My Personal Finance Journey

Personal finance observation, musing and decisions in a journey toward financial independence by 2020 with at least $3 million.


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Monthly Review - May 2005 ($226,743, +$6,465)

Contributed by mm | June 2, 2005 12:02 PM PST

May is just another good month in my journey toward financial independence. With $6,465 monthly net worth improvement, my net worth sits at $226,743, or more than $31,000 better compared to where I started this year. And if you still remember the Month-To-Retire measure, the reading is now July 2015.

Storyline for the month:

• As always, I was able to save a portion of job income. It is nice to have some (small) supplement income here and there from various ad channels at PFBlog as a plus.
• As a result of my decision to supercharge my 401(k) contribution earlier this year, I reached the 2005 contribution limit of $14,000 at the end of the month. From this point on, you will see less month-over-month 401(k) balance increase; most of my savings will show up in saving or investment accounts.
• As disclosed, I took a 12-month 0% APR balance transfer from Discover in the amount of $9,800. Consequently, the liability part of my balance sheet ballooned.

BALANCE SHEET RESULTS

(Please refer to definition of balance sheet line items.)

  1 Yr Ago 2-Mo Ago Last Month This Month Monthly Monthly
  May-04 Mar-05 Apr-05 May-05 Change Change %
Cash & Equivalent  $         1,025  $         2,716  $         4,559  $            443  $        (4,116) -90.3%
Saving  $       10,613  $       16,624  $       16,174  $       31,647  $       15,473 95.7%
Brokerage  $       19,507  $       15,045  $       15,906  $       15,475  $           (431) -2.7%
Roth IRA  $       15,640  $       18,275  $       18,793  $       17,387  $        (1,405) -7.5%
401(k)  $       15,518  $       43,605  $       49,274  $       54,650  $         5,376 10.9%
Stock Option  $         2,801  $         9,415  $       13,245  $       14,939  $         1,695 12.8%
ESPP  $         6,455  $         5,828  $         1,782  $         3,471  $         1,689 94.8%
Home Equity  $       69,842  $       78,324  $       79,179  $       80,034  $            856 1.1%
Other Assets  $         8,950  $       31,375  $       30,950  $       30,525  $           (425) -1.4%
Receivable (Payable)  $         5,920  $         2,091  $         4,032  $         4,614  $            582 14.4%
Reserve Funds  $        (3,034)  $        (5,793)  $        (6,188)  $        (6,179)  $               9 -0.1%
Loans  $        (2,214)  $        (3,838)  $        (1,827)  $      (13,828)  $      (12,001) 656.8%
Tax Liability  $        (2,014)  $        (5,334)  $        (5,599)  $        (6,436)  $           (837) 14.9%
Net Worth  $     149,010  $     208,333  $     220,278  $     226,743  $         6,465 2.9%
Liquidation Value  $     122,170  $     173,706  $     183,668  $     188,899  $         5,230 2.8%
IMPORTANT BALANCE SHEET MOVEMENT DISCUSSION

Cash and Savings: The net improvement of $11,357 is mainly attributable to the balance transfer offer. Some regular savings also flow to these accounts.

401(k): The $5,376 monthly increase is the last stretch of my 401(k) build-out. Moving forward, my wife will still make 401(k) contribution at a healthy pace, and I will also enjoy the 3% 401(k) employer match for the rest of the year. All in all, our monthly contribution will be at about $1,600.

Investment Accounts (Brokerage, Roth IRA, Stock Option): MSFT gained another $0.50 in May, only to be offset by slight decline in other parts of my portfolio.

Loans: The increase is mostly due to the $9,800 balance transfer. Purchase/repayment timing also contributed to some variances.

BRIEF DISCUSSION OF EXPENSES

Our monthly spend is $7,851. It is high -- the Canon Digital Rebel XT purchase set us back for $900 (including some accessories). We also treated ourselve a bit by refreshing our wardrobe for the summer, and dined out more frequently to balance from crazy workload in the most part of May (I'm glad it's over).

IMPORTANT PERSONAL FINANCE ISSUES IN MONTHS AHEAD

• I finally received the SSN for my son. Now it is time to complete my tax return and file online. I expect to complete this by July 15.

• Summer trip is still in planning mode. We also intend to invite my parents-in-law to come over for the summer. We will pay the airfare -- it is about $2,000 net worth haircut for June, though.

• Caveat: PFBlog will be featured in the July issue of Kiplinger's Personal Finance. You may see a partial picture of mine and a half-page interview.

This Post Has Received 23 Comments. Share Your Opinions Too.


Jonathan@MyMoneyBlog Commented on June 2, 2005

Kiplinger's! Congratulations, I'll be looking for you when my mag comes in the mail =)


Nathan Commented on June 3, 2005

Way to go mm! I also get Kiplingers so I'll keep my eye out.


FMF Commented on June 3, 2005

Pretty good month. If you could gain 2.9% every month, you'd be a rich man in a few years. :-)

Congrats on Kiplinger's. I'll look for you in my copy.


Jose Anes Commented on June 3, 2005

Congratulations!
Keep moving in that direction.
Your networth appears to be growing by more than 3% / month.

That is a big growth.


ceo Commented on June 3, 2005

Nice increase, I'll be coming here for inspiration.


Max Commented on June 6, 2005

Hi, It would be great if you post Excel files for your tables. I'd like to try to input my data into them and run the numbers.

Thanks.
Max


Jonathan Commented on June 7, 2005

I saw your article in Kiplinger's. Congratulations, and I'll check back often for motivation in my own financial journey!


jim Commented on June 7, 2005

Delete babble words such as "going forward" and "drivers" from your vocabulary.


Georgia Commented on June 9, 2005

I saw your article in Kiplinger's and that's how I found my way to your site.


Jesse Commented on June 14, 2005

Yes, I found your site via Kiplinger as well. Nice work!!
I do have a question for you..
Like you mentioned in one of your blogs, I took more than 80k from 4 credit cards (including MBNA) to pay of my home equity loan. All these cards offered a 0% for 6-12 months so that seemed like a good deal to me compared to 6% apr on the equity loan.
Now after reading some of your comments, I wonder how this could nevatively effect my credit or buying power since I'm maxing out on the cards even though I'll return the card amounts once thier 0% offer expires.
Jesse


mm Commented on June 15, 2005

Jesse, you will be tagged as potential risk in your credit profile but as long as you don't apply for new credit it does not matter.


spenders Commented on June 16, 2005

what's the best online tool to track all you financial holdings (stocks, mutual funds), etc


mm Commented on June 16, 2005

To Spenders:

Try MSN Money for your portfolio. If you want to track your checking accounts and other assets as well, you might need to purchase Microsoft Money or Quicken.

Good luck!


xyz Commented on June 17, 2005

Good steps you take towards early retirement. However, $1 million at age 40 is way short for retirement. Considering you have to live another 40 years with growing medical cost and living cost. You have to get at least $3 million in liquid assets for you and your wife. If you have or will have kids, you probably need to add another $1 million on top of it.

but don't give up. any step, no matter large or small, will be a step closer towards your dream


stasd Commented on June 23, 2005

Hi,

Just a few questions.

I was thinking about changing my deferral rate so that I can max out my 401k before the end of this year; however, I discovered that my co-worker did max out his contribution early last year, and my company stopped contributing into his 401k once he reached the max contribution. And as a result, he did not get any matching for the last two months. I'm surprised that you company still is contributing even though you're not putting any more money into your 401k account. Is it different from company to company? Is there any law allowing a company to stop contributing once a person maxed out his 401k contribution? Any ideas?


DE Commented on June 23, 2005

Yes, saw you in Kip's, too. I retired at 47 and now at 56 have just passed (if the wind is blowing in the right direction) the $2 mil mark. My wife is still teaching. I have one son in a $40,000 a year university and another 5 year college son back home working for minimum wage. Our annual income is in the $150K range. Anybody interested in hearing what the view looks like from this end?


Hokey Smokes Bullwinkle Commented on June 23, 2005

Sure, and Reality TV is really real.


stasd Commented on June 24, 2005

DE,
Please tell your story. I have two small children (a 4 1/2 months old and a two years old). My wife and I bought life insurance policies which will be mature when they enter college. In addition I already established a 529 account for my two year old girl when she turned one, and I contribute $100 monthly. Her current account is worth about $3500. I also established a saving account for her at INGDIRECT with an annual return of 3% that I contribute another $50/month.

I plan to do similar saving for my 4 1/2 month old son when he turns one. Does any one have any tip on saving for college? Any idea on 529 account and whether or not I should do the same for my son? Or would I be better off establishing an investment account to buy mutual fund for his college saving?


DE Commented on June 24, 2005

To stasd and others, (From the high side of $2 mil. At least I still hope so after the last two market days.) I made an impulse buy today. A $5000 double tax free AAA rated municipal bond. The rate was 4 1/4% and it matures in 2026. This filled a small hole in my bond ladder, and as I said I had this money that I had no immediate use for so I went shopping. Actually, let me back up. I was at the bank making a $1000 deposit ( three oil royalty checks for $1028.44 - I kept the $28.44.) and since the broker is just across the street I went over to talk to her. I checked the state bonds she had and said I'd better throw her a bone because I use her information for other investments. Then I buy or trade through my discount broker. This way she gets some business from me and I don't have to pay a high or any commission. I have my municipal bonds with her at Oppenhiemer and my equities at Brown the discount broker that I trade with online. Special note to "stasd". Years ago we were talked into whole life insurance for the kids. Bad decision. Kids don't need insurance and the "savings" feature of whole life is poor. We found that term insurance on the father and mother ( my wife and me) was a much, much cheaper way to go and the benefits were really just as good. If you don't understand ask me here and I will try to explain it to you the way I understand it. As far as separate accounts for the kids - if you can get them on a tax free basis they are probably OK but remember any money in a kid's account counts against him when it comes to financial aid time. Why not just save in your name? It all comes out of the same pocket anyway and the paperwork is less.
Word of advice. Pay yourself first - regularly. the other bills will always be satisfied and this way you get the benefit of time. I certainly don't know everything, but we managed to get to this position where we now have choices. Feels real good. Book recommendation The Millionaire Next Door. This book describes my parents behavior to a T and mine, too. Sure, I have been lucky, but I like to think that I was at least half smart.


vnmaster Commented on June 24, 2005

DE,
I do not understand everything you said to statsd. I am in a similar position. I have a 10months baby girl. Should I or should I not open a 529 account? what is your opinion. Or Do you suggest I put it in treasury bills?
Thanks


DE Commented on June 25, 2005

529 accounts are fine, but if YOU have an account where you can get a match for funds you deposit that may be a better way to go. The reason I say that is because if you have money stashed in a child's name all of that money will/must be considered available for a child's tuition and it will count against you when it comes to applying for college financial aid. Say you have $50,000 in your child's name and total tuition is $100,000. That $50,000 is assumed to be dedicated for tuition and the most aid you could hope to receive is $50,000 be it a grant [the best because it is free (never has to be paid back)], or cheap student loans. But if your child has nothing you could be eligible for the whole $100,000. So if you invested the money in your own name somehow (like maybe paid down your mortgage or deposited it in your own IRA or 401K) your child might be eligible for a larger chunk of aid and you would still have the money - it would just be in a different pocket. Also, if you are in a position to get a company match of funds for any account be sure to max that out first because that is definitely free money up front. Again, I am no expert, so don't take my word for anything. These are just ideas that you should run by a professional. Don't act on anything I or anyone else says until you fully understand it. Note: When my second son was about to enter college I went to a meeting (dealing with who could get financial aid and how to apply for same) at the high school. I sat through the whole thing and the speaker finally said "if your income tax return is thicker than 1/2 inch forget it". I forgot it and we are paying full tuition at Syracuse University. Tuition is approaching $40k per year. We can't stand being in any kind of debt. One of the best gifts I can think of is to give the kids a college education without a millstone of debt around their necks. And we have not put ourselves into debt either. Everybody gets educated. When I retired a coworker said to me,"Now it's time to start saving your money." I replied,"No, now it's time to start spending my money." My wife and I were pretty conservative all our working lives and now is the payoff. i.e. Most of the cars we have ever owned we bought used. Right now we have 5 vehicles is the family. The newest is a 1996 Saab 9000 with 100,000 plus miles, then a 1995 Toyota Camry with 105,000, a 1994 Camry with 142,000 (the best new cars make the best used cars [and these belong to the kids]), a 1990 Ford F150 pickup with 80,000 miles and the only one I bought new because it was a work vehicle. We had a Christmas tree hobby farm once with a 700 foot long driveway in snow country. The last car is a 1987 Saab 900 Turbo Convertible with 104,000 miles. So, 4 out of 5 bought used and now pretty well used but still running well. It would kill me to spend the money on a new car and besides the ones I'm interested in now are $30,000 to $50,000 used. I could pay cash for anything in that range, but the reason I can is because I don't. You can bet when I do buy another car it will be used. Let some sucker take the lion's share of depreciation for the first year or two. Have I been any help?


stasd Commented on June 27, 2005

DE,

Thanks for your thoughtful advise on saving for college. My parents were very poor so I was able to apply from grants and tuition loans. Now I'm out of college and working with the income level of the middle class, and my wife and I just paid off our student loans. I'd still like my kids to be able to apply for the needed help in case I can't provide them enough such as grants and tuition loan, but I also want to save some money aside just for them for their education. Your opinion on putting the saving under my name is a good one.

As for the life insurance, I knew that I made a big mistake because I would be better off investing that in bond and get better returns. I bought two 20 year policies for $150,000K for each account ( one for me and one for my wife) before we even had our first kid, so far we have paid life insurance for about 3 years. When the policies mature, we probably get all the principal back at least that how I understand it. I googled life insurance with return of principal and they, the EXPERTS, tend to agree with you that it is not a good idea. So, I'm not too deep to withdraw? Thus far, we paid roughly $6000 in life insurance, and if I'm taking it out I'd probably get very little return. Recently I've been thinking about cancelling those policies or roll them into regular term life insurance policies, and invest the difference else where. Thanks for the insight advise.

Good advise on used car too. We bought one new car before and we wished we would do that, and we will never buy another new car again. Used cars work just quite well. Thanks again.


BB Commented on July 4, 2005

I just want to make one point: a 529 plan is in the parent's name, with the child's name as beneficiary....so DE's point about financial aid is mute with 529's. UTMA accounts, however, are a different story - those will count as child assets.


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