, let’s take this once in a lifetime opportunity to appreciate the good things in life: family, togetherness, the ability to ride out this tempest from the confines of our homes, the food that is still readily available, the first world country we live in with robust healthcare infrastructure.
And let’s be thankful to all the superheroes out there, doing their jobs under tremendous pressure: health care workers, first responders, grocery store personnel, delivery people, sanitation workers, and all who are working to keep the lights on in all of our homes.
Aha, the correction is here! This is going to be a fun few weeks. Or months. Who knows?!
On Friday Feb 21 the DJIA closed at 28,994. The next Friday it closed at 25,402 – the largest ever drop in any single week in its history. Naturally, our numbers are down as well.
We recorded our largest over drop in net worth, month over month, at over $47k. But …all is good. We’ve pumped in about $5k from our “dry powder” to take advantage of the dip. I’m almost hoping for a 20% correction, which would take us into official bear market. Bring it on!
Major expense for February was $1,183 we paid in home insurance premium. We decoupled the insurance payment from our escrow a couple of years ago and now use credit card to pay the premium, which is already saved for in a savings account. Another expense was regular and preemptive maintenance for one of our cars at $450.