Barlotti in Boston II

[Barlotti]

Hey, I'm smarter than the average bear. In fact, I'm smarter than a really smart bear. I could make big money if I put my mind to it! Um, yeah...

[Barlotti]

Assets:
home $188,000
investments $74,488
savings $2,230

Liabilities:
mortgage $142,898
HELOAN $14,740

Net worth: $107,080

My net worth has gone up by $4,103 this month.

I was so excited this morning to see that my 403(b) investments had posted -- I've taken a few minutes to update my ERE journal.

OK, I'm doing pretty well. I'm on target to have over $100K in retirement savings before I turn 40. My other major goal is to have my primary mortgage paid down to at least $95,000 by August of 2017 when the rate on my 5/1 ARM re-sets. This is do-able.

In other ERE-type news, I started stripping my kitchen cabinets this past weekend for a light remodel.

Peace.

[Barlotti]

Last night, my mom advised me to work on my kitchen cabinets gradually and not to tire myself out. This got me thinking on the power of discipline. I can be a little OCD about whatever subject captures my fancy. I really like to ruminate on the options, but there is an opportunity cost to ruminating. I need to have the discipline to contain and structure my thinking so that the opportunity cost doesn't get too big.

I think the solution is to keep the goal in mind, and to limit the time I spend thinking about a problem. For example, when I notice that I'm ruminating, I can ask myself, "what's the goal? and how much time do I want to spend on this?"

I'm scaling down my tax-advantaged retirement savings for the year starting with my June paycheck, and will have about $2500 per month to *save* as I wish. I've started ruminating about what I should do with that $2500. I would find satisfaction in paying down my mortgage (5/1 ARM at 2.5% with a yearly rate change of no more than 2% starting in August of 2017, interest capped at 7.5%) but it also makes sense to save up cash in an interest bearing account for a down payment on a real estate investment.

Someday, I want to invest in commercial real estate and I think this will require about $300K down. The first step for me may be to invest in residential real estate. But I need to save a down payment to buy a residential investment property! I think I can save about $30,000/year cash if I really buckle down.

Here's one strategy for saving $30,000/year cash (in addition to tax-advantaged retirement savings):
1. Fix up condo to rent (in progress),
2. Rent my condo,
4. Move into an apartment/house with roommates.

Here's another strategy:
1. Fix up the condo.
2. Get a subletter for my one-bedroom condo and sleep in the living room. Now I dated someone who while he was between non-profit jobs, did this successfully for a full year. He was wildly charismatic and was able to convince the most interesting people to pay large sums of money to put up with him sleeping in the living room. He also negotiated a rent break with his landlord for re-finishing the floors, sandblasting and re-finishing the clawfoot tub and sandblasting and re-painting the radiators. Huminah huminah.

And yet another strategy:
1. Get a part-time job at Home Depot. This has the potential advantage of an employee discount on much needed tools -- like a nail gun or a mitre saw.

[Barlotti]

On my commute to work this morning, I spent some time meditating and remembered how much my life was changed by attending a 10 day Vipassana meditation course in 2010. For 10 days, I didn't have access to email or telephone, didn't speak to anyone except the instructors, and limited every interaction (including eye contact) with other people.

[Barlotti]

Assets:
home $188,000
investments $78,688

Liabilities:
mortgage $142,532
HELOAN $14,634

Net worth: $109,522

My net worth has gone up by $2,442 this month.

So I cut my 403(b) contributions from 50% to 10% of my income for the rest of the year. And I topped off my Roth IRA!

I have this monthly routine. I get my paycheck at the end of the month. I pay all my bills and move money into investments, and wait for all transactions to clear before I journal. While I'm waiting for the transactions to clear, I think about my financial future.

My thoughts this month? If I economize, I could save $90K in three years (in addition to maxing out 403(b) and Roth IRA). I could use half of that to pay down my mortgage, and the other half as down payment on another property.

[Chad]

Looking back over your last few posts you seem to be jumping around a little with your financial goals. We all do it when we are searching for what we really want. Just try and find what you really want before you make a big decision.

Oh, and good luck with that. It's much easier for me to say than do.

[Barlotti]

Hi Chad, you've helped me refocus. I really want to be financially independent ASAP, and this means paying off my mortgage. I can be FI with investments of $405,000 if I don't have a mortgage. If I continue to contribute fully to 403b and Roth IRA (with 8% returns), I will have $410,000 in retirement savings in 8 years. I can pay off my mortgage in about 6 years.

I guess I should pay off my mortgage...

[Barlotti]

I'm starting the YMOYL program.

Step 1 is to make peace with my past, and that involves calculating how much money I've made in my life to date and my net worth. YMOYL says to add up the value of every single belonging in calculating my net worth, but I haven't done that. Just used my last calculated net worth from this journal.

Earnings to date: $654,504
Net worth: $110,000

So what are my thoughts on these numbers? I've made a good amount of money. In the 7 years after grad school, I've made $479,519. Also, I'm pretty happy with my net worth. Nothin' to complain about.

[Barlotti]

In addition to starting the YMOYL program (more to come later), I'm cutting down on my possessions.

Over the last three weekends, I've devoted time to getting rid of items that I don't actually use. I think that I used to derive pleasure simply from owning a thing. My perspective has shifted. First, possessions seem burdensome to me -- they need to be maintained and eventually disposed of, and they take up space. Second, it seems utterly wasteful to own something and not use it.

Given my recent focus on decluttering, I am astounded by the material luxuriance of my life. It's too much. There are too many options.

I enjoy things more when there are limits. I used to listen to Prokofiev's 2nd violin concerto on CD all the time. That is until 10 years ago when a friend ran off with my CD. Recently, I caught Prokofiev's 2nd violin concerto on the radio, and I was rapt because it was a rare treat. I would rather that beautiful music be a centerpiece in my life, and not background noise. I don't want my life experiences, including material comfort, to drown in a sea of clutter and overstimulation.

[EdithKeeler]

I think YMOL is wonderful. I think of it more as a philosophy than a program, but it really changed how I look at money, and my life. I read it years ago, and while I've waxed and waned about some of my spending habits, I think at least once a week about the idea of giving up hours of life to own things. Powerful.

[Barlotti]

Hi Edith, I'm encouraged to hear that YMOYL has really stuck with you. I found YMOYL very moving. I've been trying awhile, but I haven't managed to reach the extreme savings rate that will get me to FI sooner rather than later. I am hoping that YMOYL's philosophy will keep me on track. So here goes with step 2 of the "program".

The first part of step 2 is to calculate my real hourly wage.

My official pay rate is $41.83 per hour. With a 2080 hour year, I have an annual salary of $87,059.16.

I estimate that I actually spend about 3120 hours yearly on job related activities. This includes 8.5 hours in the office, 1.5 hours of commuting, and 2 hours of unwinding, 5 days a week, 55 weeks a year.

I estimate that I spend about $9480 annually in work-related costs. This includes $480 in gas, $700 for my commuter pass, $2600 for parking, $5200 for eating out, $300 for clothes, $300 on cigarettes. I drive, eat out, and smoke on account of work stress.

My real hourly wage is (drumroll please)…

About $25 per hour. This translates to an annual salary of about $52,000.

OK, I feel pretty good about my real hourly wage. If I compare the environment, benefits, and “fun” of my present job to my past jobs, it measures up exceedingly well. What da heck, I have a great job! I’m very grateful. This is good motivation to excel at my job so I can keep it.

[Gilberto de Piento]

This is from about a month ago but I hadn't read your journal before:

1. Get a part-time job at Home Depot. This has the potential advantage of an employee discount on much needed tools -- like a nail gun or a mitre saw.

I've worked at Home Depot and I don't remember any type of employee discount on store merchandise. Also, it is not the worst place to work but it is not the best either. The pay is low. They will promise you a full time job and then cut you back to 10-20 hours in the slow seasons. They will never give you a consistent schedule and you will close the store on Saturday and have to open it on Sunday. They will fire you for no reason at all (not that I was fired but I saw it happen a lot, especially to managers).

[Barlotti]

What? No employee discount?!! Well I'm gonna nix the Home Depot plans.

Hello dears,
I'm doing my monthly net worth calculation a bit early even though my retirement investments haven't cleared. I'm feeling BOLD today. Heh heh.

Assets:
home $188,000
investments $81,476
bank $3,593

Liabilities:
mortgage $142,189
HELOAN $14,529
cc debt $707 + $4493

Net worth: $111,151

My net worth has gone up by $1,629 in the last month. My investments have increased by $2,788. All in spite of the fact that I'm carrying considerable credit card debt this month and that my retirement investments have not "cleared". Now I'm going to do my Owen Meany impression: THIS IS TESTAMENT AS TO WHY THE RICH GET RICHER.

Not that I'm rich. Unless you count wealth of a non-pecuniary nature. (Now I'm slipping into my Samuel Clemens.)

Yes, yes, I know the credit card debt is bad, but I'm keeping cash in reserve for my kitchen remodel, the outsourced portion, which is about to happen.

[Barlotti]

This past weekend was my fourth weekend of decluttering. I can't believe that my modest (but cute!) condo holds so much stuff. So much so that I've decided to take inventory of what I own.

I'm confident that I own well over 700 items. I discovered some surprising things about my possessions.

I own 17 pairs of shoes! This is a little excessive.
I own 14 dresses, some very colorful and unique. OK, so I love dresses. I wear them often, but I don't think I need so many.

Taking inventory of my stuff has opened my eyes. I own more than I thought I did and a bunch of crap-ola. I would much rather own high quality, versatile stuff.

[Barlotti]

My living room looks sleek and I love it.

When I say "sleek", I don't mean bare. I've got my wall of mirrors, oil paintings, Old Country Roses china in cabinet, hand crocheted afghans layered on my sofa.

Diana Vreeland wanted her living room to look like a garden in hell. All red and floral-patterned, it's refined in its excessiveness. That's what I want for my living room, but coming from a minimalist perspective.

The trick is texture and pattern on the walls.

[Barlotti]

So in my fifth weekend of decluttering, I had “yard” sales both Saturday and Sunday, and made 4 or 5 trips to Goodwill.

I logged on to say that in spite of an intense fifth weekend, the decluttering continues. I figure I reduced my possessions by 200 this weekend, but I believe I own 800 to 1000 things even after 5 weekends of focused decluttering.

Understanding how much stuff I have in my life makes me feel free to get rid of some of it. I saw that I had 5 black Sharpies in my desk. If I only have 1, I’ll take care of it and use it until it’s exhausted. Someone else can use the other 4 black Sharpies. If I need another in the future, I know where to find one.

[Barlotti]

Last weekend, I went to New Hampshire. But while I was away, I sold my Stuart Weitzman heels for $50 on ebay. I don't remember what I paid for them, but I do know that I bought them three years ago, and that they are still brand spanking new.

Notwithstanding the frustration of pointless email exchanges resulting from Craigslist postings (why oh why do people like to waste time asking stupid questions when they are not actually interested in buying an item?), I'm doing OK. I know what I want to get rid of by selling. It's just a waiting game for the right buyers.

Here are a few items I'm desperate to be rid of:
large rug and pad
dresser

They are just so big and difficult to move. Getting rid of one will be like getting rid of 50 smaller items so far as I'm concerned.

[Barlotti]

Before moving onto my YMOYL saga, an update on minimizing my belongings. I sold my dresser, and put a bunch of stuff to give away for free in my car, my storage space on wheels.

I worked on steps 3 and 4 of YMOYL tonight. I'm just gonna cut and paste from MMM for my own convenience:

3: Create Monthly Reports for Yourself
Keep a table of all income and all spending for each month, break it into catagories, and convert the figures into “hours of life energy spent”. Restaurant meals: 20 hours., etc. I find that the “Mint” financial tool does an acceptable job of this for me, but the book recommends you do it in more detail.

4: Three Questions that will Supposedly Transform your Life:
For each of the categories above, ask yourself:
•Did I receive fulfilment in proportion to the hours of life energy spent?
•Is this expenditure in alignment with my goals and life purpose?
•How might this expenditure change if I didn’t have to work for a living? (more, less, same)

Here are some categories I found convenient. Each category has more subcategories, but I'm not going to list them here. I spent about 143 hours of life energy to cover expenses in July.

Dining 7.9
Auto 14.8
Entertainment 7.1
Groceries 22.4
Household 18.8
Utilities 4.7
Health and Fitness 2.4
Medical 3.8
Miscellaneous 1.8
My pets 0.4
Work 3.1
Bank fee 4.5
Cash 5.8
Mortgage 45.6

I realized that I don't mind spending lots of life energy (i.e., money) on socializing. My grocery bill was high last month, but most of it was food I bought for social events. On the other hand, I don't like spending life energy on *eating out* alone and parking. These are both habits I have on account of work stress.

I gained some insight from fine-slicing my categories, but I've done this sort of tracking in the past. Having refreshed my accounts today, I saw that I've been spending more than I would like, thoughtlessly. That's why tracking works!

Ta ta for now.

[Barlotti]

Hi Scriptbunny,
The "life energy" thing comes from YMOYL. For me, my mortgage is totally worth 45 hours of life energy. As a graduate student, I spent 28 hours of life energy (or $700 monthly) to live on one floor of a triple decker with three roommates. The large bank fee is due to interest payment on credit card debt. I know, I know, bad me to carry credit card debt. I usually don't.

On to my monthly net worth calculation!

Assets
Home $188,000
Investments $81,457
Pension $3,292
Checking $1188

Liabilities
Mortgage $141,822
Heloan $14,415
credit card debt $3553

Net worth $114,147

OK, so my net worth has gone up by about $3K. Not great since this is the first month I remembered to count my Pension. Other "deposits" include $710 to my 403b, and $1500 to after tax investments. Considering all this, the net worth increase this month isn't great -- my investments have decreased in value.

I need to work on asset allocation.
Advice welcome.

[Barlotti]

I basically spread out my investments semi-evenly amongst the following asset classes: large cap US stocks, mid cap value US stocks, small cap US stocks, international stocks, commodities stocks, REIT, and bonds.

And you know what I realized?! It's the one year anniversary of Barlotti in Boston II. And since I like celebrating, I must take stock!

My net worth was $62,423 and is now $114,147! (increase of $51,724)
My Roth balance was $9,638 and is now $18,685! (increase of $9,002)
My 403b balance was $20,092 and is now $53,061! (increase of $32, 969)
My nonretirement investment was $6,420 and is now $9,685! (increase of $3,265)
My pension was not vested, but is now! (increase of at least $3,292)

I would love, love, love it if my investments grew another $45K in the coming year. Seems unlikely, but I'll hope for the best.

I've saved $36,624 since last August when I started Barlotti in Boston II. That's about 42% of my gross income.