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Archive for April, 2008

Goals Review - April

April 28th, 2008 at 12:42 pm

A third of the year is almost gone already and I am doing great on my goals so far. Paid off another debt this month and made a substantial debt in another.

So, let’s jump into things, shall we?
My goals for 2008 are:

1) Pay off debt (except mortgage) by October 1st
. a) Pay off CC by April 1st
. b) Pay off Car 1 by June 1st
. c) Pay off Car 2 by Aug 1st
. d) Pay off wife’s braces by June 1st
. e) Pay off son’s medical by October 1st
2) Invest $10,000 by year end
3) Invest $15,500 in 401(k)
4) Review and reallocate retirement funds by end of Q1
5) Will by end of Q2
6) Life Insurance by end of Q2

1) Pay off all debt but the mortgage by October 1st

Total Debt
04/30/2008 - $23,057 ($15,059 paid)

Car 1 (4% interest rate)
04/01/2008 - $0 ($4,264 paid)

Car 2 (3.9% interest rate)
04/30/2008 - $5,029 ($10,139 paid)

Wife's braces (0% interest rate)
04/30/2008 - $2,028 ($156 paid)

Son's medical (0% interest rate)
04/30/2008 - $16,000 ($500 paid)

True, I did have a huge tax refund of $13 k and I put about $11.3 k towards the debt but I also but in an additional $3.7 k. That means I put more then $15 k towards my debt.
We received the title for the first car, which just got my wife a little jazzed up. I only owe $5 k on my second car and I am hoping to have most of that paid of in May. May has 5 pay weeks for me, so I am hoping on putting a majority of that last paycheck towards the debt.
I am still on track on having car 2 and the wife’s braces paid off in June. That will leave me with only my son’s medical, which is looking at earlier September, if I can keep the pace up.

2) Invest $10,000 by yearend

Looks like we will start hitting this in September. If my calculations are correct, I can surpass this goal and throw $4 k total into my sons 529 plans. That would be sweet. And, I’ll have very close to a fully funded emergency fund (about 6 months).
So I am currently looking at making upping this goal to $15,000 and adding another goal of a 529 savings of $4 k. I have to run a few numbers and scenarios and should have it done for my mid month update.

3) Invest $15,500 in 401(k)

Invest $15,500 in 401(k)
04/25/2008 - $6,547 invested

I am 42% through this goal so I am still planning on this being hit by end of October. Then I plan to use this money towards Christmas, New Years, and Thanksgiving. A lot of wine and presents need to be bought and I also host a little family get together. Hoping not to have debt after the season and it looks like it shouldn’t be a problem.
That’s right. I’m already planning for Christmas.

4) Review and reallocate retirement funds by end of Q1

DONE

5) Will by end of Q2
6) Life Insurance by end of Q2


Yep, I still got to get on this and still plan on getting it done this quarter.

Summary

I am pretty happy as debt still continues to drop off. Now is the point in the race where I have to remain focused and it is getting harder. I feel myself starting to want to stray a little bit, which I think is odd. In other words, I feel myself saying look at how far you have come, loosen up the reins and enjoy life.

I have to stop and look at myself in the mirror and say, that’s great but we have a lot of work to do this year and debt is only the first goal of 6.


Ceejay - Debt Sheets

April 24th, 2008 at 01:44 pm

This post is mainly for Ceejay. Of course, if you feel inclined, please read on.

We all probably have a spreadsheet showing our debts and the like. Well, I’m no different. I have one sheet showing all my debts, the current amount I owe, and how much I have paid on a monthly basis.

I don’t just use this sheet to record my payments to the debt, but I also use the sheet kind of as a scenario analysis tool. For instance, in March, I was coming up with different ways of using my tax refund and how that would change pay off dates. I also look at it to see if I am keeping around the same pace.

I usually play with this sheet every couple of days so I am very aware of how slight changes effect my overall goals. A little nerdy? A little anal? Maybe.



The next ones are the executive reports for the boss. As we all know, bosses don’t have time for the details. They just want to now the bottomline and how we are progressing month to month. These big picture thinkers don’t want to know how I swept the residual from an envelope on the 8th to add $28 to a car payment.

So the first report shows where we are now (it ties into my other sheet). And the following two show the monthly progression.

I have organized the reports to show Dave Ramsey’s baby steps. It just gives a nice way to categorize the different goals.







So those are my sheets. (Notice how the executive ones are pretty, bosses like that.)

Just Looking Back

April 22nd, 2008 at 01:48 pm

I was thinking about my journey on my way to work. Basically, where I was last year and where I am this year and where I am going. About every 6 months, I look back over the past year and I look forward for the next year.

About 7 years ago, I had a job where I would be vested in 5 years. The company would put away 15% of my salary allocated the same as my 401k every year and it would be vested after 5 years.

Jokingly, I told my boss at the time “looks like you got me for the next 5 years.” His reply was “If you look at it that way, this job will kill you.” And he went on to give me probably the best corporate advice I ever got. He said that after every six months look at where you are, where you came from and where you are going. The philosophy is that during that six months, it is a short enough time that you can stay in a job or situation you hate with enough time to rectify the situation.

After 5.5 years at that company. I left that job. It baffled more then a few people. I was leaving at the top of my game, but I could see my opportunities a year out not being there. I need to retool. So I took a job as a consultant. I told by wife that I’ll do this for a year and then we could reevaluate. Will we did and ten months ago, I took a different consulting job that had no travel (I had 80% travel before).

Yes, I do talk to my wife about career moves. A new job directly affects her whether a move or hours I’ll be home to money we have to spend. I know men who just concentrate on their careers and could care less about their wife’s input. Sad.

Well in August my second son was born and started having medical issues (seizures). He’s ok now but my health insurance was less then spectacular and I owed about $25k.

Well that was the cause that forced me to reevaluate where we were with my wife. We decided that for the next six months we would put together a budget and really stick to it. We would go in fully committed and see where it took us.

It’s been about six months since we made that decision, so time to reevaluate.

First, if you can have an honest conversation about money you can have an honest conversation about anything. The communication between my wife and me continues to improve. Six months ago, we had money fights (she spent to much, I spent to much, grocery cost too much). Now the conversation centers around our goals and budget. If we buy that then we have to reduce our debt snowball this month.

My wife also asked advice about parenting our 3 year old. I would have never envision this 3 weeks ago never mind 6 months ago. I feel that we are getting on the same page and acting more like a team instead of individuals.

I also feel less financial stress, especially this month. I see the snowball really taking hold and see my cash flow freeing up a little bit. My wife is about a month behind me in where we are on our path, but we are on the same path.

I also feel a lot of hope lately. Probably because I am moving in the right direction faster then I thought I could.

I have already planned my last half of 2008 and it looks like all my goals will be met, plus I might add a few in Q4. I have started roughing out my goals for 2009, which are really sub goals that bring me closer to my real goals.

My real goals are to work because I want not because I have to and spend more time with my family. In other words, I am looking at passive income (whether real estate or investments) to support my monthly expenses.

So when I look at setting up my goals, I ask myself do they support or get me a step closer to my big goals. I review everything every 6 months just to make any course corrections or evaluate new paths.

By the way, my two big goals also align with my wife’s.

Is your “Why” big enough?

April 21st, 2008 at 03:21 pm

I was reading Petunia’s blog and it got me thinking why some people fail and some succeed.

My first thought was having a “what” or a vision. You start by dreaming what would by life be if I was debt free. But that isn’t the answer. We all have dreams but not all of us will achieve them.

Maybe it’s the “how”. After all, it wasn’t the “what”. Well, it’s really not hard to get out of debt. You budget less then you make or pick up another job and throw the excess at the debt. Not rocket science and I could even give you a formula. Income – expenses = what’s left for debt reduction.

The leaves us with the “why”. But not any old “why” will do. You see if I said to you your life would be better off if you could save $30,000 this year. Could you? Maybe and then again maybe not. What happens if you need to save $30,000 because your spouse or child needs an operation. Well now, that’s one big “why” and I can tell you I would have $30,000 saved will before operation whether 6 months or a year away.

But with the first scenario, it would be a hit or miss. Yea, it would be nice, but then life happens (nice vacation, eating out, etc.).

My point? A big enough “why” keeps us focused and on point and our dreams can be achieved. For spouses, the “whys” maybe different but should be big enough.

My “why”? For me and my wife to feel more secure and spend more time together as a family. And the first goal is getting out of debt with the second goal to reduce my hours away from the family.

I know the “how” for the first but not the second, because my “whys” got me focused.

And Happy Marathon Monday from Boston!!!!

Mile 13.1 Passed

April 17th, 2008 at 01:10 pm

I have hit the 50% mark on my consumer debts. Yes, I have paid off over 50% of my debts. It’s more of a physiological thing then anything else. I am at the halfway point. Like a marathoner, it’s like getting my second wind.

But, I know up ahead is Heartbreak Hill. In the Boston marathon, there are four hills in succession right after mile 16 and going to mile 21. The last one is called Heartbreak Hill. Many a marathoner has “hit the wall” on Heartbreak Hill and dropped out of the race. At this point, everything is telling you to quit (your body, your mind),, but those crowds are egging you one. “Come on!!!! Only 5 more miles!!!” “One foot in front of the other!!!”

I know this is coming up. Somewhere between now and being debt free, there will be these hills that will test my resolve to the core. After Heartbreak Hill, until the finish, are just nasty little hills. You have used everything you got just to make it pace Heartbreak Hill and now you have these small nasty little hills where every step is an effort. At this point, it is the mind dragging the broken down body to the finish line.

And what do you get when it’s done? A medal. A little bronze medal for finishing. Was it worth it? You bet.

And that’s how I see my journey. I’m at the halfway point running through Wellesley College. Everyone is screaming and the real work is just about to begin.

The first half was mostly pacing my self as people pass me and get out of debt faster. But now I have my pace and feeling pretty good at the half way mark, knowing that soon it will be a battle of pure will.

And when I cross the finish line, what will I get? A little piece of paper generated from a computer in a billing department saying “PAID IN FULL”. And will it be worth it? You bet.

But until then, keep the pace, work the plan, and keep the focus.

Rant

April 14th, 2008 at 03:23 pm

OK, this has been simmering in the back of my mind for about a month now. My wife’s best friend came over with his family. Him and his family are nice people. I really like them.

Well, there in the same place I was about 5 months ago. The cash flow is getting squeezed. Under my old thinking, there were only a couple ways out: find a new job making more, get a second job, or hold on ride this because in the future we will always make more. Right?

He has decided it best to hold on tight and hope for the best. He has a pretty good job and could have a decent jump in income over the next 5 – 10 years.

I started to talk to him about budgeting and how we have been able to find money and start cutting down the debt. While I could tell, he felt I wasn’t under the same financial pressures as him. In other words, my cash flow was better. Well, needless to say, I ended the conversation by saying that he should look into Dave Ramsey. No sense in getting things all heated for no good reason.

I was also going to say that if I could do it, you can do. But I knew that wasn’t true. And this is the issue of my rant. It’s not that what I am doing requires a master degree in finance. It requires something that a lot of people today do not have: discipline, focus and the ability to sacrifice.

Yes, it’s hard work to stay focused, to have the discipline, and be able to sacrifice. But it’s far better then the stress of picking which bills to pay and just scraping by.

To each there own, but don’t suggest to me that luck played a part in this. There’s a lot of hard work behind these numbers. YTD through debt reduction and adding to my 401(k), I have added $29,843 to my net worth (not taking into account market conditions during that time).

My 2008 goals are very aggressive for me, and I am right on track. Why? Because my yearly goals are broken into quarterly goals, which are broken into monthly goals. which are broken into weekly goals, and daily decisions are made on how they effect weekly goals. The weekly goals may need to be adjusted to keep the monthly goals on track or the monthly goals must be adjusted to keep the quarterly goals on track but the yearly goals are not being adjusted.

What have you done to increase your net worth YTD? Are you where you thought you would be? Why not? What decisions are you making today to keep you from your goals?

You still have 8 ½ months left in the year. Time to get back on track and start accomplishing your goals. There’s still a ton of days left in the year, time to get cracking.

April Update: Chillin’ like a Villain

April 14th, 2008 at 01:09 pm

It’s the halfway point of the month and I’m chillin’ like a villain. I can’t believe tomorrow is April 15th.

As I said before, the 15th is usually my stress time when all my big bills are due. This month was no different. I looked at my watch last night and it was the 13th and I just logged onto my bank account and paid them. No muss, no fuss.

Great feeling.

As you can see from my sidebar, I have paid of $12,803 just this month. Most of it was due to a large tax return but I plan on adding another $2,200 to payments this month (see if I can crack $15,000). So, now car 1 is paid off and am working on car 2. I have $7,129 left to pay off on it. The current schedule is to have it paid off in June with the wife’s braces.

Since I paid off the CC and car 1, I can start feeling the snowball gaining strength. I also feel some breathing room. Rather then treading water keeping my head up, I am starting to swim to the shore.

In fact, I have started dreaming, dare I say, of a debt free existence. Yes, I have calculated the time needed to pay of my mortgage, fully fund my emergency fund, fully fund my retirement accounts, and fund my kids college funds. It may be 5-8 years away, but I can almost taste it. I can almost see it. Dare I dream?

Yes, but now is the time to keep the head down and focus. No time to pat ourselves on our back. We got a lot of work to do before we get to these sweet dreams. A lot of work…

Bottom line: I have paid off $24,129 or 48.8% of debt to date.

Home Equity and Retirement Ratios

April 10th, 2008 at 12:51 pm

In a previous blog, I linked to an article about some quick on the back of a napkin ratio that you could quickly see if you are on target or not. These ratio are just meant as a quick sanity check,

Well, one of the ratios is savings to income. The debate then rages as to whether to include or exclude your house. The only way you could realize that equity in the house is to downsize or move to a less expensive area of the country. Neither one of these are in my near future.

The only way then to tap the equity is through a loan on the equity, which really isn’t taking the equity out but securitizing the load with the equity in the house. Therefore, I don’t include my home equity in the calculation.

However, if you plan on moving in the next few years and will be getting cash between the sale of the old and purchase of the new, I would include that in savings. Also, if you have investment properties, I would include that in savings.

For debt, I do include the mortgage. First, it is a debt. Second you have to live somewhere.

In my net worth calculations, I do include home equity but not cars.

I look at these as quick numbers to get a sense of where I am. If your income jumped recently, then the ratio are very different then they were last year. Maybe, you removed a huge debt and your income is far less now then you needed in previous years.

The idea is to be honest with yourself to see if you are on track. Where are you? Where are you going? And to a less extent, where did you come from?

Right now, I am in the forest and concentrating on my debt to income ratio. You may be further along on the journey concentrating on the savings numbers. Or you might be doing both.

Ratios for Retirement

April 7th, 2008 at 01:10 pm

So, I came into work this morning and it was a little slow at 7:00. So I decided to cruise the web a little and found an interesting article on retirement ratios from the Financial Planning Association.

The article talks about looking at three financial ratios. They are all based on income and are savings to income, debt to income, and savings rate. There are 2 tables in the article: one for a 5% real rate of return (think 8% return on portfolio) and 4% real rate of return.

The author doesn’t include home equity into the savings ratio, which I agree with. You have to live somewhere and most of that equity is going to be tied up in that home, so better not to include it.





Anyway the article is at: http://www.fpanet.org/journal/articles/2006_Issues/jfp0106-art6.cfm

So are you on target?

Personally my savings is a half what it should be, I am carrying 50% more debt, but I am looking at saving 12% - 15% this year. I got a lot of work but I got 1 year before I hit the age milestone.

Time to get cracking!!!

I ain’t no April fool

April 1st, 2008 at 02:08 pm

I was hoping to post this over the weekend or Monday to close out the quarter on a great note but whatever.

So, I got my refund from the fed on Saturday for $12,922. Most of it was due to my taxes being screwed up when I switched jobs. Bottom line, this is one time refund that I will not see again. The check cleared today and so I have already allocated the money.

So, what did I spend all this new found wealth on? A new boat? A first class vacation? Invest it in BA’s pyramid scheme?

They all sound so tempting, but alas I just decided to reduce my debt (and pay for TrueGreen or ChemLawn to take care of the lawn). The breakdown was Car1 paid off and $7,195 towards Car2.

I was hemming and hawing about whether to pay off the braces or Car2. Truthfully, in the end, it won’t matter. One way, I pay the braces off now and Car2 at the end of June. This way I pay the car off in mid June and the braces at the end of June. Since the braces are a 0% loan, it really doesn’t matter. So, I decided let’s due it this way and have both of these paid off in June.

So there you go. I started the year with $49,422 in debt and now I am down to $26,657, paying off 22,785 in just over a quarter.

Yes half of it was my tax refund, but Murrphy and his family are getting pretty nervous as an eviction is coming in Q3.