First major DIY project in this house

We have started to undertake the largest DIY project we’ve done in this house (and really, I’d say to date).  We’re pulling up the (moldy, stained) carpet in the basement – and  replacing it with tile.

We literally just started today, and I already curse anyone who uses carpet mastic.  I was hoping for some nice “tackless” carpet (the kind with the metal tacks on the edges), some crowbar love, and wa-la, bare concrete in the basement…  I should know that I’m not so lucky.

I’ve been wanting to pull up the carpet since December 2010 – when a root caused our main drain to back up – twice.  Most of the basement had sopping wet carpet – which we vacuumed up with the wet/dry vac, and since it didn’t smell anymore (and I was 8 months pregnant), I didn’t push it.  It did however seriously stain the carpet, and I was sure that there was mold growing under the carpet….

I got the “OK” from Dad this week – we turned the heat pump on cool for the first time since we turned off heat back in March-ish – and the drain pipe has two problems: 1) it’s leaking inside the A/C unit where the drain pipe connects, and 2) water’s not going down the drain like it’s supposed to.  I thought I fixed that.  The HVAC guys who installed the humidifier dropped a flexible hose down the drain to drain it, it moved the A/C drain pipe just enough so that it doesn’t go down the drain.  And the genius who built/designed our house did not put the drain at the lowest part of the house – that was somewhere under the carpet (or the “bar” they built in the basement) – the water seeps under the carpet and not into the drain.  It’s been smelling a bit rank in the basement, so Dad said, “OK”. (The HVAC guys are coming on Wednesday to fix the inside leak – under warranty).

Because we’ve basically flooded our basement 3 times since we’ve lived here in the last 5 years, I want a flooring that will be able to handle being flooded again – and that is either bare/stained concrete, or tile.  I love tile, and I mostly know how to install it, so I’ve managed to talk Dad into glazed ceramic tile in the basement, and we are currently looking at tile that runs $0.88/sq ft.  I haven’t measured yet, but based on the wall lengths, we’re looking at about 500-700 sqft roughly.  New floor for about $700 (and a lot of work/time)?  Sign me up!

I’ve never tiled an entire room before, but based on Youtube, it doesn’t look that hard, it’s mostly tile layout, then a lot of work on your knees.  I’ve tiled small areas, so I’m familiar with the general concepts, and I’m going to trust in Youtube, Google and my Home Depot 123 book for the rest.  First, we have to remove the existing carpet.

Today, we started removing the carpet.  We discovered that the carpet was glued down (very well in some places), and have been removing the carpet in pieces.  Dad has actually gotten at least half of the room cleared of carpet (but not glue).

We have some “issues” in the basement which make the whole project interesting:

  1. There are many heavy things in the basement (freezer, washer, dryer, treadmill, exercise bike) most of these things cannot be moved elsewhere while we’re working because of either hookups, or the fact that we can’t get them up the stairs.
  2. The basement is kind of a dumping ground for things we’re not sure of where to put elsewhere, so it has some piles which we’ll have to deal with.

What we’ve done so far, is move as much as we can to one side of the room, and remove the carpet.  I’d prefer to remove the glue as well before we move it all back to the other side.  Some things, I’ve tossed into a “sell, donate” box which is now in the garage.  I’m trying to go through things as we come across them.  The biggest storage closet in the room (takes an entire wall) has carpet on the floor, so we’ve got to remove things out of there temporarily as well.  We’ll continue to move things around as needed to remove the carpet and glue and put down the tile – the hard parts will be the treadmill, bike and washer/dryer.

Murphy schedules a visit

Just as we pay off the line of credit, we may need to use some of it.  We have a lot of wood trim around the house (exterior), and much of it is rotting, and the paint is deteriorating, and the gutters are failing (and causing a leak).  I’ve got quotes for the work, and the guy I’m going with will run us about $7,000 to do all of the work – replacing the rotting wood, painting, etc.  And we’ll finally get to change up the colors on the house.  A previous owner had some warm cream siding installed, with a bright white and bright blue trim.  The clash of warm and cool colors even bothers my design-dumb eyes.  While I’d prefer the cool color scheme, the siding isn’t getting replaced anytime soon, so since we’re repainting the trim, it’ll become “warm”.

I’ve got at least 30 days to come up with as much as I can before dipping into the line of credit, and we’re going to use some (not all) of our emergency fund to cover it.  I estimate that we’ll need to borrow up to 3k from the line of credit, which would get completely paid off (again) in September.  I don’t want to drain the emergency fund, so we’re taking 3k from there (leaving us with 2k), and before we really attack the line of credit again, I want to “refill” the emergency fund, which is why September is the payoff date rather than sooner.

We have to file for an architectural change with our HOA, which can take up to 60 days (neighborhood rumors say it takes less than 30), then the company has 30 days to start work.  We need to put down 35% for materials, and pay the rest when he’s done, so we might not borrow as much depending on when the work is completed.  The work needs to be done before our rainy season in August/Sept, but we can push it off just a little bit to try to save more, but there is some wood that I hope will survive the next month.  We’ve already put it off as long as we think we can, and the leaking was the final straw that told us “OK, you need to take care of this”.

We looked at covering it with vinyl so that we never had to paint again, but several trusted contractors said not to do that because the wood still rots under the covering, and we wouldn’t know about it.  So, we’re going with painting, which is guaranteed for 4 years, so it’ll be a while before we paint again 🙂

Detailed Financial Picture – May 2013

April’s Numbers

As of May 7, 2013, we are $466,805.10 in debt (that includes the mortgage).  Without the mortgage, we’re at $42,943.84 in debt.  This includes a credit card, student loans, and an auto loan.  We currently have $939,708.64 in assets (including our house).  Our retirement accounts are at $292,621.36.  Our Net Worth is $472,903.54 (includes house and mortgage), up from $454,769.31 last month (3.97% increase).

Our Line of credit is paid off!  I took a little from savings to do so, so this month is mostly paying ourselves back rather than really attacking debt.  It was worth it in for how good it felt to send in that last payment.  Now, we have a significant line of credit which will become part of our emergency planning (new roof, other major disaster, etc) until the rest of the debt is paid off.  It costs us $50/year to keep the line open, but we figure that it’s worth it for the relatively low interest rate it provides.

Our retirement accounts did great this month (up 4.55%).  We’re still contributing less than I would like, but not an insignificant amount of our incomes is going towards our 401(k) and 403(b).  I haven’t really noticed the tax hit from changing 1% of my contribution from my 401(k) to my Roth 401(k), but until the debt is paid off, we’re leaving the contributions where they are.  I’m really hoping the markets aren’t going to correct themselves anytime soon, but I know that’s inevitable someday.

I’ve switched our order of repayment around a bit due to Chase being PITAs as well as a potential job loss in our future (near the end of the year).  My company is not doing so well, and we have enough money in the bank to keep running until the end of the year (and that’s without getting any new work), and so there’s a potential I won’t have a job next year – at least with the same company.  I love where I work, and who I work for (and I own part of the company – sort of – through phantom stock options), so I’m sticking around to help make it work out.  I’ve told my boss if things aren’t looking better by September, I was going to start looking for another job.  I’m confident that I can find another job because of my line of work and my skills, but I’d rather not leave a company that I really like.  But I’m not being stupid about it either.  We’ve switched to paying off the Chase card before the student loans because the student loans can be deferred if I do get “laid off”, the credit card can’t.  I ran the math, and should things go well, we’ll have paid an extra $30 in interest by paying off Chase before the student loans – that’s a $30 insurance policy as I see it.

On the plus side, I’ve just brought in enough work to completely pay my salary (and benefits) for the next year and a half, and our busy time doesn’t happen until September through December, so I think we’ll be OK.

Debt (in the order we’re paying it down):

  • Line of credit (8.75%): $0.00 (-1300)
  • Chase (4.99% for life): $ 5976.58  (-472.43)
  • Student loans (aggregated 6.55%):  $13,626.98 (-139.72)
  • Car loan (0%): $23,480.00 (-490.00)
  • Mortgage (4.125%): $ 423,861.26 (-655.53)

Total paid off in April: $3,057.68

Our Story: The Plan

Why yes, we have a plan now – unlike previously.  I happen to love my job, who I work for and what I do, but I know that that’s not the case for everyone – especially Dad.  Dad likes what he does, but in the 3 jobs he’s had since I’ve known him, he’s not a big fan of who he works for.  He’d rather work on his own. But, with our debts, we cannot live on one salary, even without them it’s a bit hairy, and we’re not ready to take the chance of no-salary yet.

We’re loosely following Dave Ramsey’s baby steps.  We have $5k set aside in a baby emergency account for when Murphy pays a visit – which seems quite often to us (baby step 1 slightly modified).  Our first financial independence goal is to pay off all our debts except the mortgage (baby step 2).  We think we can do this by July 2014 (maybe earlier if the stars align).  If you haven’t been following me, we have 3 debts that still need to be paid off (a credit card – at a nice fixed rate, student loans, and a car loan).  After we pay those off, we’ll be building up a 6-mth emergency fund (baby step 3), which we hope will be in place by the end of 2014 (or at least most of it).

Once that’s done, we’ll be socking away the maximums to our 401(k) and 403(b) plans, and splitting what’s left between paying off the mortgage (baby step 6) and saving for Daughter Person’s college (baby step 5).

In what I know is controversial, we’re ignoring most of step 7 – giving.  We’re not religious, we’re quite libertarian, and we don’t have very many causes we feel strongly enough about to actually donate money to them.  Dad donates blood regularly (I can’t), and we donate to races, etc that friends are raising money for, but we don’t have a “giving” plan, and certainly don’t give a percentage of our income away.  Instead, we’re using that money to help ensure that we’re never a burden on others.

Our Story – Part 3: The Awakening

I’ve always been interested in personal finance, but it never “clicked” for me until the end of 2011. Before Daughter Person was born, we didn’t budget, we didn’t do more than the minimum for saving in our 401(k). As long as the cash flow was OK – I thought we were OK. We always had money in the bank, never made a late payment, never even had to time our bills to our paychecks, never been declined/denied for credit, and always had available credit on our credit cards. So we thought we were doing good. Obviously, I (at least) had my head in the sand. This is our story. It’s not intended to be an excuse for our poor decisions, but to give some background.

Part 1: A Tale of Two Houses
Part 2: The Panic

We left off where we were trying to live with $200/mth extra – and I was panicking just a bit. I had found You Need a Budget, and once I figured out the methodology and realized that we had $200/mth left after paying for our “necessities” and obligations, the panic set in. I showed Dad the numbers, and while I think he thought I was crazy, he went along with me. We cut back on a lot of our eating out, wine, and buying random things and got to a point where we were comfortable. We could pay our debts, eat good food, still have a bottle of homemade wine once in a while, and maybe even make some progress on paying off those debts.

Around this time, our county library started lending books on the Kindle. The first book I checked out was Dave Ramsey’s Total Money Makeover. And while there are a few ideas of his I disagree with, he’s certainly good at getting people motivated. So I was fired up to get started with his Baby Steps (we’re still on baby step #2 in case it wasn’t obvious). I got Dad mostly on board, and I think the reason he’s on board is that we allocate a certain amount per month to “fun money”. We each get the same amount every month, and we can do with it whatever we want – spend it all, or save it up for something. At this point, Dad’s still not completely on-board, but he’s humoring me – and I know he likes to see the balances go down.

The next book I check out is The Millionaire Next Door. I start to think that hey, this might be a real opportunity that we could reach $1mil net worth, Dad’s still rolling his eyes at me at this point. But I start checking out more books about living frugally, and reading blogs online, and find Mr Money Mustache. I start reading his blog, and others on early retirement, and think – hey! we can do this! I finally got Dad on board earlier this year when I sent him several of MMM’s articles and he’s thinking, “wouldn’t it be great if I didn’t have to work??” So, we’re both in this together, and I’m allowed to try any hare-brained scheme I want, but if Dad (or Daughter Person) is not OK with it, we go back to status quo.

We’re slowly changing the way we do things, and even considering more drastic changes like living with one car and selling our house (although those are only in the discussion stages at the moment)…

We got ourselves into the mess we’re in, and now we’ve got to dig ourselves out before we can really start on our journey to financial independence, but paying off debt gets us back to zero, then we can move pretty fast with both our incomes.

Our Story – Part 2: The Panic

I’ve always been interested in personal finance, but it never “clicked” for me until the end of 2011.  Before Daughter Person was born, we didn’t budget, we didn’t do more than the minimum for saving in our 401(k).  As long as the cash flow was OK – I thought we were OK.  We always had money in the bank, never made a late payment, never even had to time our bills to our paychecks, never been declined/denied for credit, and always had available credit on our credit cards.  So we thought we were doing good.  Obviously, I (at least) had my head in the sand.  This is our story.  It’s not intended to be an excuse for our poor decisions, but to give some background.

Part 1: A Tale of Two Houses

During 2009-2011, we were paying 3 mortgages on 2 houses, and still had about $2k/mth left over for eating out, buying things, etc.  We figured we were pretty flush.  I didn’t *like* having to fix things on our remaining townhouse, and was trying to patiently wait until the two years was up to see if we could sell it.  Daughter Person was born in January 2011, right as the renter’s lease was up.  I had met the Realtor in November to see if it might be worth selling, and notified the renters that I wouldn’t be renewing their lease.  When I hauled Daughter Person over to the townhouse to meet the Realtor, I was frankly disgusted at the mess that the renter’s left and started trying to pursue keeping their security deposit – turns out since I wasn’t re-renting it, the county laws said I couldn’t keep it (boo!).  So, we spent about $7k on fixing it up just to be presentable – we had to paint, replace carpet, replace closet doors – a huge mess.

We listed it in March, and got our first offer in April – the buyer backed out in May because he didn’t like the condo rules.  It went back on the market and we had two offers in July – I took the offer for the person who would be living there, not the investor, and turns out that was a bad decision, despite her pre-approval letter that said she could borrow *way* more than the value of the house, the lender wouldn’t approve her.  Finally, I got an all-cash offer in September, and through a hilarious sequence of events, finally made it to closing – where I brought $8k (borrowed). Yes, I basically paid to get someone to take the property off my hands, I was so tired of it at that point.

And this experience is why we have no intentions of ever owning rental property as a second income stream.  I know we could do it (and make money on it), especially if we selected an appropriate property, but we just don’t want to.

Meanwhile, I go back to work in April, and Daughter Person goes to daycare, at $1600/mth.  Now, we’re down to $200/mth extra and trying to fix all of these problems and issues with the townhouse.  I start to panic about how we’re going to survive, etc.  I can be a bit of a drama queen when things look bleak…

Part 3 – The Awakening

Our Story – Part 1: A Tale of Two Houses

I’ve always been interested in personal finance, but it never “clicked” for me until the end of 2011.  Before Daughter Person was born, we didn’t budget, we didn’t do more than the minimum for saving in our 401(k).  As long as the cash flow was OK – I thought we were OK.  We always had money in the bank, never made a late payment, never even had to time our bills to our paychecks, never been declined/denied for credit, and always had available credit on our credit cards.  So we thought we were doing good.  Obviously, I (at least) had my head in the sand.  This is our story.  It’s not intended to be an excuse for our poor decisions, but to give some background.

When Dad and I met, we both had already been working and living on our own for 10-15 years.  We each had careers, and more importantly: townhouses.  We both bought during the great runup in home prices, luckily not at the very top.  I bought in 2004, Dad bought his first house somewhere around 2002, and his second in 2005.  He “made” a lot of money on the first house and put it into a down payment on his second.

We got married in April 2008, when the market was still somewhat decent, but things hadn’t collapsed yet.  His house was worth more, in a nicer neighborhood, and didn’t need as much work on it to sell, so it went on the market right after we returned from our honeymoon.  It sold in August 2008, and two days later, we had an offer in on “our house” – a single family – we both hated living in townhouses.  We had a nice down payment of about 10% thanks to Dad’s old townhouse, but we had two loans – intending to pay off the second when my townhouse sold.

The market had pretty much started crashing at this point, and the value of my townhouse was about exactly equal to what I owed on the mortgage, so we decided to rent it for at least two years, and make a decision then.  It rented for below expenses (mortgage, condo/HOA fee, management fee), but -$300/mth was a much better cash flow than -$1700/mth, so we took it.  We were hoping that the combination of making mortgage payments, rent increases, and market value would let us sell it at some point in the future.

Part 2: The Panic