“Money is like gasoline during a road trip. You don’t want to run out of gas on your trip, but you’re not doing a tour of gas stations. You have to pay attention to money, but it shouldn’t be about the money.” –Tim O’Reilly
For the first time in several years, I have the ability to contribute to a 401(k) plan through Sincerely’s new parent company, Provide Commerce. There were only two index funds available among the predictably limited mutual fund offerings: the Spartan 500 Index Fund (FXSIX) with a rock-bottom expense ratio of 0.05% and the Spartan International Index Fund (FSIVX) with a respectable ratio of 0.17%. The rest were all managed funds with expense ratios between 0.8% and 1.2%. Given that my existing investments at Schwab are all index funds with an asset allocation of 40% large cap, 40% international, and 20% bonds, I skipped the bonds and just went with 50% large cap (aka domestic) and 50% international for my 401(k).
I like to take some time at the end of each year (or in this case, well past the beginning) to look back on the financial decisions I’ve made and think about the year ahead.
Not much happened in the first eleven months of 2012 besides dutifully making our first year of mortgage payments. One down and 29 to go. It feels like an important milestone, though I can hardly fathom the next 29 years. Given how dramatically the housing market in San Francisco recovered last year, we started thinking seriously about refinancing before the year was up. If the value of our condo had appreciated to the point where we had 20% equity, then we could cease flushing nearly $400 down the drain each month paying for private mortgage insurance (PMI).
Once a year, I like to look back on the financial decisions I’ve made and think about any changes I anticipate making in the year ahead.
Financially speaking, not much happened during the first eleven months of 2011, besides the steady evaporation of my travel savings. I did, however, accomplish the few financial goals I set for myself in my last “Learning how to save” post: I increased my exposure to international equity—predictably right before the eurozone economies slumped, I sold off my managed retirement funds (in favor of index funds), and I rolled over my Roth 401(k) to my personal Roth IRA.
When Stephanie and I returned to the United States in August, we had $10,000 as a post-travel savings buffer, an arbitrary amount that seemed reasonable in order to restart our lives. That estimate turned out to be prescient, as there wasn’t much left of it when our first paychecks showed up in the middle of October. It goes without saying that we were both exceptionally fortunate to be offered jobs within a week and a half of our return to San Francisco.
That would be the end of this post, if it wasn’t for something I wrote way back in 2007 (and subsequently acted on), shortly after starting this “Learning how to save” series. In my post, Thinking ahead (about real estate), you’ll find this little gem:
My 31-year-old self would probably want to take my 27-year-old self out for a beer and thank me profusely if he looked at his savings account balance and found $50,000. Of course, between then and now, there’ll probably be a lot of plane tickets and other spontaneous large expenses to account for. So saving $50,000 might take a little longer.
After discovering that someone had made a bold preemptive offer on one of the coolest condos in San Francisco we’d seen, our real estate agents’ advice was to wait and see. Occasionally people make impulsive decisions and back out once they’ve had a chance to think it through. Miraculously, they were right. We discovered a few days later that the preemptive offer had been withdrawn. The sellers were still accepting offers—and expecting them to be submitted less than a week after the open house.
On Friday, November 4th we learned that 5 offers had been made, including ours, and that the sellers were going to do a multiple counteroffer to all parties. We were still in this game! Though we tried not to get our hopes up, we eagerly awaited the counteroffer. The night passed with no counteroffer. The weekend passed, no counteroffer. The more time that passed, the more our idle minds couldn’t help but imagine making it our home.
By midday on Monday, the belated counter finally arrived. It was a single page document requesting the purchase price be raised over our initial offer. And since it was a multiple counteroffer, we had no idea what the other offers had been, or what their counteroffers looked like. And we had to respond by 9pm the same day. This put us in an interesting position as we’d already made an offer at the top of our price range (not to mention over list price). Our real estate agents advised that if we really loved the place, we should consider responding with an offer over their counteroffer—to separate ourselves from the pack.
It’s easy to start down the slippery slope of “what’s another 10k?”, but if the purchase price went up, so would our down payment (which effectively acted as the upper bound on what we could afford). So we decided to split the difference, and made a counter-counteroffer slightly higher than our original offer but lower than their counteroffer. It was a funny moment, I felt good about sticking to our budget and countering their counter, but also wistful, figuring that we were effectively throwing in the towel (surely someone else would pony up).
So you can imagine our surprise the next day when our real estate agents called and said “We have some potentially very good news for you.” This was not the call we were expecting. They basically said that if we were willing to adjust one of the non-financial terms of our counter-counteroffer, the place was ours. OMG!!! Yes, yes of course we’ll do that. That night, November 8th, we were officially “in contract” on the coolest condo we’d ever seen, a mere month after starting our search. We were agog at our good fortune. We were in a complete state of disbelief.
Since starting to seriously look at real estate at the beginning of October, Stephanie and I made a habit of trying to check out at least one or two open houses every Sunday. We weren’t being lazy, it’s just that there wasn’t that much available which met our minimal criteria: a two bedroom flat for less than 700k (preferably much less) in a broad central swath of neighborhoods from NoPa to Dogpatch (and possibly parts of SoMa).
Once we’d gotten a good baseline of what was already on the market, and ruled most of it out, we realized that finding a place was going to depend wholly on something new being listed while we were looking. We also knew that the market was going to cool down around Thanksgiving and not pick up again until after the Superbowl. I pretty much expected we’d still be going to open houses in the Spring.
And then, just before the weekend of Halloween, our fourth week of serious looking, I got an email alert for a new listing with the following blurb:
Modern meets Historical in Hip Mission Dolores! This 3BR 1BA completely renovated home features soft & hardwood floors, new electrical, central heating, new windows, period details, wood burning stove in the living room, TONS of storage, chef’s kitchen w/Wolf range, stainless appliances & counters & Scavolini cabinets. A bright sunroom features built in shelves & an eating nook w/custom table for 8-10 people. Ship stairs lead to the attic bedroom which features roof windows, walnut floors & ample storage. On a quiet street with a Walkscore of 94, it’s close to Dolores Park, Bi-Rite, Delfina, MUNI, BART & more! Add to that the active street community with an active Google Group & annual block party and all that’s missing is YOU!!!
Real estate descriptions tend to be pretty formulaic, but something about this one caught my eye. And good thing too, because there were no photos. I pinged our agents for more details, and they said that the photos would be up on Saturday. When I finally saw them, they took my breath away. We went to the open house on Sunday, and it was even better in real life. The kitchen was to-die-for. There was a cute sunroom/dining nook. There were two bedrooms downstairs, a lovely single bath, and an attic-space upstairs that had been converted into a third bedroom. People were crawling all over the place to get a look at it. This was going to move fast.
The obvious appeal and popularity of the condo tempered our initial reaction. Nothing else we’d seen either in photos online or in person came even close to the level of finish and character of this place. We figured we didn’t stand a chance, so we figured, let’s give it a shot. I emailed our agents that afternoon to say we wanted to make an offer. They called back to tell us that someone had made a preemptive offer for more than 100k over list price, well above our price range.