We paid a buttload in property taxes this month, and the only reason that I’m not bawling my eyes out is that we saved it up throughout the year. Savings buckets work if you make sure to treat them like they are not your money anymore once you make a deposit.
Our Savings Buckets
I have set us up quite a few separate savings accounts at CapitalOne360 (formerly ING). In fact, here they all are:
- Emergency Fund – for crappy months that pop up. A small percentage of any monthly extra gets put here until this hits $15,000.
- Taxes / Insurance / HOA – set monthly amounts for property taxes and 30% of our paychecks get put here, no limit.
- Roth IRA / Investments – a super huge chunk until the Roth IRA’s are fully funded, no limit.
- Home Maintenance – large percentage of any monthly extra until this hits $10,000.
- Rent Home Maintenance – large percentage of any monthly extra until this hits $10,000.
- Car Maintenance / New Car – $500 a month gets sent here plus a small percentage of any monthly extra until it reaches $25,000.
- Vacation – 5%-15% of any monthly extra depending on how the other accounts look, $5000 limit. We stole from it for the new house too.
- Hubby’s Fun Money – 2.5% percentage of any monthly extra. If it gets huge, we steal from this for other goals (like when we bought our new house).
- My Fun Money – 2.5% percentage of any monthly extra. If it gets huge, we steal from this for other goals (like when we bought our new house).
Altogether, we squirrel away half or more of our gross income into those accounts every month (obviously, the tax account sees the most, lol).
No Exception Rule
Moving money from our checking account into those savings accounts isn’t the hard part. The hard part is avoiding the impulse to raid accounts at will when we really want something. Heck, sometimes we make the choice to ignore our own advice. For example, we zeroed out the vacation account and the car account when we bought our new home in October 2012.
But we do have one no exception rule.
We don’t touch the taxes account for anything other than income taxes, property taxes, home owner’s insurance on both homes, the Home Owner’s Association fees, and an annual allowance to check for overages. No exceptions.
Once money is put into this account, it can’t be taken out unless there is a surplus in April of each year after our income taxes are paid (and yes, we take into account January-April’s contributions when we check for the surplus). If there is any money that wasn’t used for the previous year that was set aside, we divide it up between our other savings buckets based on where our percentages are set at the time and move on.
Prioritizing Your Savings Buckets
We base our percentages breakdown of where to place excess cash on which goals have the highest priority for us. Once those are achieved, the percentage of the money that we were funneling that way then gets divided up between the remaining savings buckets. For example, here is a screen print of our percentages sheet:
Our Savings Priorities (aka, “Yep, I’m That Anal”)
As you can see, we have prioritized our goals in the left column and along the top. We base the percentages breakdown of savings on these priorities. When one is fulfilled, we move to the next column of the sheet and use that breakdown instead. We’ve only made it to the second column this year (Percentages After Roth IRA Target). We’re hoping to blow this chart away next year, lol.
How do you handle annual expenses like property taxes and home owner’s insurance?
You know I hate debt. Heck, we paid off both of our cars less than 2 years into our car loans. Now we save cash for future cars. We paid off the mortgage of our first home, now our rental property, in 6 years. Some of you have even pointed out that I could have used that $70,o00 in principal payments on something that could have earned me more than the 4.5% interest that we saved. I argued that owning a home outright is a sort of insurance policy for us self-employed people.
BUT, today I want to look at debt in a slightly different light than usual. I want to see any of the debt we’ve ever had as a gift…what did it lead to overall?
Our Debt History
Mr. BFS and I are 30 years old. The debts that we’ve had so far have been a family college loan, 2 car loans, and 2 mortgages in our lives so far. Here is our debt history:
- The $8000 family college loan was forgiven a few months after we started making payments when we graduated in 2005.
- The first car loan of $11,000 came along in 2005 too. It spurred us to live like college kids even when we started making decent money since we wanted to pay off the 6.1% car quickly. In early 2007, our Chevy Aveo was in my name.
- Then we took on a $91,200 mortgage in mid-2007. We lived on less than we could have in order to make principal payments from the very beginning.
- We splurged on a better family/hobby job vehicle for Mr. BFS in 2008, so we got a $20,000 car loan for the Prius at 4.1%. We again tightened our belts and paid off that car loan in 2010.
- In late 2012, we bought our current home and signed up for another $208,000 of mortgage debt.
- In early 2013, we paid off the first mortgage to give ourselves some monthly breathing room in regards to cash flow.
So our “only” current debt is the $204,000 mortgage left on our current home. I italicized “only” because $204,000 is a lot of debt in my eyes. I don’t care if it’s considered “good” debt. It’s money that I owe someone, and my home isn’t really my home completely until that balance is zero. And the 4% interest, which is about $600 a month, is truly annoying too.
Slaughtering Debt Motivates Us
Looking at our last 8 years out of college, it is obvious that our debts actually caused us to live on less consciously. We’ve definitely embraced some lifestyle inflation, but not to the point that we couldn’t save for our future or tackle current debt. We simply funnel extra money to our priorities, and debt repayment is a huge priority for us. So in that way, debt is actually one of the main motivating factors for the beneficial financial decisions that we’ve made up to this point. Not too shabby.
Do I appreciate debt anymore now than before? Nope. But I will say that we don’t regret any of our debts, and they have motivated us to stay on track to pay them off and get ready for our future.
How do you see your debt?
This post is part of The Gift of Debt Series an eight-day, multi-blogger extravaganza hosted by The Fiscal Flamingo. The series is designed to give you the permission to kick up your heels, embrace your debt with glee, and look forward to finding the gold at the end of the rainbow. Follow along in the series as we tell the story of our gift and encourage you to find yours.
In my post about losing the election to be on my home owner’s association (HOA), one of the commenters asked me to take a look from my HOA members’ point of view even though she probably knew some of my supporters may lash out at her for it. I’m glad they didn’t. Linda’s comment was:
Crystal, do you think there’s a chance that other HOA members were offended when you said the HOA is “crazy” and “annoying”? Not sure if you can see the other point of view but I wouldn’t want you on the HOA either because of all the public venting. HOA is a private matter and I’m sure people will worry that you will complain about them publicly and the real estate development.
Even though I think that venting posts that happened before I actually met the actual members of my HOA shouldn’t matter after the last 8 months of getting to know all of them better, I realized after Linda’s comment that I only praised specific members of the HOA after those attended meetings verbally to my friends and husband. I never blogged about it. And it is obvious from the meeting that they read my site, so here I go.
First of all, let’s get the awkward out of the way. To any of the members that weren’t specifically targeting me and my family, I’m sorry. I should not have lumped you all into one group to vent about, especially before I even met you. Specific members of this neighborhood have gone out of their way to make me feel unwelcome, but not you. In fact, there were at least 3 members of the past board that made me feel like they were truly listening and empathizing with me. To any of you non-bullies that were hurt by my words, I sincerely apologize. I hope to get to know you better the longer we live here. Please feel free to reach out to me in passing and I promise not to lash out again.
Thank you to the neighbor who let me know about the guy campaigning specifically to keep me off the board. You didn’t know me, but you thought that what he was doing was wrong. So thank you for speaking up. To everyone with kinds words for me before and after last week’s meeting, thank you. To the neighbors who showed up to the meeting to participate because you listened to me during the door-to-door evenings, thank you. And thank you to everyone in the neighborhood who smiles, nods, or waves while we all go about our daily lives. You are the reason that this neighborhood is as awesome as it is.
For the Rest…
As for the other point about keeping all HOA stuff private, I can’t apologize for blogging about things that affect me. That’s my personality – I talk and blog about anything that seems big to me. I don’t use real names or break confidentialities, so the internal workings of the HOA meetings and what they cover wouldn’t be here, but of course I will blog about the big stuff that is public.
Anyone could ask our management company about the number of deed restriction violation letters sent out. I only blogged about the ones sent to me. Anyone at the big meeting last week would already know what happened and that I was targeted negatively and publicly by the guy running on the same ballot. I only blogged about that public setting. I’ve been attending the HOA bi-monthly meetings since February but haven’t blogged about any of those details. Those are private to others and don’t just involve me. I know the difference.
So if anyone from my neighborhood is reading this, please be assured that I know the difference between sharing about my life and sharing about everyone else’s lives.
Okay, so for all of my regular readers, I promise this isn’t turning into an HOA blog. I just had this on my mind since the comments on my last post, and I thought it would be better to get it out there now. For any neighborhood readers, please feel free to ask my anonymously in the comments or directly in person if you have any other questions about me. I really am a pretty open book. My general mind-set is: bullies=bad. That’s it. Most of my readers can vouch for me too.
Remember all of my post’s about my home owner’s association earlier this year? Well, they did.
My husband and I moved into our new neighborhood in October 2012. We knew about the HOA, several people suggested we find a place elsewhere, but I thought we could fit in really well anyway. By February 2013, I was completely frazzled by about 6-7 letters about deed restriction violations that just didn’t make sense to me. But I started attending the meetings, tried getting to know all of the board members through those evenings, and I thought it was all getting better. No letters, so I figured that meant that the board and I were getting to know each other finally.
I also thought that since I was getting more involved with the meetings and even offering to be a one-woman welcoming committee to new arrivers, I could probably take a spot on the board this month since 3 positions were opening up.
Elections Turned Personal
The elections were October 24. I was out of town for blogging business from October 15-20 and was sick October 21. There were 3 open positions on the board and 3 official people running for them, including me. I figured I could concentrate on getting better and then make it to the Thursday meeting.
But I answered the door to a concerned neighbor on Tuesday morning. They let me know that one of the guys running had started going around the neighborhood asking for people to sign over their proxy votes so that they could elect a write-in candidate – a friend of the two guys already on the ballot. He was pointing out some of my blog posts titles and explaining how I would be bad for the neighborhood. Great.
So I had a little breakdown, printed up some fliers, and started going door to door Tuesday and Wednesday night. I knocked on more than 100 doors, spoke to dozens of people, and thought I was making a difference. I learned a lot at least and met a few super nice people that I hope to get to know better.
But the last minute push (and 5-6 hours of walking) didn’t get rid of the proxy ballots. I showed up to the Thursday meeting, got drilled in front of everybody about my HOA-hating posts, more ballots were collected, and the vote came in for the two other guys and the write-in candidate. At that point, I wasn’t surprised.
Hind-Sight is 20/20
Being put on the spot in a negative way in front of others simply sucks. But I handled it the best I could, and I pointed out that all of my venting was for justifiable reasons and happened before I started attending the bi-monthly meetings in February. The super stressed ones were before I met the board members. I said out loud that I was surprised anyone would bring it up since I thought we had moved on. That’s the best I could say to sum up all of my feelings at that moment in time.
With some sleep, I figured out what I wanted to say. I wanted to say that I have 12+ years in customer service, a BBA with honors, and the ability to understand the budget. I would make an excellent HOA treasurer. I wanted to say that I disliked how I was treated and was running for the HOA board to help ensure that others weren’t as sad after moving in as I was, and that disliking an HOA is not disliking a neighborhood. I wanted to ask why I was being attacked just because I publicly state how I feel while everyone else hides it. Wouldn’t that make me a great person to work with? Easy to read, straight-forward, and detail-oriented?
But you always know what to say later. Plus, it wouldn’t have actually mattered anyway since the stack of proxy and absentee ballots far outweighed the 30 people who voted in the meeting. Overall, I lost last week while I was out of town.
Knowledge for the Future
Going forward, I know that at least 3 of the 5 board members generally don’t like me. They may have even deeper feelings about their distaste, but I’ll just sum it up with “don’t like”. Well, I hope that changes. It would make life easier on all of us since we live on the same street, lol. I actually try to avoid drama on a general basis, so I hope there’s none here regularly now.
I also know that you can’t make people accept you. Based on the feedback about my blog from the other home owner’s not on the board, I’ve got at least 3 new readers (welcome!) and 1 lady that had no problem publicly denouncing it and me. But at least she read most of a post and not just the title. The lines she read out loud in the meeting were actually from this post (http://www.budgetinginthefunstuff.com/home-owners-association-bullies/):
I love my house. I really, really do. I also knew that we were moving into a neighborhood with a home owner’s association, but I didn’t realize how annoying that really can be! Ugh. And I feel silly because I was warned. My parents have been in a neighborhood with a crazy HOA for years and years. All of my friends and family were jealous of our last little subdivision since it was HOA-free. But none of that prepares you for receiving stupid little letters and wanting to poke someone in the eye…
I think that post was well-written and stated exactly what I meant. I love my neighborhood, I was warned about HOA’s, and now I have to deal with one that actually doesn’t like me. And it’s not like I’m being paranoid – one or two of the members actively didn’t like me enough to go door-to-door telling people not to vote for me. For an unpaid, volunteer position!
I don’t know why that woman in the front row was offended by the post. I do love this neighborhood and I was willing to volunteer my time on the board. I didn’t see her up there or on the ballot. It’s not like it’s a paid position and I was trying to sneak in and steal a salary from someone. I am very proud of this blog and I like my neighborhood, so I was trying to make a difference instead of just whining.
Meh. It’s all good. I’ll keep attending the meetings since they do keep me up to date on the neighborhood. I’ll keep reaching out to the friendly neighbors that wave back. And I’ll accept for now that I am not wanted on the board. My 449 neighboring households either don’t know me well enough to know what they are missing, or they sincerely want nothing to do with a balancing voice on this HOA. Either way, I can’t change anybody’s mind right this second, so I will just keep on keeping on for me.
Have you ever been in a similarly charged situation? Think I’m handling this correctly? How would you proceed from here?
There is a theme in the comments of the Yahoo article that covered our mortgage payoff story (for our first house, not our current one). You can actually read my payoff story in my own words here. Long story short, we bought a house in April 2007, paid it off in April 2013, and did it mainly by paying $160 more than necessary every month. That would have had us paying it off in 10 years. We shaved off an additional 4 years by throwing additional principal payments onto it when I started making more online.
Mainly, with Yahoo’s post, there are whiners and normal people in the comment section. Let me be clear, whining is great. I love to do it. But lashing out at others because of what you have stuck in your whiny brain is stupid.
Here are my responses to all of the whiners that I am sharing here because I love my readers and think my I-really-want-to-say-it responses will make you laugh or at least agree.
But We Don’t All Make $120,000 a Year
Then work on increasing your income! Or shut up. My business didn’t magically appear. I worked my butt off to create it, grow it, and to keep it going! Don’t want to work that hard? Then don’t. I don’t care what you earn, and you don’t have to either, but that means you can keep your mouth shut when someone else succeeds.
We Can’t Buy a Good $114,000 House Where We Live
Then move. Or shut up. Yeah, I live near Houston, TX and homes are cheaper here than along the coasts. But you can either move, make more wherever you live, or suck up the fact that you choose to pay more. We have to deal with hurricanes and crappy summers. You have to deal with coastal views and crappy prices. Whaaaaaaaaaa. It’s a choice – a really hard one, granted, but a choice none-the-less.
I’m Not Married
So get married. Or get a second job. Or shut up. Sensing a theme?
I didn’t say you had to be married. And I didn’t get married just to buy a house. It’s my situation. Deal with your own situation.
I’m Not Listening Because You Don’t Have Kids
Damn skippy. It’s by choice. And if I decide to have kids, that’s our choice too. I know kids are expensive, but I also know people who have kids and have paid off their home too. Kids are not an excuse. They are a prioritized expense. If you have kids and want to pay off a loan faster, cut something else out of your budget. It’s not rocket science – it’s budgeting.
I Don’t Want to Rent Out a Spare Bedroom to an Ax Murderer
Then don’t. We have rented to 4 friends and 2 strangers. It wasn’t necessary in paying off our mortgage – I just liked the extra income. Overall, we brought in about $9000 over the 6 years we owned the other house. Maybe $11,000 if I am forgetting a few months. That was not how we paid off a $92,000 mortgage in 6 years. It was just a way of making extra money that Yahoo wanted to include. Bite me.
Paying Off Your House Loses Your Interest Deduction
This is stupid or ignorant. First, you must be assuming that the standard deduction wasn’t higher than itemizing (which is was, so we never itemized the first house’s interest). Then you seem to assume that making back your tax bracket’s worth of interest is better than paying no more interest at all. NO. BAD HOMEOWNER. No interest is way better than a 15%-33% discount off of interest.
You Must Have Lived Like Homeless People
Nope, we live quite nicely, thank you. We splurge like everyone else, but we don’t splurge on absolutely everything else. It’s called prioritization – look into it. If you rather pay off a loan than smoke, give up smoking. We splurge on food and services, but we don’t buy absolutely everything we want. “You can afford anything, but you can’t afford everything.”
Your House Must Suck
Nope. It’s a good house. Built in 2004 and here’s a picture. Bite me.
It is a cute home. 3 bedroom, 2 1/2 baths, 1750 square feet. Nice neighborhood.
We moved into our new home in mid-October 2012. I saw a few recycling bins around the neighborhood, but I assumed it was an additional fee since only about a quarter of the houses seemed to have one. Well, you know what assuming does…
Finally Looked Into Recycling
Well, the lack of easy recycling has been annoying me a little. We are a household with 5 adults and throwing away aluminum and paper makes me cringe. I was saving our aluminum cans and newspapers, and then would Craigslist them for free every few months. But that was taking up a lot of room and brought in some bugs to the garage. So I stopped earlier this year.
Overall, I’m not a sustainability fanatic in general, but I am a fan of doing the easy stuff to save money or help the environment. For example, we use those energy-efficient light bulbs when we replace burned-out bulbs. Why not? The extra cost makes up for itself and then some apparently. We also bought a Prius in 2008 instead of the SUV we were looking for since it had the storage we needed and cost $5000-$7000 less. It having way better gas mileage is just a gigantic bonus for us.
In short, I was hoping to find an easy way to recycle that wouldn’t cost me extra. When I was talking about that last week, one of our friends – Anne – offered to pick up our recycling every week when she visits and just throw it into her bin since her neighborhood just upgraded to those gigantic ones that are as tall as me. I loved this idea but it did motivate me to call and see how much our own recycling bin would cost since I would feel a little bad sending our trash home with a friend every week.
Bin on Its Way
I first called our water utility provider since that is who is listed as our trash provider as well on my home owner’s association’s webpage. They nicely informed me that they did not run our trash, but they gave me the correct phone number. So I called that one and had to leave a message. A rep called me back within 10 minutes and let me know that they only handled trash, but they also were super friendly and gave me the phone number of the recycling company for our area. I finally called the right number and found out some very interesting info!
Not only did they provide recycling bins, but the service was already paid for through fees on our water bill! So I have been paying for recycling pickup for 6 months and didn’t even know it! Moving on…our recycling bin will be dropped off today. And I finally understand why our bill is about double that of our old house even though we use similar amounts of water. So two birds with one stone, yay!
The company even seems to accept a lot of recyclables and I don’t even need to sort them:
- Paper – magazines, newspapers, copy paper, computer paper, catalogs, pizza boxes, paper egg cartons, shredded paper tied tightly in plastic bags, etc.
- Plastics – juice, water, milk, soda, cleaning and detergent containers (if in doubt, check container for stamp. Most plastics have mold stamp; they collect #1 – #7).
- Thin Plastics – grocery store bags, dry cleaning bags, produce bags, plastic sleeves from newspapers
- Aluminum – any type of soda, beer, drink, foil, pie pans, trays, etc.
- Tin Cans – any food can, pet food, etc.
- Cardboard – boxes, cereal, food, detergent, pet food, etc. (please break down larger boxes)
Getting the Word Out
I bet I’m not the only one who has been paying for recycling that they haven’t been using, so I’m trying to get the word out. I posted a topic in the forums on my HOA’s website. I updated my welcome-info form that I’ve been giving to all of the new families that move into this neighborhood. And I am going to request the recycling company’s contact info be placed into the community newsletter. With any luck, way more people in our neighborhood will be participating by this time next month.
Do you have recycling pickup where you live? If not, make sure, lol. Would you participate if you could?
Mr. BFS and I would love to diversify our investments for retirement, and the rental property we have is making us crave more. We’re looking at our buying options and finances right now to see if we really need to wait until next year like we originally planned. Here is how it is looking.
I was browsing foreclosures in our area last week and noticed two in our old neighborhood. That area is perfect for rental property!
- Homes built in 2004 and 2005.
- $110,000 to $130,000 foreclosures with 3-4 bedrooms and 2.5-3 baths.
- The homes need less than $10,000 in repairs and basic renovations before renting.
- Great school district.
- A solid market for tenants at $1300-$1500 per month since the area is nice (safe suburbia close to groceries and entertainment).
- Well built homes (we have had very low maintenance costs on our first house in these last 6 years).
- Affordable property taxes ($2500-$3000 a year).
- No home owner’s association. Score!
- 5 miles away from our new house (10-20 minute drive depending on the time of day). That’s close enough to keep an eye on our properties but far enough away that we won’t be physically visited by our tenants very often.
The only thing holding us back is the cash on hand needed to buy another house.
The Financial Picture
At 4% interest, a 30 year mortgage after putting 20% down for one of the foreclosures available right now would run about $450-$500 a month plus about $300 a month for property taxes and home insurance. That’s $800 a month for a property that can easily rent for $1300 right after it’s fixed up. That looks to be a great investment!
Plus, even in the no-tenant months, we can cover $800 extra without risking our overall financial health. It would bring our monthly nut including taxes to $8000 again like late 2012 instead of the $7200 it is at right now. We have been hitting that income target for 2 years. We also only have one debt – the $205,000 mortgage we have left on our current house. So this would bring our debt up to about $300,000, but our properties would be valued at a combined $500,000.
BUT, buying another house right now would also mean we would need the cash on hand for 20% down, closing costs, and renovations. A realistic estimate on the high side of all of that would be $40,000. We do have a little more than $40,000, but that would pretty much wipe out most of our cash savings. We never would do that since padding is just plain necessary when you are self-employed.
- Wait until next year and see how much cash we can save up by then. The risk here is that there won’t be any foreclosures available in our old neighborhood by next year. We may have to expand outside of our comfort zone or pay $130,000-$150,000 for a non-foreclosure.
- Take out a home equity loan on our paid off rental home to cover that $40,000 needed around closing. But then we’d have two more loans on top of our current mortgage.
- Look into loans that don’t require 20% down. We do have 2 years of self-employed tax returns now, so finding a loan will be easier than it was last year hopefully. But self-employment may simply mean that banks will want 20% down. We’ll visit a couple and see what they suggest.
- Ignore rental properties completely and open up a SEP IRA as soon as possible instead. I just can’t see retirement accounts making the interest that would make them more profitable than $1300-income rental properties that only cost $800 a month. Property values in this area are still pretty low and make for great long-term investments (there aren’t many places where you can get a 2000 square foot home for $110,000).
We’re leaning towards talking to some banks and seeing what our loan options would be. If 20% down is necessary, we’ll probably wait until next year.
What would you be leaning towards in our position? What obvious options have I missed?