January net worth: a fresh start

So, I know I’m getting naked with my finances over at Consumerism Commentary, but I’m still going to do my own monthly check ins here. That is, after all, one of my main reasons for writing a blog: to hold myself publicly accountable. It’s one of my favorite posts every month, and it’s one of my favorite spreadsheets. Dork alert*: every time I make a payment, I immediately open my Google doc to adjust whichever payment to its new spot. It’s so fun.

I’ll link to his site once it’s live, but I’ll still keep track here.

Frugal Portland January Net Worth

This is the January baseline. My net worth is hovering right around $17.5K. If I could write a note to myself a year ago, or even better, two years ago, it would say: “keep trucking, you’ll have positive net worth in 2012 and over $20,000 in net worth sometime in 2013. Don’t buy a life insurance policy yet.”

New in 2013 is including my savings account in my assets category, because for the first time, it’s more than the required minimum for emergencies.

Okay, so that’s where we are. Next month, I can do a net worth percentage calculation, but January is my reset point.

Now, I need your advice, you beautiful, wonderful readers. Did I mention that your hair smells nice and is that a new top? You look amazing. I’m getting a slice of commission in my next paycheck. As in, something like 1.5X my regular monthly salary. Last year, I had credit card debt, so the solution was simple. Throw anything extra on that pile! But now, I’m wondering what to do.

If I put it all on my student loan, then I would no longer have any student loan debt which, I have to admit, is a thrilling proposition. But is that really necessary?

In the event that I somehow manage to get a condo in this market (and by the way, how did the market get so competitive¬†all of a sudden?) perhaps I should have easy-to-access cash for things that I don’t quite understand. Like earnest money. Isn’t all money earnest? Every dollar I’ve earned certainly is!

Commission is a strange beast, that’s for sure. I feel like I should be prepaying my car insurance like a responsible person, or buying a year-long membership to a yoga studio so that I can take advantage of a deal. I’m much better able to negotiate around my ¬†normal expected monthly income. I know, I know, what a problem to have, right?

I think the reason it’s a bit challenging is that for all of last year, my finances were simple. Pay off credit cards, max out IRA, pay down student loan. But this potential increasing of liabilities by a jillion percent really throws a wrench into things. I don’t really know how my payments are going to shake down. How much more my housing prices will rise. So, I’m hesitant about the whole thing.

But I have to live somewhere, right? And it’s worth a little more than my current rent in order to get something that is mine, too. At least that’s what I tell myself. But my resolve is nowhere near iron clad.

Any suggestions? Get my savings up? Prepay for something? Pay off my student loan?

45 comments

  • Ouf that's a toughie. If it was me, I would put it towards student loans. Having few liabilities means that if something did happen, at least you would only have to worry about your mortgage payment, not your mortgage payment plus student loans.

    But then, I'm a debt repaying fiend so I think I'm a little biased.

    • I would totally do that if I weren't looking for real estate, you know? It's just odd how this whole thing factors into this decision in a big way.

  • If you pay down the debt, you might be able to replenish the cash relatively quickly especially since you won't have that payment going out anymore. That might keep you out of the market for a few months, but if you're not planning an immediate purchase, that could be OK.

    Personally, I'd target the car loan before the student loan payment. Then, if you don't make a move in the real estate market, I'd actually advise taking a portion of the money you were previously paying on the car loan, and saving it toward when you need to get another car down the road. That way, your next car will require a smaller loan or maybe no loan at all. Car payments suck!

    • I'm so close on the student loan, and the interest is double that of my car loan, so to me it makes sense to get rid of that one as quickly as possible, then focus on the car loan. At the same time, if I'm adding a new payment to my life, it might make sense to save this money and see how my financial picture shakes down.

  • Some will say you should put some toward one thing, and some toward another, but i am one of those people where I hate breaking a lump sum up. I'd say – pay off your student loans! But then if I were in your situation, I'd put it away for the "earnest money" you were mentioning. There are a bunch of weird fees you need to pay with home buying.

    • Thanks, Daisy, that's what I'm leaning toward too. It's just funny how it changes. Last year, it was a no brainer!

  • I would pay down the highest interest loan.

  • Credit Report Chick

    I agree with Moneybeagle and would pay off the car loan before the student loan. I made the exact same decision last year and in a few months I'll have my car paid off. Then I will roll that money into my student loan debt. But I would caution you to thread carefully. Addvodka is right. There are a ton of fees assocatied with home buying.

    • Jeff from sustainablelifeblog also thinks I'm paying these off in the wrong order, but the student loan's balance is lower and interest is higher.

  • The condo market got hot all of the sudden. It seems like the number of available units went way down in just a few months. Good luck finding a condo. The rate is still low though so it's still a good idea.
    I would pay down the car loan. I hate car loans.

    • I put in an offer yesterday and mine was the fourth offer that condo received! It went on the market on Saturday.

  • John S @ Frugal Rules

    That's a tough one! If I were in the situation, then I'd probably throw as much as I can at the student loans in order to become debt free. The rates may not be that high in some minds, but anything to get the loan off the books is great in my opinion. Beyond that, I might build up your savings.

  • I would probably pay off my student loan but that's just me. I'm debt averse.

  • My vote goes towards paying of the student loans. Just imagine the euphoria of NO MORE DEBT :)

  • I would pay off the student loans. It will probably be the most psychologically rewarding seeing them vanish before your eyes. However, I do understand that there are complex financial situations that one must consider. Maybe divide it up? 60% savings/condo, 10% EF, 30% student loan.

  • Tough question here. On the one hand, you've got a couple of debt (student loan, car loan) and a possible situation where you'd may be needing to lay out a large cash position when purchasing a home.
    You could pay off the student loan and if there's any left over (you didnt specify).

    All would depend on timing – if you're planning to do some serious house-hunting this spring/summer, see fi you'll be able to make back what you sink the student loan with that you'd save in payments to the loan. If you're not that serious about looking for a place, I'd pay off the loans – if you are, consider holding on to the cash until you've found a place or stopped looking

    • Thanks, Jeff — your spidey sense must have known that I just mentioned you in these comments! :) I just put an offer on a condo yesterday so I think I\’ll wait to see how that shakes down. I was the fourth of many offers so if it doesn\’t work, then I\’ll go ahead and pay more toward the rapidly diminishing student loan.

  • I was thinking about this recently, when you're getting ready to buy a house or something, does that mean you just save until you have $100,000 (or however much you need for a down payment)? That's a lot of cash that could be working for you, but instead it's probably in a low interest savings account.

    Still, I vote for saving for the big purchase.

    • Thanks, Daniel, for your insight! My coworker just put an offer down on a house, not because he was particularly interested in moving, but because his savings account was so fat that he thought it would be a good idea to buy a new house. Odd?

  • Pauline @ Reach Financial Independence

    I would keep the money until I have a clearer view about the real estate. There are so many costs on top of mortgage, moving, furnishing, fixing, repairing, maintaining, you name it. Having a buffer will be nice.

  • Since you seem unclear, I say to split the difference. Go half in the liabilities and keep half around for the possibility of the condo.

  • I vote for paying off your student loans. It will feel so good not to deal with that anymore.Then there will be more money in your account to put towards other bills/goals. When you purchase your new place it will be great! But, it will cost more initially than you would expect. The first day you have to have your locks changed. Literally, the first day. Could you hold off for another 4-6 months before you put another offer in? What a great way to start the year. While I hate large tax returns, maybe you will get some taxes back as well? That could be applied towards your car loans. Looking forward to hearing what you decide.

    • I didn\’t get the condo I put an offer on so I think I\’ll keep my savings at 3K and put the remainder toward student loans.

  • If you are going to purchase a condo in the next few months, I'd save for that. There is always some sort of unplanned expense, but home ownership is wonderful in my opinion. I've never regretted it for half a second. If you don't end up buying, I'd kill the student loan.

  • I would make buying a condo the top priority right now. I have a feeling the average price of homes in the US will only go up from here. Pay attention to the 20 city composite of the case-shiller index because Portland has been more or less following the same trend since 2008. 97% of American millionaires are homeowners. Some people will try to time the real estate market, but my philosophy is to start as young as possible :D

  • I'd hold on to it till after you buy the condo. There's always fees… For us, it was $650 in lawyer fees plus another $500 or so in various service charges that no one bothered to mention until it was time to pay! If you end up not using it, you can still use it to knock off whatever remains on your student loan debt.

  • Honestly, I'd throw it at the student loan debt, then save for the condo. Get rid of the debt first, and you'll have that much more to save later on…and you're only delaying your condo purchase for about a month, right?

    • You make a good point! However, I think that the condo is not going to be purchased for a year now, so it is an easier decision.

  • I am in the "purchase a living space" camp, all the way.. The market in portland is absolutely crazy, and the sooner you can get started- the better you will be. Your progress on the cash flow front has been crazy impressive, and will certainly help a ton when the time comes to jump in.

    • Thanks, Jeff! I tried for a condo but of course they picked some other offer. I think maybe I will wait a year.

  • I'm leaning toward paying off the student loan debt as well. Your interest rate may not be that high, but the prospect of having no more student loans would be awesome!

    • I am also leaning toward it but for some reason it seems difficult to put that much at one time to it! It will still be there next month.

  • I cannot wait to have conversations like this- right now it's pretty hand to mouth (though I'm having fun) but I can't wait to have a fancy graph with 20k in assets! lol. Rock on girl!

  • IF your really thinking of buying soon, hold on to the cash. Lots of unexpected expenses coming up!

  • I want to say get rid of your debt and then channel all those payments to build the fund back up. But as you are very close to buying a house AND close to get rid of the debt in 2013 using regular payments, it might be better to hold onto to the cash. If you get a great deal on a condo that needs a little work, if you don't have immediate cash on hand you might drop that house. Having cash on hand while home shopping gives me peace of mind (at least for me).

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