Lazy Man and Money

Bostonian View: The Longest Week

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You might have noticed that I haven’t been publishing much this week. I’ve lived 85% of my life in Boston’s suburbs. Six years ago, I moved to San Francisco, but I was fortunate enough to be able to move back to New England in the last couple of months. I might have went a little over the top with my feelings about moving back home – Boston does that to you.

Many of the long time readers are familiar with my (quite possibly overly obnoxious) pride I’ve taken in Boston, in particular Boston sports. I remember clearly writing to one my friends who lives out of town how much I was looking forward to watching the Red Sox game on Monday morning, the earliest game on the MLB calendar every year. It’s was Patriot’s Day, the biggest holiday in Boston.

I remember the Red Sox winning that morning on a walk-off double. It seems like three months ago since Boston celebrated like that.

I wasn’t going to write about the Boston Marathon bombings. I didn’t want to believe it for awhile. It’s easier for me to think of an explosion as an accident like the San Bruno Pipeline Explosion that was just a few miles from me in CA. I simply can’t comprehend evil without conclusive evidence, so I shook it off. Within hours, it was clear that it wasn’t an accident.

Many people have asked me if I was okay as news of the bombings hit. I appreciated the concern, but I explained that I live far enough from Boston now to put me well out of harm’s way.

And then came Watertown…

When I said I lived in Boston’s suburbs a vast majority of my life, I mean a city adjacent to Watertown. I’ve shopped at Ann & Hope at the Arsenal Mall hundreds of times. I waited in line at the DMV across the street for hours. If you saw Andrea’s House of Pizza on the news (big blue lighted awning), let me tell you, they have tremendous pizza.

This hit me closer to home than the marathon bombing.

There’s never such a thing as good timing with something like this, but for me and my family, it was particularly poor timing. Living far enough from Boston wasn’t going to work on Friday morning. My six month old had surgery scheduled at Children’s Hospital at 7AM. We had to be at the hospital by 5:30AM so they could prepare. We got up at 3AM to the news of the car chase through Watertown.

No one knew what was going on, so we proceeded to the as planned. As we drove in, we learned that the first suspect had died at Beth Isreal, a hospital very close to Children’s. The trip was very uneventful. When we arrived we talked to all the nurses, anesthesiologists, doctors and sent off Little Man to surgery. A half-hour into surgery, we got word that the hospital was on lockdown, like all of Boston and several suburbs.

It is around this point when I thought, “This is terribly inconvenient.” Perhaps my thoughts were a little stronger as I was low on sleep. It was at that point, I noticed a few people to the left of my wife and I in the waiting room. They were wearing purple shorts with a well-designed logo reading, “Rowan – Army Strong.” I hadn’t thought much about it until I heard one say that they had an update on Rowan. Not one to make a scene, I typed out a note on my cell phone to my wife saying, “See those people?” Before I got too far she had written back, “Be thankful we don’t have T-shirts made up for Little Man.”

I was. We were in for a very common procedure that, as far as surgery goes, was one of the least risky ones. Spending a few extra hours in the hospital is a grain of sand in comparison to what people have been through over the last week.

I’ve been thinking about how to explain how it felt when they finally caught the guy. Maybe it would be like if you combined a lifetime of 4th of July celebrations into 5 minutes that would be it. Even the FCC gets it, ignoring the David Ortiz’ obscenity.

On this blog, things will return to normal. Actually, after 7 years of blogging, I’ll be making a significant change. Look for an announcement in the next day or so. I think you’ll like it.

What You Can Learn from the 4 Events in 2012 That Changed my Financial Life

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I’m rarely one to follow the pack. So when everyone publishes a review of 2012 in the first week or January, I say, “Let’s make em wait until February.” Also, rather than just give an update of what I did financially in 2012, I’m going to dig a little deeper and get a little Fat Alberty on you delivering a lesson or two.

1. Having a Baby

One of the biggest events of a person’s life is when they give life another. This past year I got to experience that. And while it is fun to joke that Little Man is a nice little tax deduction, he’s a whole lot more than that. Having looked at the the cost to raise a child in the United States it looks like this USDA calculator estimates our costs to raise Little Man will be $28,500 a year.

We are only a little more than four months into Little Man’s life. I feel safe in saying that we are going to come in far under that… at least for the first year. Here’s a breakdown:

  • Housing – The USDA estimate is that it will cost us another $10,600 in housing. I don’t think our housing costs have gone up that much, but it’s hard to say since that’s related to the #2 event (our move).
  • Food – The USDA estimate is $2,450. I think we are under that, but it is hard to calculate because right now he’s on breastmilk. That indirectly leads to his mom eating more food.
  • Transportation – There’s an estimated $3,125 in transportation costs. We bought a new car due to our move to Boston, and part of that was because I felt I needed a safer car for Little Man. On the other hand, my 12 year old car probably need replacing soon anyway.
  • Clothing – Due to the generousity of friends and family, especially my own mother’s gift of amazing bargain hunting, we shouldn’t have to buy clothes for the next five years. The USDA budgets $1438 and I think we’ll avoid much of this expense.
  • Health Care – One of the best benefits the military has going is its health care. I think we’ll save a vast majority of the $1113 that the USDA has allocated. The exception is out of pocket things like baby Tylenol and the like.
  • Child Care and Education – The USDA estimates $7,538 and this is where my blogging career really pays off. I can be that child care provider. I had estimated day care for Little Man to be around $15,000 a year. Since that’s after-tax money, it’s almost like adding $20,000 in salary. However, as it turns out we might be able to get almost full-time coverage for $6,000 at a military base. We’ll see if that comes to pass.

I think the lesson here is that raising a child can be done on a budget. It certainly helps to plan ahead (be a blogger), have a great support system (thanks Mom!), and get a good breaks (military benefits rock). Oh and if you are going to be a new parent soon, here’s some of my favorite baby gear.

2. Moving Across the Country

This year we moved back to Boston, which has always been where my heart is.

One thing I can say about Silicon Valley. Having lived there, I understand how a foreigner would come to United States thinking that the “streets are paved in gold.” Silicon Valley is a lot like that too. There’s a ton of money due to all the successful technology companies such as Google and Apple. I don’t know if it is the money or great schools like Stanford, but there are a ton of very smart people there.

Not only is it a land of opportunity, but the three feet of snow that we are getting right now in Boston reminds me how wonderful the weather is in San Francisco.

As wonderful as that is there were two major downsides for us: 1) Our friends and family are in Boston 2) The price of housing is 3 times more than what we can get in the Boston area. That’s literally a million dollar difference.

It’s not like Boston is a horrible place either. With Harvard and MIT, there are some smart people here too. I’ll probably always wonder what life would have been have been like, not just for me, but for Little Man, if we stayed in San Francisco.

What’s the lesson here? It’s probably nothing new, but geography does play a huge role in personal finance.

3. Refinancing Two Mortgages

Lost in the birth of baby and the move back to Boston is the financial move that flew under the radar. I was able to use the government’s HARP program to refinance two mortgages. With the drop in value of real estate over the last 8 years, these properties no longer had 20% equity and we were paying on average 6% interest on them. We were able to keep the payments close to the same and change 22 year mortgages to a 15 year one. The reason we were able to do that? The interest rate of 3.5% on a 15 year lowers the payments to what we were paying on the 30-year at 6%.

It was extremely difficult, especially because I’m a self-employed blogger. I might as well be a third-class citizen to mortgage underwriters. The hours on the phone and email really paid off…

The result of eliminating 7 years of mortgage payments on two properties is tremendous. Some rough math tells me it will save us $225,000 in mortgage payments.

The lesson here is to take advantage of these low interest rates if you can.

4. Buying a New Car

In any other year, buying a car would trump the money moves. After buying a house, it is usually the biggest purchase someone makes. One month in, I still have no regrets on buying my Subaru Forrester.

Wait, maybe I do.

The last lesson is that before you buy a new car, look at what is coming down the pike in the near future. It’s something that I think about whenever buying technology, but I somehow forgot about it with buying a car. I think it was because I was going in with the intention of buying a slightly used car and saving on depreciation. However, they made the new car a lot better deal because they had dealer incentives and 0% financing for 63 months.

It wasn’t until a few days later, I found out that they are coming out with a 2014 Forester in a couple of months that is going to get 5 miles more per gallon. As it turns out waiting wasn’t a good fit for us because we need to snow-worthy cars in New England, but doing some rough math, the money that I saved with the 0% financing is about what I was likely to save on gas through the life of the car.

I might still come out ahead if Subaru bumps up the price of the 2014 Forester as many expect they will.

Putting it All Together

Most years, I don’t make too many big financial moves. Obviously some of them like taking a new job or having a baby are common life milestones. Other things such as taking advantage of historically low interest rates (particularly for mortgages and cars) fits in the category of making the most of opportunity presented.

Now it’s time to take a year to settle down.

Financial Analysis of Moving From San Francisco to Boston

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DICKSON, TN – Last week, I mentioned that I’m moving from San Francisco to Boston and focused on the emotional change. With all that mamsy-pamsy junk out of the way, let’s dig into the mathy, financial fun side of the move.

Straight Dollars and Cents

Many people take a new job because it will pay them more money. At least that’s usually a big factor. That’s not the case here. We’ll be losing about $500 a month. A portion of my wife’s military pay is pegged to the costs of living in an area. San Francisco is one of the highest, if not the very highest on the scale. Boston is still very high on the compensation list.

On the other hand, unlike many military moves, where the spouse (i.e. me) has his/her job completely uprooted, all my income should remain unchanged.

As for the actual costs of moving, the military foots most of that bill. They even gave us some cash for incidental costs incurred in moving. The only thing that I can think of is that we are giving up some Groupons. We might use those next year (minus the promotional value) when we plan to come and visit.

Costs of Living

The cost of living in Boston and where we would be living is considerably less than San Francisco. Here’s one example: our 1400 sq. ft home with a small patio was costing us $3200 a month to rent… and that is a bargain compared to the nearly $900,000 it would cost to buy it.

It is that reality that put a swift end to any thoughts of living in San Francisco permanently. When my wife retires from the military, her housing allowance disappears… and blogging in San Francisco doesn’t pay more than blogging in Winslow, Arizona.

Opportunities Gained and Lost

Whenever you evaluate something as big as this, it also is worth looking into the opportunity cost.

In general, my wife’s military status is pretty rigid. It’s not like the private sector where living in Silicon Valley gives someone a chance at switching to a better technology job down the line. That said, when the time for promotions come around, a switch to a new job shows growth and looks very good.

It’s always tough to quantify “opportunity”, but it doesn’t appear that my wife will lose much and has more to gain.

On the other hand, I’ve had the pleasure of working with a number of financial start-ups in Silicon Valley. I wrote for Prosper’s blog, which was a nice side job. I got the chance to work a bit with Mint, which wasn’t the best experience (they are in a better direction now than they were before). Beyond the work things, SaveUp (review: SaveUp Brings the Fun While Rewarding You for Saving) invited me to their Christmas party.

I’ll surely miss out on some of these opportunities, but I’m not sure how much they’ve added to the bottom line.

The Hidden Benefits

The biggest hidden benefit is one that I haven’t mentioned yet. With the new position my wife will work 4 ten hour days a week, with two of them work from home. It’s interesting to note that even the government recognizes that it is a signficant cost savings when people work from home. With only two days of commuting, we’ll recognize a savings on gas and wear and tear on the car. (She was already bringing her lunch most of the time, so that’s not a saving like some would recognize by working from home.)

In San Francisco, my wife had occasionally been working from home and she found that she would naturally work 9 or 10 hours, putting her commuting time into work. Now she’ll actually get credit for it. The 10-hour days when she has to go into the office will be difficult, but the hope is two days a week isn’t too bad, especially in exchange for 3-day weekend.

It took me a couple of weeks to realize another hidden perk. My wife gets 30 days of vacation a year (government jobs are good like that). In 5 day work weeks, that turns out to be 6 weeks. In 4 day work weeks, it is 7.5 weeks of vacation. This is where I ask readers not to go off into a tangent about government spending, the fiscal cliff, or any of the related topics that I have been listening to on talk radio as I drive across the country.

Breaking away from financial analysis for a second, my wife will now be around the home 5 days a week to see our son grow up versus the 2 days of week she had in San Francisco. This is huge for us.

Child Care Costs

While I hardly expect our extended families to put in a lot of time with baby sitting… having grandmothers around will likely lead to some savings.

Summing it up

This didn’t turn out to be the kind of financial analysis that I had hoped when I wrote the title. However, just setting the up the pros and cons list makes me quite confident that we’ll come out of this move for the better.

P.S. Did you catch the dateline in the beginning of this post. I’ve always wanted to do that. Just like a real reporter, right? We’re mostly through our travel across the country (taking the Southern route to avoid storms as much as possible). We couldn’t figure out why Nashville was so expensive to stay in, but it turns out that it has the Grammy’s concert and the baseball winter meetings going on.

“I Think I’ll Go to Boston”

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“I’ll get out of California, I’m tired of the weather…
Oh yeah and I think I’ll go to Boston,
I think that I’m just tired
I think I need a new town, to leave this all behind…
I think I need a sunrise, I’m tired of the sunset,
I hear it’s nice in the Summer, some snow would be nice… oh yeah,”

– Boston by Augustana

A little over six years ago, my wife and I moved from Boston to California… just before that song got popular. I was the mirror image of those lyrics… traveling in the opposite direction, but for some of the same reasons (“just tired”). The two biggest reasons were my wife and my careers. Her job was wearing on her. When you work at a federal prison and the inmates are the bright spot, you know things are not good.

At the same time, my current company was paying me in the bottom 5 percentile of my Salary.com value as a senior software engineer. At the time I got the job, 2004, things were still pretty bad after the dot com bust. When company’s VP left the compensation database lying around… well, let’s just say it was clear I was being taken advantage of. There were people with much less experience making a lot more money. I made my case for an increase, not mentioning that I knew others were being paid more, but it wasn’t successful. I didn’t get any more money, any more stock, or even more vacation time. I rarely ask for anything and they didn’t even throw me a bone.

My wife stumbled on a rare opportunity out in San Francisco. By rare, there are probably about 200 jobs in the country that my wife can transfer to as a pharmacist with the military. I had never thought about leaving Boston, but I was pissed off enough at my company that I said, “Go ahead, might as well apply.” She did. After three rounds of interviews, we were on our way to San Francisco.

I had always lived within a 15 mile radius of Boston. I had underestimated how tough the adjustment period would be for me. All my friends and family were in Boston. My brother was making me an uncle! Many of my friends were having their first children, too. I didn’t know anyone out here in San Francisco. I missed Boston.

That song became a dagger to my heart every time it hit the airwaves. I became extremely jealous of that fictional person who traded places with me… leaving California to go to Boston.

In six years, one can make a lot of adjustments. I joined a Meet-up group with a lot of people who came to San Francisco from Boston and were interested in sports. Together we shared a lot of highs and lows. We watched the Red Sox, Celtics, and Bruins win world championships. We watched the Patriots lose a couple of Super Bowls. In time, we did things that were completely unrelated to sports like tour Napa wineries. We got together at Christmas. I didn’t realize it until this year, but for the third straight year, we hosted Thanksgiving dinner at our house.

On the blogging side of things, I met enough people to fill a think tank. There are too many to mention, but a few that stand out are Kevin Gillett to SVB and her husband from The Digerati Life, and Revanche from A Gai Shan Life. Actually each of these people are stand-alone think tanks.

Today, I am that person in the song. I’m no longer the mirror image.

As my wife and I packed the car to go to the hospital to have our baby, she got an email alert on her phone. The military had just sent over the official paperwork for her new job in Boston. We are going home!

Home.

I’m not even sure what that word means any more. The last time I went to Boston, I had to ask how large the medium sub at D’Angelo’s was. They confiscated my Bostonian membership card on the spot. They say home is where the heart lies. If that’s true, Tony Bennett’s is still here in San Francisco. After talking with my wife, our hearts lie in two places now. We are Robin Scherbatsky caught with ties in two places, but neither feeling like a true home. The episode ended with Robin learning a lesson that we are hoping sinks in with us: We’ve got two homes and with that comes twice the awesomeness. We get to get back to our Boston roots and ridiculous accents (Side Note: watch this 30 second commercial for typical Southie Boston accents) and we know the Silicon Valley culture (a little more on that in a future post).

Baz Luhrmann sang, “Live in Northern California once, but leave before it makes you soft.” Truer words have rarely been sung. Today on the news they had a big weather advisory that it had been raining for 20 minutes.

The hope for later this week is to do a financial analysis of the move, which, as it usually does, played a key role.

A Brief Net Worth Update

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Last month, I decided there probably isn’t a whole lot of value in sharing my net worth ups and downs with you. If you want to put yourself in my shoes, here’s a basic synopsis of my account holdings. I have a little over $200,000 in net worth. About half of that is in retirement accounts. A quarter is invested in a condo. The last quarter is cash and other assets that are lot more liquid.

Each month, I look at how I much money I had the previous month and how much I have today. The quick look this month shows that real estate has a minor upswing in Boston where my investment condo is. I use Zillow to keep track of prices, because it’s very accurate for my condo. Since it’s one of around 200 identical units – there are enough similar recent sales to get a good trend.

My retirement accounts rebounded slightly this month. I’d like to take a lot of credit for it, but other than asset allocation, I simply let the market go where it wants to.

The real part that control is the liquid portion of my account. It’s this area where I can see gains from my alternative income, reducing my spending, and other day-to-day money matters. This last month wasn’t a particularly stellar month for me as far as that goes. The biggest expense was eating out. Though it was probably fewer than 5 times for the month, we’d probably be better off with our health and our wallet if we stayed home and cooked almost all the time.

The other expense was a surprise gift of jewelry for my wife. She had been eying a particular piece for some time. She has been extremely understanding of my increasingly frugal nature and it was time to show that being frugal does have it rewards.