Monday, November 19, 2007

This is my (really really long) awe-inspiring (for me) epiphany moment

You'll certainly see this turning into the Home Improvement Cosmos over the next few months (years) as I get the new place fixed up, but something a little more under the radar that I've been working on for the past few months, and am making long terms plans for, is fixing my personal financial situation.

I found Get Rich Slowly after my friend Rebecca sent me a link to a gardening post he did, and I immediately got hooked on the blog. The writer is a pretty average joe (actually turns out to be one of Chai's friends!), so he's not doing crazy investing I wouldn't understand or couldn't afford, and he's not dealing with some totally fucked up credit situation and starting from square one.

So he's a lot like me: a fairly responsible person who wasn't born rich and acquired more debt than he'd like over his lifetime for some legitimate and some regrettably wasteful reasons. He's way ahead of me, and is about to become debt free for the first time when he gets his bonus over the holidays. (The only places we seem to differ are that he's married and seems to live in the suburbs -- I remember a long comment thread of people appalled at the mere thought of a $10 cocktail -- but for the most part it's irrelevant when it comes to his advice.)

I'm just starting out. If I'd put off buying a house, and dedicated myself to saving money the way I've been doing over the past six months, I could have been credit card debt free in about a year and a half, maybe two. But, I found the house I loved, and the equity I'm building along with the huge tax benefits I'll get (to wit: the $5000 credit I'll get next year) made me steer off course a little bit.

The major problem, however, is the massive amount of money I have to spend up front for this thing. I'm getting about $23,000 from my construction loan, but there is about $8000 in other work that needs to be done before or contemporaneously with the major projects. (Not to mention the kitchen and bathroom redos, which aren't necessary, so they'll have to wait awhile.) And of course I have to cut a $7000 check tomorrow, but I haven't actually received any of the loan yet! Gaaaaah.

The next six weeks are going to be about me manipulating my finances like Catherine Zeta-Jones robbing a laser protected bank. After this is over, after my house has passed inspection and I get the rest of my loan, after I refinance and start paying $600 less a month on my mortgage, I'm going to fully embrace personal finance reform, starting with opening a high interest online savings account ... which is something so unbelievably obvious I can't believe I had to read it on a blog to realize I should be doing it.

Then: I will "pay myself." Which is the concept of direct depositing your paycheck into your online savings account, from which you pay all your bills, and also from which you give yourself a small "allowance" that you deposit into your standard ATM wielding bank account (but assuring that you're paying over your minimums and/or keeping a substantial amount in your HI savings), and compromises the amount of money you're actually allowed to spend every pay period. It's kind of stupidly brilliant.

I'm actually getting pretty used to this very lo-fi lifestyle I've been living. Progresso soup for lunch everyday (at $2 a pop rather than the $7-10 I was spending every day)...I know I should be bringing my lunch, but one step at a time. I almost never eat out for dinner, instead make dishes that last 2-4 days with different formations of rice, pasta, stewed tomatoes, black beans, onions, jalapenos and cheese, with some turkey sandwiches to break up the monotony. When it gets cold I become a homebody anyway, so staying in and watching netflix (or like the past few weeks, working) is my status quo, and not spending $30-40 on beer or jack daniels or whatever. I haven't bought a piece of clothing since I hired on my realtor in August (even though I'd kill for some sweaters right now).

But you know what? Spending close to nothing (we'll ignore the $420 I dropped at Home Depot on Sunday) feels Really Really Good (the HD purchase gave me serious anxiety). It feels GREAT. I think way back when I just got used to having this stupid credit line, and didn't feel so bad using it because I was 1) in law school and was using it to buy groceries or 2) eventually started making good money and was paying more than my minimums, even though I'd still use them on occasion. Now the thought of hitting up the mall and dropping a hundred bucks on a new pair of pants actually, inexplicably, outweighs the satisfaction I'd get out of the new clothes. Being debt free eventually is such an exciting thought, it actually makes me even more happy I now have a big house to ramble around in, cook big meals, and practice my hobbies (gardening! writing! starting my own business! (yes, that's a "hobby" for now)), rather than sitting in a bar three nights a week drinking cheap beer. Not that I won't still do that on occassion, but man it's a huge money and time suck.

What I'm saying is that now that the House has pulled me screaming into Adulthood, maybe....I'm happy I'm here?

Don't worry, marriage and children still freak me out. One thing at a time people.


At 9:39 AM, November 20, 2007, Blogger HomeImprovementNinja said...

By the way, when you're ready to start fixing, I have a contractor who's good, so drop me a line.

At 4:14 PM, November 20, 2007, Blogger Heather said...

Doh. I pretty much have all my guys, though I am still poking around for a guy who can install a door (already purchased), for fear I'll fuck up the doorjam and leave my house exposed for days. So any general contractors or handymen recommendations would be welcome.

Next year I'll need a bathroom/kitchen contractor, so I'll def hit you up then.

At 6:59 AM, November 21, 2007, Anonymous Financial Planner Deb said...

i appreciate the resolve to be financially responsible, but seems like buying an apartment in the dc market when the market has a WAY to fall, and taking on more debt was not such a good idea. dc by many accounts is still about 20% overvalued. can you really afford that house?

At 1:21 PM, November 21, 2007, Blogger Heather said...

Deb - First, as a disclaimer, on a blog that my full name is attached to, you're going to have to assume that I'm not giving you my full credit/debtor/personal information that would allow readers to make an objective assessment of my situation.

Second, I really have to disagree with your take on the market. I don't doubt that it's certainly not on the rise yet, but this isn't middle America, and making it sound like my property value is going to drop 20% in the next few months just isn't accurate. DC property will *always* be overvalued, and due to both the location of my house and the renovations I've been doing, it's already been appraised at 18% more than I paid for it, and that's in THIS market, not the one five years from now, which will presumably be at least marginally better, considering that as soon as they finish the Tivoli Square developments, just the land itself that I bought will give me a huge turnover.

I'll admit I balked on buying a condo for many reasons, but a major one is that I think it's affected much more by the situation you're talking about, particularly with the glut in some buildings (some are so bad they're turning into apartments). I'll definitely be treading water for the next 3-4 months, but I've made a tight budget and should be back to saving money/paying down my debt by March or April, *and* I'll have about $50,000 in equity to boot.

At 2:12 AM, November 30, 2007, Blogger Roonie said...

I loved this post of yours, Heather. Because it makes me realize I'd better wise up about my finances. Not like I'm a horribly extravagant spender, but geez, I don't even know how to get my loan payments down, let alone build equity and save money to the point that it's untouchable. I feel a little panicked.


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