2013 Review of Major Financial Decisions and Progress

financial progress reviewWe are nine months into 2013, I thought this would be a good time review the major financial decisions and progress for 2013.   2013 thus far has been very very busy year and I’m pleased to see not only how much we were able to accomplish but also how well we were able to accomplish them.  At the same time, putting this post together has reminded me how much more I still need to do.  I have broken these financial decisions into four major categories:  House, Major Purchase, Investment and Financial Protection.  

  • House – all things related to our primary residence
  • Major purchase – big ticket items, generally $1,000 or more
  • Investment – stocks, mutual funds, employee stock options, restricted stock units, 401k, 529 plan, investment properties etc.
  • Financial Protection – deal with all things related to disaster protection like auto insurance, home insurance, life insurance, living trust, etc.

For each item, I’ve given myself a letter grade scale rating on how well I did.  This helps me to see where I have done well and where I need to focus.

1. House

1.1 Bought a new house (A)

buy sell houseWe purchased a new primary residence for our growing family at the end of 2012 after almost one year of active search.  It was a very time consuming process, and at times very frustrating and emotionally draining.  We made five offers before we got this house.   In the end, it was time and effort well spent.  We pretty much got our dream home in our dream neighborhood that had just about everything we were looking for.  We did have to stretch our budget by about 10% in the hot south bay market, but we did manage to get a great value.

One plus is that by doing most of the search and open house visit on our own, i was able to negotiate a much lower commission with my buyer agent and was able to use that money for the remodel.  All in all, I would give us an “A” rating on this one.

1.2 Remodel the house (B)

The house was already in move in condition and the previous owners had done quite a lot of quality renovations.  Updates included kitchen and bathrooms remodel, new paint inside and outside, new roof, new hardwood floor on the main floor, new window treatments, new kitchen appliances etc.

Most of remodel items were not out of necessity but out of desire.   Major work included replacing second floor carpet with hardwood floor, new paint color for all the bedrooms, crown molding for the bedrooms, new mantel and tile for the fire places, new tiles for master bedroom, recess lighting throughout the house, power room remodel etc..

The remodel came in on time and costed about 20% more than our original budget, I’m generally happy with the end results.  All in all, I would give us a “B” rating on this one.  We could have stuck closer to our budget, negotiated harder with our contractors and done a little more research on some materials choices.

1.3 Sold a house (A+)

sold a houseSelling our old house was something I was stressed over since I really wanted to avoid paying two mortgages.  In addition, I had to sell the house in December which is not an ideal time to sell.  I have written a series of posts on selling home , and in the end we sold the house in 7 days and for more money than we had expected.  The outcome exceeded my expectations, and I would give us an “A+” for this one.

1.4 Mortgage (B)

When we purchased the new house, it was definitely a stretch for us financially and I decided to take a 5/1 ARM loan to lower the monthly payment.  I got a great loan at 2.125% interest rate.  Later after selling the old house the short term financial strain is lifted.  Since we plan to stay at the new house for quite a long time, I was looking to refinance to a 30 year fixed rate loan to lock in the low interest rate.  In April timeframe, I had the opportunity to lock in at 3.5% for a 30 year loan.  i hesitated a little as our current 5/1 ARM rate was so attractive and so low.  I got greedy and wanted to wait for the interest to drop another 1/8 point to 3.375%.

Unfortunately, the rate never came down and since then the rate has been on the rise.  While we are good for another 4 years on our current 5/1 loan, I doubt that type of low interest rate would return.  This is one of those “penny wise, pound foolish” moment.  Didn’t do so well on this one.

Overall, I did very well on the house category.   I would definitely acknowledge it was time consuming, even after bought and sold 10+ properties, I’m still learning with each new transaction.  Luckily I really like real estate and enjoy the process overall.  But even without a personal interest on this category, given how much money is involved in these transactions, they definitely deserved the amount of time and effort invested.  For me personally, real estate is a category of investment I plan to do more in the future, and all these learning will definitely be beneficial.

2. Major Purchase

2.1  Bought two new cars (A)

buying a new carBoth of our cars were getting close to 100,000 miles and we knew it was time to upgrade. Once we narrowed down the car model, with some good research and smart bargaining, we were able to purchase two 2014 vehicles for a couple thousand dollars below invoice (not MSRP, but below invoice).   The whole process was smooth and pretty fast, the time we spent can be roughly broken down to the following:

  • 1/2 day to test drive and determine the car model
  • A couple hours research on option and pricing
  • A couple hours negotiating with dealers online and on the phone
  • Once we decided on the dealer, it’s another couple of hours of haggling to agree on the final price and process the paperwork

I think we nailed this one.  🙂

2.2 Bought extended warranty for the new car (A)

Since I’m planning to keep the car for 5-7 years, i wanted to get the extended warranty for a peace of mind and minimum hassle,  As part of the research for cars online, I also found a great deal on extended warranty and was able to purchase it for several hundred dollars less than what the dealers were offering even with hard bargaining.  The whole process was very simple, just a few minutes of phone call and it’s done.

2.3 Sold two old cars (B+)

We decided to sell the car ourselves instead of trade in since the deals were really trying to squeeze us as we bargain hard for the new cars.   Craigslist was what we used to advertise the car.  We took the cars in for thorough cleaning to make sure it would show well,  took time to write up a nice ad completed with good pictures, and priced it a little below the Kelly Blue Book value (very similar steps as prepping the house for sale but smaller scale).  In the end we were able to attract a good number of interested parties, and each car was sold within 2 days.  We probably could have gotten a little more for the car, but I was happy with how quickly and smoothly everything well.  I would give us a “B+” for this one.

2.4 Bought a new piano (A)

buying a new pianoWith a bigger house, we finally have room for a piano.  After some research online and in person, I narrowed the choices down to Yamaha U1 or Kawai K3 Piano, good solid choice for entry level.   If my kids have talent for it, I figure I would upgrade down the line.

I was amazed at how much room there is to negotiate.  The MSRP price for Yamaha U1 was around $11,000,  just by showing genuine intention to buy and not even trying to bargain, the dealer offered me a price of $6000, almost half off.   This is one of those instances where you don’t want to make the first offer.  In the end, I was able get the Yamaha U1 including tax, delivery, tuning for more than 50% off retail.  Not bad if I shall say so myself.  A for this one.

2.5 Make Credit Cards Work Harder (A)

credit cardLast year I discovered the world of credit card points through pointsguymillion mile secrets.  I don’t recommend go crazy over it as too many credit churns could lower your credit score and could also be too time consuming.  I spent some time researching these sites to figure out what credit card would give me more cash back or points and take advantage of the sign on points as well.  I settled on Chase SapphireAmerican Express GoldFidelity Investment American Express and swapped out a few of the plain jane credit cards we owned previously.  I was able to use points earned from these cards for a pair of round trip tickets to Europe for my husband and I this summer.   All in all, with no change in behavior and just a few hours of work, I made my spending work harder for me.  A for this one.

2.6 Automate Bill payments (A+)

automate_bill_payAt last count, each month I have electricity, gas, water, garbage, cable, internet, phone, cellphone, auto insurance, life insurance, multiple mortgage payments (primary residence and rentals), multiple home owner association dues, and multiple credit cards..  In all, 20 plus bills each month.  In our busy household with dual working parents with young children, time is precious.  I have automated all of these bills about ten years now and don’t spend more than 10 minutes a month on paying bills and have not had a late payment in years.  For more details, read my post on Smart Guide to Automate Your Bill Payments without Losing Control.

Overall, I did well on this category.  Not only did I get good prices for these major purchases, but also didn’t have spend much time.  You will see this as a recurring theme for me, time is as precious as money, and sometime even more so.    I look at the combination of return on my time and money to gauge how well I did in each category.

3. Investments

Our investments is mainly spread over stock/mutual fund, rental properties and company stock options and restricted stocks units (RSU).  I’ll discuss each subcategory below.

3.1 Stock/mutual fund portfolio (C)

stock bond mutual fund portfolioIt one of those things that have been my to do list for a while, I have done a few things here and there and have done well with a few stocks (picked up Apple and Facebook on the dip). But in general, I haven’t been systematic and consistent with managing the portfolio. Definitely an area I need to focus on.

3.2 Stock options and restricted stock units (C)

smart investmentOne of my basic investment philosophy is to diversify.  For Employee stock options or Restricted Stocks Unit (RSU), my intention is to sell them off regularly and use the proceeds to invest in other equities.    It’s not that I’m not confident about the company I’m working for, I am. It’s about diversification.  Think about it, we already have so much invested in the company we work for, salary, bonus, benefits etc. are all tied in with the company.  That’s a very high concentration in one company, a lot of eggs in basket so to speak.  This is where diversification becomes very important.  Generally I don’t worry much about tax consequences, I’m sure there are people who will disagree with me.   In my experience, the ups and downs of stock market could easily wipe out any tax saving.

I haven’t been very good about sticking with this practice and worse yet after I sell the stock, I have just left the money in the account in cash and not put into other forms of investments.  In the future, I need to implement a system where this can be handled automatically.

3.3. Investment properties (B)

rental propertyMy rental properties generally have been pretty healthy, everything is rented, no problematic tenants and no major repairs in the horizon.  However, one of the property management companies has been terrible though, late with rental payments, overcharge me for repairs and late with statement etc.  I have been thinking about changing  property management company or just sell the property all together.  However, upon reviewing the contract I signed with the property management company, I realized how egregious the terms are.  Basically, I can only cancel before the annual renewal date with three months written notice; and if I want to sell, I have to use the property manager as the realtor, the list goes on and on.

Definitely a hard lesson learned, next time I would interview the property manager personally and review the agreement carefully rather than just sign the agreement blindly.    For now, I will keep a tight leash and micromanage the property manager to hopefully keep things in check.

I started looking at potential rental property since a few months ago.  With the hot real estate market, it’s not a good time to buy, the cap rate is terrible.  I will continue to monitor the market and see if the market would cool down to more reasonable level.

In the investment category, I did pretty poorly and need to focus.

4. Financial Protection

4.1 Life Insurance (A)

With the new house, I needed to take out a bigger life insurance for both myself and my husband in case something terrible were to happen to either one of us.  I’m doing 20 year term insurance for both of us.  I’m not a fan of Whole Life Insurance I like to separate financial protection from investment.  Once I got around to do it, the whole process was actually quite simple and smooth, and the price was reasonable.  I felt it was money well spent for a peace of mind.

4.2 Auto and home insurance (A)

auto_insuranceWith new house and new cars, I had to redo the insurances.  After doing a quick comparison shopping, I decided to stay with my current insurance provider Liberty Mutual since they offer fairly competitive rates and have been easy to deal with.  Liberty Mutual rewards loyal and good customers and gives me pretty significant discounts (i.e. long term customer, no claim, multiple insurance etc.)  For example, my primary residence was about 40% of standard rate.

However, for my rental properties, Liberty Mutual was not a good choice for us.  None of the discounts can be applied to the rental property, and they have been raising my rates drastically over the course of last two years. After some shopping around, I have switched to All State for all my rental properties and save myself several hundred dollars annually.

4.3 Living Trust (In progress)

With young children and some nest egg, I put living trust on the agenda earlier in the year.  I have made some progress

  • Gathered a list of recommended attorneys from friends and colleagues
  • Enrolled in the ARAG network through my work benefit to have part of the living trust cost covered
In the next months or two, I plan to meet with a couple of the recommended lawyers and get this wrapped up.  After that, I can put this category on autopilot.

Closing thoughts

financial to do listThis is turning out to be a much longer post than I had intended.   I’ll definitely give myself a pat in the back for how many things I’m able tick off.  As I said in the beginning of the post, it’s been a busy year.

It’s been very helpful for me to write up this post, now it’s clear where I need to spend more time.  For the remainder of the year, I will focus on the investment category.

Readers, I’ve covered a lot of ground in this post.  If there are areas you would like me to go into more details, drop me a comment below, happy to go into more depth in future posts.  And if you have experiences and stories to share, do drop me a note below as well.  E8JKJGCCJAAG

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