Progress Report – July 2018: Financial Plan Update

I haven’t posted anything since the first of the month.  There is a reason for that.  Previously, I wrote about the busy season.  Well, the reprieve I had has ended.  There’s a decent chance that I will be busy for the next two-three years.  So, there will be periods when I will be able to blog a lot and then there will be periods that I won’t. I think you can always count on the monthly updates and, at least for the rest of the year, the inspirational quote of the month.  But, now, I’ll be posting on my progress report for July, including an update to my financial plan, which required a shift in my investment priorities.

There are many things going on in this transition period in my life.  So, this might be a long post because I have lots to talk about.  So, rather than any more stalling, let’s get to it and see my progress report for July 2018 and updated financial plan.

Student Loan Repayment

In June, the beginning balance of my student loan was $10,878.85.  The minimum payment is $97.61 and the interest rate is 2.625%.  My goal is to pay off my student loans by October at a rate of $2000 per month.

In June I was NOT able to achieve my goal.  I made a $597.61 payment towards my student loans, but still a far cry from the $2000 goal I set for myself.  The new balance is now $10,281.24, after accounting for a little interest.

They say life is what happens when you make plans.  Well, life just happened.  Despite the fact that my goal was to pay off my student loan in October, I don’t think that’s going to happen.  This is in large part because I simply changed the goals of my financial plan.  I don’t want to spoil it but read below for the change that occurred in my financial plan.

Finally, to follow my progress towards paying off my student loans, visit my debt tracker for 2018.

Savings Rate

Below is my savings rate represented graphically.  This graph will be updated monthly for the remainder of the year.

My savings rate in July was a little lower than it was in June.  I realize that my savings rate is higher than some Americans, but it is definitely not as high as I would like.  Specifically, I want to consistently have a savings rate of 50% and hope one day to get to the 75% mark.  I fully recognize that it’s going to take hard work and some time to get there, but slow and steady wins the race.

Financial Plan Update

At the beginning of the year, I created my financial plan.  At that time, I wanted to eliminate my student loan debt as quickly as possible so that I could focus on purchasing a house, at some point thereafter.  Well, I am in a much different financial situation now than I was back in January.  That’s both a good and bad thing.  In other words, I make more money but have significantly more expenses.  So, what changed?  Let’s a closer look.

I Bought A New Car

Honestly, I debated with myself for a while what kind of car I wanted to get.  I had trouble in the past with used cars.  Indeed, I used to purchase one used car after another and got tired of them breaking down.  I’m not good with cars.  You see, years ago it got to the point where I could either afford to purchase one more used car or lease a car.  I opted to lease a car.

I swore I would never lease another car.  The problem with a lease is that they limit your miles.  One time, I was over my miles and I would either have to pay the fee or buy the car.  Or, I could waive the fee by leasing another car.  So I did waive because I didn’t have the money at that time to pay the fee and I needed a car for work.  I like driving a car every three years, but I hate being limited by the miles. So, I swore I would never lease again.  That was then.  This is now.

Quite frankly, after evaluating my situation, I strongly considered leasing a car. I think it can make sense under certain situations. However, I chose to avoid the temptation this time around.  My concern had to deal with the limitation on miles.  I also realized that I’ve never actually bought a new car before.

Car Shopping Experience

I really didn’t know what car I wanted to get.  I would go to the dealership and let them know that I was interested in a small 4-door car.  That was essentially my only criteria.  To a large extent, a lot of the cars pretty much looked the same.  They were all nice.  But none of them felt right.

After talking to a few people, I came to realize that two of the more reliable cars were Honda and Toyota.  Also, both appeared to hold their value when it comes time to sell the cars.  I looked at a 2016 Honda at Carmax and it was around $17,000.  I told the dealer that it didn’t make sense for me to buy a 2016 used car when I could buy a 2018 new car for about $20,000.  I’m sure that was my naivete speaking, but that’s what made sense to me.  It’s very much related to Oscar Wilde’s quote when he said that “nowadays, people know the price of everything and the value of nothing.”

Anyway, it helped to narrow my search to Toyota and Honda.  Toyota had great pricing options.  In fact, I could get 0% interest on the car, given my credit score.  But, I just didn’t fell in love with a car.

Then I went to Honda and the sales guy was telling me about the Honda Civic.  My last lease was a Honda Civic.  He went over the features of the basic model and I was unimpressed.  I think what happened was, the dealership I was going to all went over the entry-level model for their cars and it didn’t seem like anything special.

The sales representative at Honda then went over the next model up.  The car had keyless entry, a sunroof (which I didn’t care about) and a camera that shows you your blind spot when you turn on the right blinkers on.  It seemed interesting and so I decided to do more research.

Love At First Sight

One of the things I came across when doing my research was something called Honda Sensing.  Basically, for a $1000 more I could get lane assist, crash prevention and my personal favorite, dynamic cruise control.  I’m sure it has other things, but you get the idea.  Now we’re talking.  I finally could have a car with a little more bells and whistles.

I now know that some of these features have been available for some time.  Initially, I didn’t know that, and so I was telling a friend about all the cool features I could get with the car if I bought it and he practically laughed at me because some of that technology has been around for the past 3 years.  I also realize that virtually every other new car has similar features by a different name.  But for some reason, I was just focused on getting a Honda Civic with Honda sensing.  I was tired of looking and finally found something that I wouldn’t mind owning for a long time.

The Color Black

Now that I decided on what car to buy, the only thing left was to get it in the color I wanted.  I figured if I’m going to spend around $25,000 to buy a car, I should get it in the color that I want.  It turned out that the Honda dealer close to me did not have the car in the color black.  They had plenty of black Honda Civics, but no Black Honda Civic with Honda Sensing.  They had white, cosmic blue, gray/silver, etc but no black.  I was also considering getting Aegean Blue since it was similar to my motorcycle, but they didn’t have that either.

There was no black Honda Civic with Honda Sensing that was close enough for it to make sense for the dealer to transport it to my location.  I decided to try another Honda dealer about an hour away, and they told me that there was only one black Honda Civic with Honda Sensing left in my region and they would have to get it transported to me if I was serious about purchasing it.  Well Duh, I was serious and so they got it transported.

Believe it or not, I had to travel for work the next day.  The vehicle was not going to be transported in time.  So, I decided to purchase it anyway and have it wait at the dealership for me to pick it up when I returned a week later.  I think it makes owning the car a little bit more special since I had to go through so much trouble to get the car and color I want.

Auto Financing

Since this is a financial blog, you might be interested in the financing.  As you will see below, my goal is to buy a house within the next year.  So it’s important to keep my car costs low.  It was very important for me to keep my payment around $350.

When I went to the first Honda Dealership, they were able to come close to my price by giving me 84 months to pay off the car.  But, when I went to the second Honda Dealership, an hour away, they said they could only do 72 months and my payments would have been a little bit more than $400 per month.  I asked for the same deal I got with the first Honda Dealer and they worked it out where I pay $351 per month, with a very reluctant $2000 down from me.

I paid for the $2000 with my credit card.  So, that card is currently maxed out.  One of my very first priorities will be to get my credit card balance back down to $0 as fast as possible.

I Want To Buy A House

I just moved to a very expensive area and have decided to buy another house.  Initially, my thought process was to pay off my student loans and then save up for a downpayment.  That sounded great in theory and I was actively working towards that goal.  But, now that I’ve moved and have decided to buy a house, I will concentrate more on saving for a down payment. I’m still trying to figure out the best plan forward.

I’m really torn between the idea of buying a really expensive house in this location vs trying to buy a cheaper home outside of the State.  In any case, I am operating under the notion that I will be buying an expensive home here.  I am working with a realtor and her preferred mortgage lender.  Supposedly, I can qualify for a commercial (non-FHA) loan with 3% down.  I only qualify for $400k in loans, but I’m working on showing increased income to get that up to $500k.  That’s a lot of money for a house, but it’s an expensive market.

Once I have the 3% plus closing costs, I will start the home search in earnest.  Right now, my main goal is gathering information, learning about the market and save, save, save.

I will be doing things differently next time around.  I’ll ensure that I have adequate cash reserves prior to any purchase.  Additionally, I’ve been relying more on my credit cards and a top priority will be to get them back down to zero in the next couple of months.  So, I will try and get my financial house in order before I make such a big purchase on a house.

**EDIT:  Since I was asked this in the comment section, I plan on buying the house in Sacramento, California.  Unfortunately, I am priced out of the Bay Area.

Conclusion

There was a lot more I wanted to talk about, including my discussions with a financial advisor from Personal Capital and why my blog was suspended for a few days.  But I also wanted to get this post out as soon as possible since I haven’t posted for a while.  It’s amazing how difficult it is to find quality time to blog these days.  Hopefully, that will change once this transition period has ended.

I haven’t visited many of your blogs recently and I intend to do so when I can.  There’s still a lot going on, but I’m still here and I won’t be going anywhere.  Looking forward to hearing your thoughts, so let me know by commenting below.