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 - September 2005 ($263,886, +$1,832)

Contributed by mm | October 4, 2005 11:54 PM PST

On surface, the monthly addition of $1,832 is the weakest showing in my track record since the start of 2004, and it is a complete change of fortune after a record-breaking August gain of $23,273. The underlying fundamentals are not too bad though -- MSFT retreated almost $1.50 during the month, and knocked off almost $9,400 (or after-tax value of ~$7,000) from my stock option holdings. Excluding the stock option impact, my other assets almost grew $9,000 thanks to the following drivers:

• The annual bonus for FY05 (July 2004 to June 2005) was announced and paid out in the month. The bonus amount is about $5,000 higher than I originally accrued on an after-tax basis -- nice surprise!
• My heavily-internationally-exposed 401(k) portfolio reaped ~$1,500 in gains during the month, partially offset by brokerage account losses.
• Continued belly tightening (a.k.a. regular saving, organic saving) keeps pumping up a few grand a month to my coffer.

BALANCE SHEET RESULTS

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

  1 Yr Ago 2-Mo Ago Last Month This Month Monthly Monthly
  Sep-04 Jul-05 Aug-05 Sep-05 Change Change %
Cash & Equivalent  $        7,111  $        2,341  $        1,611  $        7,213  $        5,602 347.7%
Saving  $      24,740  $      43,493  $      46,648  $      50,642  $        3,994 8.6%
Brokerage  $      14,870  $      13,604  $      14,625  $      13,613  $      (1,012) -6.9%
Roth IRA  $      14,060  $      16,891  $      16,941  $      17,503  $           562 3.3%
401(k)  $      24,370  $      61,273  $      64,505  $      66,543  $        2,038 3.2%
Stock Option  $        8,940  $      15,188  $      28,720  $      19,294  $      (9,427) -32.8%
ESPP  $        6,685  $        1,766  $        2,438  $        6,307  $        3,870 158.7%
Home Equity  $      73,221  $      81,724  $      82,609  $      83,469  $           861 1.0%
Other Assets  $      15,797  $      29,675  $      29,250  $      28,825  $         (425) -1.5%
Receivable (Payable)  $           162  $        4,809  $        4,514  $      (1,189)  $      (5,702) -126.3%
Reserve Funds  $      (4,421)  $      (7,018)  $      (7,429)  $      (6,991)  $           439 -5.9%
Loans  $      (8,826)  $    (18,341)  $    (13,821)  $    (14,892)  $      (1,071) 7.8%
Tax Liability  $      (3,434)  $      (6,624)  $      (8,556)  $      (6,452)  $        2,104 -24.6%
Net Worth  $    173,275  $    238,781  $    262,054  $    263,886  $        1,832 0.7%
Liquidation Value  $    143,411  $    199,605  $    219,547  $    222,878  $        3,331 1.5%
IMPORTANT BALANCE SHEET MOVEMENT DISCUSSION

Cash and Savings: The payout of annual bonus, and, to a lesser extent, the receipt of 2004 tax refund, caused the $9,500+ growth in my cash pile.

Stock Option: As mentioned above, stock market was not favorable to Microsoft last month, hence the sharp drop after an impressive run in August.

ESPP: The monthly growth is higher than usual, primarily because part of the bonus payout increase my allowed contribution (15% of total compensation) to ESPP.

Receivable/Payable: The sharp decline is due to the reversal of bonus accrual throughout the year. The bonus accrual was designed to smooth out the month-to-month seasonality and it served its purpose this time.

Reserve Funds: Breaking the trend of continued month-to-month growth, in September I used some of the funds for home sale preparation -- it actually didn't cost much for all maid service, gardener and carpet cleaning combined. Let's see what it will bring us during the actual sale.

Tax Liabiliy: Some interesting story this month. On one hand, the receipt of 2004 tax refund of about $700 (which was intentionally generated for profit-making purposes) added to the tax liability. On the other hand, the liability is reduced according to the retreat of stock option balance.


BRIEF DISCUSSION OF EXPENSES

Our spending is still under good control. We spent $6,181 for the month, the third lowest of the year. Compared to August, we spent a bit more on dining out and clothing, and gas price after Katrina didn't help too. Still, adding several grands every month through organic savings let me feel our spending picture is still reasonable.


IMPORTANT PERSONAL FINANCE ISSUES IN MONTHS AHEAD

My home sale is in crunch time. A sale will certainly mean the recognition of the vast increase in property value in my accounting book in the range of $80,000 to $90,000. Plus, the cash-out of home equity will expose me to a whole different world of investment opportunities. During November and December, I will probably spend some time to investigate and decide on how to effectively deployment the money.

• Now that I almost reached conclusion in my tax strategy research for sideline income, I am about to set up a company and individual 401(k) accounts.

• My relocation is imminent (in early November), and one of the benefits is year-around tax consulting from KPMG. I'm preparing some good questions for the upcoming meetings.

• Time to close a lot of utility accounts and/or banking/credit accounts.

This Post Has Received 4 Comments. Share Your Opinions Too.


Jim Commented on October 5, 2005

you might want to change the word 'coffin' to 'coffer' (last word of 3rd bullet point).... funny how a simple typo can change the tone of the article


MM Commented on October 5, 2005

Thank you Jim. Typo corrected. I must be too tired last night.


JJ Commented on October 5, 2005

Nice bonus:-). My monthly addtion went negative in September due to option slide


Anon Mouse Commented on October 10, 2005

quick question: why don't you include a portion of your 401k as a tax liability (given that you will eventually have to pay income taxes on your 401k distributions)


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