Archives for July 2012

“If you want to make God laugh, tell him your plans.”

There are many people that ascribe to this school of thought. I definitely think it is essential to remember that, ultimately, everything we do is up to God.

However, I think that this quote is really misleading and damaging for a variety of reasons. For one: this quote has always seemed mocking to me, as though God is up there, laughing at our audacity like an Olympian Immortal. Secondly, I think that it is part of our duty as human beings, made in the image of God, to thoughtfully make plans for the future. When it comes to finances, I think this is even more true. Being ignorant of your situation and what you could do to improve it is akin to being a slave to it. You cannot be generous with your money if you are a slave to it. Furthermore, you cannot serve God if you are a slave to anything.

For this reason, I am a fan of plans that involve enough planning to free us from constraints, but not ones that involve tying us down, making us a slave to our money/budget. In other words, if our plan gives us freedom, I’m all for it. Surprisingly (for me, especially!), budgets give me a HUGE sense of freedom! I didn’t think it was possible, because it seems so counter-intuative. Once I became accountable and really took a hard, honest look at where the money was going every month, spending became a way to honor God, instead of something I did sneakily within the shadows.

There’s a curious overlap between contentment and planning, however. My definition of contentment, in this regard, is whether or not I’d be okay if all of those plans were ripped away from me. Certain plans, I feel okay with changing– others, not so much. So I’m definitely learning about that balance! Anyone else?

Okay. The newest plan.

Our last “almost bought a house” experience taught us a few things this past year.

1. FHA loans are expensive to close. The closing costs are a whole lot higher than a conventional loan– definitely more than we anticipated (around $10k).

2. FHA loans are picky. We were advised that unless the inspections came back perfect, we probably wouldn’t be able to get the house financed. If we go the FHA route, we will have to be looking for something brand new. This would be great, except for the fact that while we’re teachers, we will have 3 months off every year– time we COULD spend putting equity into a house. If we had our choice, we’d want a house that we could update (minor things, like floor, kitchen, windows, landscaping, etc.).

3. Without a 20% downpayment, one is locked into a PMI (property mortgage insurance) rate for 5 years minimum. I didn’t think this was a big deal, until I saw our final printout– over $200 a month towards the PMI! That’s $12,000, DOWN THE FRICKIN DRAIN! Holy Smokes! I understand that could be a small deal for some, especially when they are dying to get into a house, but it is a hard pill for me to swallow, that’s for sure (also, some people have a lower PMI. Ours just happened to be really high!).

So, as you can probably guess, our newest plan involves avoiding the FHA loan at all costs. If our credit scores are high enough (which, I just checked, and they are!), we can still get a good interest rate using a conventional loan.

Sounds dandy, except for when you realize that in California, 20% down is around $40,000! Um, yikes. Double yikes.

But I think I have a plan. Oh golly, there’s that word again. Haha, maybe I should substitute “dandelion” for the word “plan” to make this more interesting (plus it’s got all sorts of poetic implications)….

I think I have a dandelion.

The dandelion goes like this: We save $2,000 a month for 15 months.

That’s it! Sounds brilliant, right?

Except for….our teaching salaries are kind of embarrassingly low.

So, part of the dandelion has looked like this: whittle all of our monthly expenses (utilities, rent, groceries, gas, car payment, minimal extra spending) down to just what we make from teaching. This was surprisingly easy– our utilities in our “magic house” are only around $40/month. We have a pretty low-key Netflix membership, and we are switching cell phone companies in one month to get a MUCH better deal (buh-BYE Sprint!). I tracked our grocery/eating out purchases for the month, and we underspent my budgeted amount by nearly $150!

In fact, I whittled things down so drastically, without a ton of pain or effort, that we will be able to save at least $400/month just from our teaching salaries!

But, as the dandelion likes to remind me, $400 is not $2000.

Fortunately, I have yet to factor in my piano-teaching tuition. Since this number can often fluctuate, depending on family vacations, sick kids and 4-week months vs. 5-week months (ah, the joys of self-employment!), I do not want us to depend on any of this income for our monthly budget. It’s too risky. Instead, I want it ALL (and I mean ALL) to go into a separate savings account.

I already have between 8-10 students on a reliable monthly basis, which adds up to about 5 hours a week of work. In order to meet our savings goal, however, I am going to need at least 6 more.

So, August/September’s goal is: aggressively campaign and obtain 6 more students! Start saving $2,000/month, add it to what we have, and boom! 20% down plus closing costs! Piece of cake, right?

If we can make this happen (and, by “we”, I am mainly talking about God, here, since saving this much money seems virtually unreal to me) it will set us up to be “free” in a variety of ways. Given the fact that we won’t have a PMI, AND the fact that we will already own 20% of the loan, we will be able to afford a 15 year mortgage vs. a 30 year. Since we will be used to saving lots of money every month, we will be able to start throwing drastic amounts of $ at increasing the property value, our retirement, not to mention quickly getting rid of any other small debts we have. Within 15 years, we will own our home, free and clear of any debt (and, hopefully, we can also get a return on the repairs we’ve done). Sounds rather spectacular, no?