A Little Perspective

When I started this blog, I intended it to be a dialogue about my writing as well as my finances. Over time, I mostly stopped talking about the writing, which I think was a smart decision. Writing about writing makes me incredibly self-conscious, and feels awkward. Today I'm going to take a moment, however, to talk about what I've accomplished with my novel, because in many ways that journey correlates with my financial journey.

I just found a draft of my novel from this time last year. In that draft, I was still laboring under the delusion that I would use the first draft of my novel as a framework, and 'bulk it up' for the second draft. I laughed when I looked at the amount I accomplished since then. Only about 70 pages of that old draft survived. I wrote almost 400 more pages between then and now.

I get down on myself when I look at the novel because of all the revisions it needs, but I just need to remember how I ended up with that massive manuscript to begin with: one page at a time. I wrote almost every day. Sometimes it seemed like a snail's pace, but realistically, those small additions created a giant product. It's like my debt. It never seemed like much, but a few dollars here and there swept $12,000 away and put me (mostly) back on my financial feet.

I think I need a Do-Over Day. I have these occasionally. Sometimes I get overwhelmed, not just with the things I need to do, but with my accomplishments. Not only does the journey ahead seem incredibly long, but it also seems impossible to top last year. I feel like I need to do even better, when in reality, if I did half as much this year as I did last year, I would still being doing great!

I can't get in my own way. I need to just shout Do Over! and put everything back in perspective. In this journey, it's still just one page, one dollar saved, one step at a time.

Boots On The Ground House Hunting

I'm still holding out hope for some properties in the Crocus Hill area of Saint Paul. This is an area that would have been great to buy in about five years ago because it was still possible to get a house at a reasonable price. Historically, the intersection of Selby and Dale Ave in Saint Paul was the worst part of the city. About twenty or thirty years ago, in fact, the city of Saint Paul actually owned a large percentage of the property in this area (in the past, the city bought condemned property), and they GAVE the houses to people who promised to fix them up. I think they even got low interest loans or grants to revitalize the neighborhood. It worked--big time. Thousands upon thousands of hours of sweat equity revitalized this area of town. The crime problem has been mostly taken care of. I'm looking at a narrow swath of streets that's sandwiched between two affluent neighborhoods--three blocks where the housing is affordable. To the South is Summit Avenue, several miles of old brick and Victorian mansions, and to the North is Selby, which is just beginning to understand it's property value (a recent developer just put in brick townhouses selling for upwards of $450k).

However, today I'm spending some time driving the city. I'm checking out the Northeast, which everyone says is the new "hot" spot. I can afford a lot of property here, but I don't know about the neighborhood. I've mapped out the houses and I'm driving the area. Right now I'm in a coffee shop in Southeast. My writing group meets here sometimes. I want to check out the neighborhoods before my realtor and I start looking at specific properties.

House Deal Fell Through

My first housing deal fell through! The seller pulled out because she wanted almost the same amount she paid for the place, which was high even for last year. She's decided to go into foreclosure instead of cutting a deal with the bank. I think what happened was this: if she sold to me, the bank would force her to pay some of the closing fees. If she foreclosed, she just walked away and didn't have to pay a dime. I found out afterwards that this was the third deal she turned down.

It's interesting because about five years ago, I could see myself making the same bad decision she did. She only saw the few thousand dollars she would have to pay to get herself out of the hole she dug, and she didn't see the positive qualities of the deal. Now she's out a house and she destroyed her credit, the bank will have to foreclose and probably won't get near what I offered, and I have to keep looking for a place. Her realtor quit and the bank is apparently in a rage.

Defining Short Sale -- And -- A Talk With My Realtor

I had a talk with my realtor this morning and told her in a very polite but direct manner than I wanted to be kept more closely informed on the proceedings. She was very nice and forwarded me a three or four emails; part of a conversations she's having with the seller's realtor. I learned a few things--the seller is planning to haul away the dozen old windows in the basement, and also the large appliances tucked next to the garage. That's a relief, as I had already planned on doing that on Day 1. More importantly--the bank has given the OK on my offer, and it just needs to be signed by the seller. Again, this is a short sale, so the bank is the party that matters most (from everything I've read), as they're going to eat the loss. Here's a helpful Wikipedia description of short sale:

"A short sale is when a bank or mortgage lender agrees to discount a loan balance due to an economic hardship on the part of the mortgagor. The home owner/debtor sells the mortgaged property for less than the outstanding balance of the loan, and turns over the proceeds of the sale to the lender in full satisfaction of the debt. In such instances, the lender would have the right to approve or disapprove of a proposed sale."

A short sale comes right before a foreclosure (in fact, this seller will foreclose in six days if they don't except my offer). You have to be on your way to foreclosure, generally, to qualify for a short sale. I have a feeling the rules are changing daily with these deals, and wouldn't be surprised if the banks were leaning more heavily on the original owner to pay back some of the debt, and not just absolve it completely. I'm pulling that from my magic hat, however, and I don't know if that's true. In practical terms, what this all means to me is that I'm simply waiting for the seller to sign a piece of paper, and then the deal will essentially be sealed. I honestly think the selling party is dragging their feet in the hopes a better offer will come through.

I have to say, I know the financial weather is horrible right now, but this is a very exciting time to be getting into the market. I guess I just like storms.

Closing On My First House: Limbo

I've been waiting impatiently since Friday evening for my agent to get back to me concerning the house. She called me at four today (Sunday), and explained why we aren't signing anything yet--the selling agent was in a car accident over the weekend. She spent some time in the hospital, and apparently the people in her car are STILL in the hospital, so it must have been bad. The selling agent sent a two line email to my agent saying something to the affect of "we'll get the information to you tomorrow," but we don't know if that means the signing papers, or a decision as to whom they've gone with. While I wish I had more decisive data, I understand the circumstances. I just wish my agent was more proactive with getting me information. Even if she hasn't heard back from the agent, I want to hear that. While it's not a huge deal, in terms of real estate, $237k is still a lot of money, and I want better communication.

I went to an Easter brunch with my GF. It was at her aunt's place. Because several members of her family are in real estate, they talked through the deal with me, and agree I need to jump on it. They suggested contacting the branch manager to get a better response from my agent, but my agent is my landlord (or she helps manage the property), and I like her personally, so I don't want to do that. Also, she's been really nice and responsive with respect to my place. Lesson learned, however. Think twice before using those personal contacts to do business with. I'm usually pretty good at driving a deal, but I can (and have) let people railroad me into decisions, and this is a case in point. I wasn't certain if I wanted to use this woman as an agent, but she was persistent and I finally signed and agreed. If I do this again, I'm going to have a short interview with several agents, quiz them on property details, and then choose the one with the best follow up to a few questions I ask. Sigh. Live and learn. If this goes through, and it might, I'll have to say it's more due to luck than effort.

Waiting Nervously

No word on my house offer yet. The longer this takes, the more disappointed I'm going to be if I don't get the deal. Yesterday morning, it was no big thing. Eight o'clock last night, I was wandering the aisles of Home Depot, pricing out supplies. On the one hand, how pathetic. On the other, I can install laminate flooring for only $500! What a deal! And it looks great. And did I mention the siding special?! Home Depot could install the whole house for $10,000, which is $7,500 less than I originally estimated. And I blush at the midnight internet cruising, oggling counter tops like cheap porn.

Then I went to bed and dreamed of buying the house, fixing it up, and building financial equity.

Alright. I'm hung over from my debaucherous night of domestic fantasies. I'm off to my writing group. They're reviewing the last bit of my novel.

Call Me Old Fashioned, But What Happened to "Run!"?

I recieved a little wallet-sized brochure from my company, on what to do in the event of an emergency. Most of the advice seemed sound: for fires, you go out, for tornadoes, you come in. Etc.

For bomb threats, however, this is what they tell employees to do:

1.) Keep the caller on the line as long as possible.
2.) If possible, alert a co-worker to call security.
3.) Try to get as many details as possible. Examples include:
- The reason for the call.
- What kind of bomb it is and what it looks like.
- Background sounds or identifying characteristics.
4.) When the caller hangs up, do not hang up the phone.
5.) Call security from another phone.

I started to laugh at "the reason for the call." Seriously? Come on people. What ever happened to a healthy regard for life, and the evacuation of the building? I know, bomb threats are generally a hoax, but still...

"Wait sir, you say there's a bomb in the building. Now, is that the reason for your call, or can I help you with something else?"

Earnest Money

I'm more than a little annoyed with myself. KNOWING I had to have earnest money for my loan, I still paid off some debt that could have waited. In order to scratch enough cash together for the earnest money, I used one of those checks that your credit card company sends out. I know. I feel like an ass, and wonder if I'm ready for a house loan if this is how I handle the situation.

Okay, so a bit of what happened yesterday.

After low balling the buyer with a $215 offer, they countered with $237. That's a serious discrepancy, but they're only getting $223 of that, because they have to gift me $14k back so I can cover the down payment. It's called a Genesis program. This puts my mortgage (and taxes and insurance) at about $1650 a month. I have a renter downstairs who pays $950. The rest of the mortgage would be less than my current rent. Also, my GF is moving in with me, and we're splitting the costs, so I'll essentially be paying $350 a month. This leaves me a significant amount of money to do upkeep (I'll have $1,500 'free' each month, after expenses), and I'll have about $50k equity in the house right off the bat. I know, that might disappear with the market, but at least it's a buffer.

With respect to the figures I posted yesterday, I was off by a lot. The furnace is only around $2500, and I think I can get the siding done for under $15k. Also, I talked to a home inspector and he said the siding has years left if I'm careful and keep it painted. I can get the windows repaired--I found a company that will do that for a fraction of the replacement cost.

So I'm taking the risk, but it seems like a reasonable risk and a good investment. Also, I'm glad I lowballed because I think they came back with an honest "low as we can go" answer.

WRT the earnest money: it's folded into the loan, so I get it back when the mortgage goes through (I double-checked with the loan officer). Using that check, I took a $90 hit for the initial 3% interest they charge (the amount is capped at $90), and the loan is at 2.9% while it sits on my Discover card. It was frustrating, but I think it was the right decision.

One other point: I did some shopping around for different mortgage rates, and I was pleasantly surprised at how shocked other companies were by the 5.5% interest I'm getting, for a 30 year mortgage. I had a family member in the mortgage industry go over the loan terms, and she said it's a great deal, and there are no funny costs associated with it.

That's all for now. I have to wait for a day or so because two other buyers were putting in bids. I wouldn't be surprised if I get beat out, but this is my first offer, and I'm happy with the initial attempt.

Making an Offer

So I'm making an offer on a duplex. I'm bidding too low, but I'm super nervous about the property and I want to protect myself. The duplex is about to go into foreclosure. The bottom unit is rented out ($950/month) and I would live in the top unit. The property is listed at $241K, but I'm bidding $215, with a Genesis gift program wrapped into it, which means the owner would "gift" me about $12,000 from the actual amount I pay him, so I can use that for my down payment. That means I'm essentially bidding $202. Here's why:

$280,000 (similar houses in the area went for this last year)
-$42,000 (15% property value loss: 10% last year + 5% conservative estimate for this year)
-$17,500 (siding: siding is crap, and while functioning right now, it needs to be replaced. Online estimates put siding at about $7 square foot with removal. House is about 2500 square feet of surface.)
-$4,000 (furnace: this unit has 2 furnaces, and one of them is 25 years old)
-$7,000 (windows: some of the windows could probably be fixed, but a few are fogged and they're all 25 years old, and not the best quality. I put this at 14 x$300 (small windows) + 4 x$700 (bay windows))
-$5,000 (it's next door to some kind of halfway house--it's a giant brick mansion, but it's still a halfway house. I didn't realize this the first time I looked at the property.)

= $204,500

The repairs I list are honest, but not necassary right away. They are right on the edge, however, and I don't want to risk it. I KNOW this is asking a lot (the guy bought this one year ago at $340k, but that was a lame deal), and I'm probably asking too much, but I was panicking last night and decided that I wanted to go way too low, and get laughed at, so at least I feel like I'm covered in case of all eventualities.


I put down $350 to lock my interest rate at 5.5%, with a one time "float down" option, to bring it down to a lower interest rate if one should appear. I have this interest locked for 90 days--even if I don't use it, this is worth the investment.

I'm bummed about putting in such a low offer, because I don't think it will be accepted, and the financials are nice even at a higher price. My GF wants me to jump on the property. At $241K (the asking price), my mortgage would have been around $1800, and as I get $950 from the bottom tennant, my GF and I would split the rest of the mortgage, each paying $450.

There are other deals in the world, however, and I don't want to jump at the first one I see.

I've Paid Off Almost $12,000 In Debt!

In the last year I've paid off just about $12,000 in debt. I wanted to think back a bit. I've been down on myself, lately, but looking at my numbers and knowing what I started with, I decided it was time to put things in perspective, and talk some about the last year, and my personal journey of debt reduction.

First off, just before I started this blog, I transferred some credit card balances to low or no interest cards. That was when I had about 9K in credit card debt, so I was getting killed with ~25% interest rates.

I was losing thousands of dollars a year to interest.

To get the better rates, I sorted through my junk mail, went online, and called around to an assortment of credit card companies. Several reps told me I could report my year-end bonus as salary, and doing that freed up some credit space on my maxed-out portfolio. Although at this point I often paid bills a few days late and ate hundreds of dollars in fees every year, I had been decent about getting things paid within 30 days of their due date for the few years previous to this, and my credit score had improved (your late payments don't get reported until after 30 days). My credit score was probably in the mid-600s at that point, so that and the reconfiguration of my salary allowed me access to the better credit card rates.

One of my first blog posts was to figure out how much debt I had.

Wait, you say, you didn't know what your debt was? Not even then. I couldn't have told you what my student loans were. I knew nothing about my car loan or my credit debt across my varied Visas (despite having just moved some big balances). I certainly didn't know the interest rates were for most of that! I wouldn't have been surprised if I had $50K in loans. When I first added them up, a few estimates put me almost $5,000 over the actual number--that was how little I was aware of my own money!

At this point, I lined up my loans via interest rates, made some charts (I put together this rather simple Excel sheet, if you would like to use it), and then I ran a scenarios to determine what payoff would get me out of debt fastest. I made some decisions, taking into account types of loans, interest rates, and psychological satisfaction of getting a certain loan paid off first. I learned that student loans can sit on your credit history forever, and banks don't blink at them. Car loans are similar, but my car was at a 9% interest rate, and that was eating a hole in my wallet. Credit cards look the worst to banks, but I managed to get most of the balances to better cards, as I mentioned, and decided to take a hit on my credit score and leave some of the bigger balances at low interest rates in order to get the car paid off quickly. Just a note: even if it's a low rate, high credit card debt isn't just bad for your credit score, it's just plain dangerous. Credit card debt is some of the most volatile debt out there, and rates can change at a company's whim. I just recently transferred a balance off a Bank of America card because I felt the company was trying to trip me up, and make it purposefully difficult to make payments on time. My automated payments weren't registering on the right days, and BOA said I was late (I don't want to explain the intricacies of this, but suffice it to say they were wrong). Three months in a row I had to call to get my rate returned to the zero percent I signed up for--they cranked it up to 29 percent!--at which point I cut ties with them. By this time, I had the luxury of a quick and easy balance transfer where I didn't have to pay the normal 3% transfer fee, but don't count on that unless you have a excellent credit score (mine was around 750 by then).

After making a plan on how to pay the debt off--what order to pay my loans off and how quickly--I had to buckle down and just do it. This was the hard part, because it suddenly became necessary to own up to my problems.

I couldn't go out with my friends like I once had, and I finally swallowed my pride and told them I was paying off (gulp) credit card debt.

That was tough. It was embarrassing. It was very very necessary. I needed my 'play' money to get the debt paid down, and I couldn't just put people off indefinitely without them thinking I was shunning them. I had to be honest and say "I can't afford that," and in the U.S. these days, that's a hard pill to swallow. For those of you with debt issues (and that's a lot of the country) I think it's a really important step to tell at least some of your friends and family that you're having money problems. You can admit it to yourself all you want, but until you tell another person, it's often not real to you. I confessed part of my problems to my GF, and told her that I was taking steps to make certain I repaired the issue. She shocked me (although only me, I'm sure), when she said she knew I was spending money too freely. She was having second thoughts about being in a relationship with such a horrible financial planner. I probably just managed to save my relationship by getting my books in order!

And then...

And then I came up with a hundred little ways to help myself stay on track. The most important step? I automated all my various payments through my bank's online BillPay service. Wells Fargo's BillPay is one of the few services I don't mind paying a monthly fee for. It costs me $5 a month, but they mail up to 18 bills (I think) which justifies itself in postage. It also centralized my bill-paying to one easy-to-use interface. Because I set it up ahead of time, BillPay knows when to send my bills out, even if I flake a bit. Also, I timed all the payments to coincide with the day I got paid, so I don't accidentally spend all my money for the month and then discover that my electricity bill needs to be paid.

I've done a few other things, of course. I've gotten better, although I'm by no means perfect, at making my own food instead of eating out. Some people would scorn me and say that I'm not any good at this at all, but compared to what I once was, I'm now a saint.

I try to avoid fees of any kind. I once paid an atrocious amount of money towards ATM fees. I would withdraw $20 twice a week from mismatched ATMs, getting hit with $2 from my bank and $2 from theirs, losing almost 20% of my money before it even got in my hands! That's over $200 a year, just because I didn't want to plan ahead and get my money from the right ATM! Now I go out of my way to get to a Wells Fargo ATM, and I set up an account with my work bank for the simple reason that I often need to withdraw money from their ATM, and I would get charged any other way.

That's about it. What it comes down to is determination. It's not fun to pay off debt. It's not sexy. It doesn't (or didn't) give me a thrill. But it has deeper satisfaction. The first year went by quickly, and I'm sure the next will too. Soon, I'll have to start looking at what's next, and having the luxury to plan ahead is wonderful.

Today

Sorry about the occasional self-pitying melodramatic posts. If you meet me, I'm normally stable to the point of stoic, but I have a flair for melodrama in my personal thoughts. Anyway. I'm looking around for duplexes right now--I found one just off of Summit Ave. in Saint Paul for $240K, a bit more that I want to pay, but also $50K below market value, and in a really nice part of town. Also, the GF likes it, which is important because that means she'll move in, thus helping with a few hundred a month. Not that this is any indicator of anything (these days), but it sold for $343 last year. Needs a little cosmetic work on the inside, but nothing pressing. My real estate agent is also my landlord (for now) and I'm going to see if she can give me a deal on moving out early. We'll see.

It's EXCITING looking for places. Probably too exciting! I'll have to temper my enthusiasm. It occurs to me, also, that if I buy a place for below value, I've essentially devalued the entire neighborhood, because prices are set with respect to what's sold for what price in the neighborhood. The neighborhood that this house is in, however, is affluent and resistant to price fluctuations.

Anyway, it's just one of a billion places. I'm off in a few minutes to say hi to my agent, and see what's what.

Just Thoughts

So I had a good time in Singapore, but it was difficult and a little... embarrassing isn't the word, but I walked away being kind of ashamed of my life. I hung out with some members of my family who are very successful. Success that, when I started to make comparisons to my own life, gave me nightmares. I was taken out for dinners I couldn't possibly afford, so I felt ten because there was no way for me to pay my own bill, much less be gracious to my host and offer to pick up the tab for all their troubles. We drank wine that cost more than I make in a week. And here's the thing: my family who have done well, did it through hard work. They really earned it.

It put my life so in perspective. Worst of all, some rumor started in my family that my book was about to be published, so they were all excited for me when I got there.

Nope.

My book was rejected by an agent a few days before I left. I've been working with a professor on it, and I've become aware that I have a lot to do. Not that it's an impossible mountain, but enough that I feel like I've been deluding myself. Or worse, I haven't been deluding myself, I've been deluding others to make myself feel good.

I thought being in Singapore would be so exciting. I felt so... privileged. The bad, conceited emotion of privilege. But once I got there, I just felt out of place.

I grew up in the middle of nowhere, and my parents were poor. I always liked the aura of success, so I've spent my life inflating my accomplishments to sound like I've done a little more than I actually have.

I'm going to attempt to keep it real, in life and blog. Here's my first admission: nobody really reads this thing! A good days these days sees fifteen people. And yet I still feel the need to exaggerate. I'm going to try to be more honest, and work harder at my job and my book and my life. Or work more honestly. That would be better.

Qualified for a Home Loan

I originally wanted to get a loan for a rental property that I could just run as a landlord, however it turns out you need to put about $30K down and have about $15K in the bank to qualify for a true rental property loan. However, I can buy a duplex and live in one half of it, and as long as I live in it for at least a year, I qualify for a loan of about $250K.

It turns out I have perfect credit with respect to home loans--my credit score, even after a bit of a beating in the last two months, averages to 730, which gets me the best rate. The rate is variable, moving as much as three times a day, but is somewhere between 5.5-6.5%. If I decide to go ahead and buy a property, which I'm not certain I will yet, I can wait until the rate hits 5.5% and put $350 down to hold the rate for 90 days. This $350 is subtracted from the eventual loan, but even if it wasn't, it's a comparitively small amount of money with respect to the amount you save in interest (0.005% of $250k is $1,250).

So now this is where I get picky. I have a few months to think this over, and this is what I want in a place:
- Nice part of town (not a rich part of town, but at least a safe neighborhood). Aside from the rich neighborhoods, here's a few areas I'm thinking of buying:
> Uptown
> Calhoun Lakes (theres a few places I could afford)
> Merriam Park/Cathedral/Mac-Groveland
> Longfellow
> Northeast
- An area with a high rental value, so when I move out I can easily rent my portion
- Energy efficient
- A property on a quick sale, for below market value, so if need be I can turn a profit in a few years
Hmmm... anything else on my wishlist? :-)

That's all for now. I'm going to contact a real estate agent today and start to feel my way around the process.

Home Loan

Today I'm meeting with a loan officer to see what I can get for a pre-approved home loan. I honestly don't know if I'll even qualify, but I have excellent credit and a decent paycheck, plus I've paid off my car and most of my credit cards. I don't have any money to put down. We'll see.

Also meeting with a professor who's reading my novel--he liked the first 90 pages and gave me some great feedback. He's just finished looking over the next 90. I'm nervous as to what he's going to say.

And... $600 more paid off!

I just got paid so I sent another $600 to my Chase card, bringing that balance to...

$200!!!

Oh, I'm giggling with delight. All my debt is getting easier and easier to pay off. I've really hit that "snowball" point. I'll finish up the Chase bill next paycheck and start work on the AMEX, my last old bill to finish up. I should break apart my AMEX bill in April (although not quite pay it off). In May, due to the irregularities of a every-two-week paycheck, I'll get an extra paycheck, with which I can easily pay off my old Macalester loan (this is a college loan with a high 8% interest rate).

Back From Singapore

Back from Singapore, and I'm wailing away at my debt! I didn't spend as much as I feared in the trip--about $900 over 11 days. I ended up getting waylaid in Hong Kong for a day, and decided I should go into the city and see some sights--I don't get a chance to see Hong Kong often! I spend an extra $100 there, but this still kept me under my $1000 limit. The exchange rate worked in my favor, and things were pretty inexpensive. As usual, my sister nickle-and-dimed me through the trip. Example: "Well I paid $50 for that and you bought that for $62, so why don't we just call it even?"

Oh well!

And today, the exciting news:

1.) I finished paying off my car!
2.) I sent a check for $4,600 to my credit card company, with the intention of sending more tomorrow!

Here's my new credit card debt:
AMEX: $1214 at 2.9% (Remainder of big bad debt)
CHASE: $803 at 0% (Remainder of big bad debt)
DISCOVER: $1000 at 0% (Singapore ticket, paying $50 every 2 weeks)

Ha ha ha!