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Our Financial Snapshot for June 30, 2017 – Where We Stand Financially

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financial snapshotI’m just a couple weeks into this website and now is the moment of truth. I have decided to come clean about our own finances and where we stand financially.

Since June 2017 was the first month for this blog, I’ll give you a snapshot of where we stand, and then list our goals for the next several months and years.

But first, let me tell you a little about me personally. I’m a 41-year-old Father and Husband. My wife and I have 3 children, ages 7, 5, and 3. It’s a crazy household, to say the least. We live in a “modest” home in the suburbs – about 2,000 square feet, nothing fancy. We bought this house in 2009.

My wife is a stay at home mom, which is to say she works a lot harder than I do during the days. I’m an attorney and I own my own law firm. I do well financially, but our income is irregular. I’ve started several “side hustles” over the years, none of which has panned out long term. I will discuss those businesses, and what happened with each of them, in future blog posts.

The purpose of this post is to be completely transparent with my readers. In previous posts, I discussed how much money you would need to retire. For our family, that number is approximately $1.5 million (this assumes we have paid off our house and student loans).

Because I’m a lawyer with a firm, (and am currently looking for a position at a firm), I will remain anonymous until one of two things happens – first, I become financially independent and no longer require the income from my law firm to support my family or second, this blog makes me enough money that I no longer require the income from my law firm.

Our Current Financial Snapshot

Here is how we stand right now, as of today. I’ll start with an overview, and then dig into each asset with more details.

Financial Snapshot

So as you can see, we aren’t in the poor house, but there are definitely areas for improvement. In addition, we are a long way off from the $1.5 million we need to achieve financial freedom.

Here is my analysis of where we are and where I would like to see us get to.

First Things First… The Debt Snowball

The most obvious number that stands out at me when I run this snapshot is the amount of debt we have. I honestly did not realize how big this number was, in part because I never counted my Wife’s student loans in the total (her’s are $84k). Clearly, the majority of this debt is in student loans. You should be aware that both my Wife and I financed our law school education with student loans, (and I financed my undergrad with student loans as well).

Just so you are aware, neither of us have family members to fall back on or assist us out of this financial hole we have dug while pursuing higher education.

I think it is important to point this out because I’ve read so many stories of people getting out of debt by moving back in with their parents and plowing all their income towards their debt by virtually eliminating their expenses.

This is not an option for us as #1, we don’t have any family members that live within a 10 hour drive of us (and as a lawyer, I’m not inclined to take another bar exam and uproot my practice to another state), and #2, even if we did have family that was willing to “take us in”, that would also mean taking in our children. This is most definitely not an option.

Keep in mind, I’m 41 and my Wife will be 40 this fall. We aren’t DINKS anymore (dual income no kids). Our budget is higher and tighter because we have kids and are completely self-sufficient. (We don’t even have grandparents that can help us with babysitting).

I’m not saying this for pity – but when you are reading other articles about how someone saved a million bucks in 5 years or paid off $250,000 of debt in 2 years, you need to read it with a grain of salt. If you have parents or family that can help you and support you while you pay off debt, fantastic. More power to you. But that is not our situation.

That being said, knocking out the debt is our #1 priority in the coming months. And since we are dealing with this on our own, some tough financial decisions will need to be made.

To do this, you can either use a pad and paper and do it the old-fashioned way, or you can use a spreadsheet. I recommend a spreadsheet from Vertex42. You can download it here. (Affiliate link). Just click on the debt reduction calculator. It’s free for up to 10 accounts. If you have more than 10 accounts, there is a small fee to purchase an upgraded account.

Just click on the link for the debt reduction calculator. It’s free for up to 10 accounts. If you have more than 10 accounts, there is a small fee to purchase an upgraded spreadsheet. This is the spreadsheet I’m using to calculate my own personal debt snowball.

Using the calculator above, if my Wife and I can afford a payment of $2,500 towards our monthly debt service, (the minimum payment is $1,432), then we could theoretically pay off all of our debts within 7 years.

As we move forward on our path to financial freedom, getting out of debt is priority number one.

Paying Down the Mortgage

The second biggest priority for us is to pay off our mortgage. I’m currently speaking with an advisor about how to accelerate the paydown of our mortgage. It’s a complicated strategy that involves the use of a home equity line of credit (HELOC), but if executed properly, we should be able to pay off our mortgage within 7-10 years. Currently, we are 8 years into a 30-year mortgage.

An alternative way to accelerate the pay down of our mortgage would be to refinance into a 15 or 20 year fixed rate mortgage and make an extra payment every year. This is another strategy that we are considering, and I have already submitted an application for a fixed rate, 3.1% refinance over a term of 15 years.

One way or another, by the end of July we will have a plan in place to start moving towards paying off our mortgage.

Increasing Our Assets

At the same time that we are paying off our debts through a debt snowball, I intend to continue contributing to our savings accounts and investment accounts.

One way that we can begin to do this is with an app called Acorns (affiliate link). I discussed this app in a previous post on how to start investing with little to no money. Basically, the program will round up every purchase you make to the nearest dollar, and invest the difference into a basket of investments based on your risk tolerance.

If you use my affiliate link, we will both receive and additional $5 in our accounts.

Why the Large Cash Balance?

You may be wondering why we don’t take the large cash balance (almost $40,000) and apply it to our debts to start to snowball them even faster. There are two reasons.

First, a portion of this cash is made up of our safety net fund. So if I have a bad month with the law firm, or we have an unexpected expense (as we did this month with approximately $1,000 in vet bills for our cat who was diagnosed with cancer), then we have cash to fall back on to pay that expense.

Second, a portion of this cash is allocated for my retirement accounts. By September 15th I need to transfer $27,000 into my SEP retirement account. If I don’t, I will have a huge bill from the IRS. But by funding my retirement account, I will receive a small refund when I finalize my corporate taxes.

What’s Coming Next?

So in the coming month, my Wife and I will need to determine how much we can afford to apply to our debt snowball. We will also need to decide what to do about our mortgage so that we can start to pay it off as quickly as possible.

Next month I will bring you up to speed on where we stand, provide you with a new snapshot, and start the process of tracking our monthly net worth.

Is this helpful to you as you move forward on your path to financial freedom? Do you have any advice or guidance about what we should or shouldn’t be doing financially? Please comment below and let me know.

 

 

 

The post Our Financial Snapshot for June 30, 2017 – Where We Stand Financially appeared first on The Bearded Money Guy.


Financial Snapshot – July 31, 2017

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Financial Snapshot - July 2017Here we are in the second installment of my monthly financial snapshot. If you missed last months report, you can click here to check out my first financial snapshot for June 2017.

July was a big month for us, as we (my Wife and I) started to talk more about our finances and started to be a lot more aware of our money and how we were spending it. We decided to join Costco, which paid for itself on the first trip and has drastically reduced our grocery budget since. In addition, we canceled our home warranty with American Home Shield this month, saving us approximately $60 per month, as well as our housekeeping service which will save us another $200 per month or so.

Some of the links below are affiliate links, meaning that The Bearded Money Guy will receive a commission if you purchase a product we recommend.

But before I get into some of the other decisions we made that will affect our long-term finances, here is our financial snapshot for the end of July 2017.

financial snapshot July 31 2017

Takeaways from This Month’s Financial Snapshot

The most obvious and glaring thing to be noticed from this month’s financial snapshot is that our net worth increased by $24,436, a gain of 14.41%!

This gain can be attributed to several things. First, I updated the value of my personal residence using three separate websites (zillow.com, trulia.com, and homesnap.com) and then averaging those values. This alone increased our net worth by almost $20,000.

However, I also updated the values of our vehicles using KBB.com, which decreased our net worth by about $8,500. Netting that against the house, and we had a gain of approximately $11,500 just from updating the values of our house and cars.

As for the remainder of the gain, we received a small tax refund for my Mother’s Estate which I have split with my siblings. So even though there is a gain for that this month, that will get wiped out when their checks clear in August. I did add money to my investment accounts this month and paid off a large portion of our credit card bill from last month, but the vast majority of the gains in my investment and retirement accounts is attributed to market gains.

You will also notice a “Costco Credit Card” that has a balance. This was the only way we could purchase groceries at Costco, and that will be paid off after I receive the bill this month.

Finally, you will notice that I started investing with Acorns. Even though the balance is small ($93.41), this will continue to grow as we add to it each month.

What Happened to the Debt Snowball?

My goal was to put an additional $1,000 towards our debt snowball moving forward. Unfortunately, we were only able to add an additional $250 to the debt snowball. Not great, but ok considering the month we had. We had a cat that was diagnosed with cancer and we had to put him down this month. A portion of our Care Credit bill (well over $1,000) is attributed to his care and treatment. In addition, we spent money out-of-pocket on his care that depleted the amount we had otherwise allocated to our debt snowball.

The Plan for August

We’ve initiated several changes that you won’t see until the end of August when I prepare another snapshot.

First, I’ve upped our mortgage payment by adding 1/12 of a mortgage payment to each monthly payment. This will allow us to effectively pay 13 mortgage payments each year instead of 12.

One other thing we’ve done to further speed to process of paying down our mortgage is to apply for a 15-year mortgage. There are 22 years left on our current mortgage, and by getting a new mortgage in place, our payment will go up slightly, but we will also eliminate private mortgage insurance (PMI) which will save us an additional $1,200 per year.  Not to mention, we will be on track to pay off our mortgage even faster.

I realize this is not in line with our overall debt payoff plan, but I really hate making a mortgage payment each month and would like to see that go away as soon as possible.

Next, I need to take a required minimum distribution this year for an inherited IRA. I will be withdrawing this money to pay off a portion of the Care Credit Card this month.

Finally, both my Wife and I have started listing items for sale on Amazon and Craigslist. My Wife recently sold some kids toys for $50, and I have an old flat screen tv and office printer listed for sale currently. Any proceeds I receive from the sale of these items will go directly towards paying down our debts.

Are You Tracking Your Personal Net Worth?

I’d love to hear from you about two things. First, is this type of post helpful? If so, please comment below to let me know!

Second, are you tracking your own net worth? Yes, no, sort of? Please comment below and let me know how your experience has been tracking your own net worth!

 

 

 

 

 

The post Financial Snapshot – July 31, 2017 appeared first on The Bearded Money Guy.

Financial Snapshot for August 31, 2017 – I Broke Through $200k!

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This post contains affiliate links. If you decide to click on a link for a product I recommend and sign up for that service, we will receive a small commission. This helps to defray the cost of this website. Thank you for supporting me!

It’s hard to believe it has been three months since I started tracking my net worth. In case you missed the previous reports, you can check them out here:

  • June 2017 – First report, net worth $169,628
  • July 2017 – $194,064 (+$24,436, 14.41%)

There was a big move between June and July, in large part because I started tracking my cars and updated the value of our home using some online services (Zillow.com, Trulia, and Homesnap).

This month saw a slight uptick in our overall net worth (+$7,142 or 3.68%), in part because we were able to pay down our overall consumer debt by about $1,000 (even though the balances on the credit cards actually went up). I also made a large payment ($2,400) on our Care Credit Account during the month.

Financial Snapshot for August 31, 2017

A Word of Warning About Credit Cards

I think it is REALLY important to caution you here about credit cards and explain a bit about how we are using ours. If you knew nothing more about our situation, you would think that our credit card debt has actually increased and we are basically shooting ourselves in the foot with our debt pay down plan, which I initially laid out in my first financial snapshot.

Back then, I set forth our plan to use the Costco Card to save money on our overall grocery budget. Although we had some large trips to Costco at the beginning, those trips have now tapered off and we are spending less and less on each successive trip. In addition, the goal was never to incur any additional debt – I will be paying off the balance on this card each month so as not to incur any finance charges.

As for the other credit card we have, this has been used sporadically – mostly for unanticipated one-time charges. And like the Costco card, I intend to pay off the balance each month.

The last card we have is a Care Credit Card. If you aren’t familiar with this card, it allows you to pay for medical expenses interest-free for 12 months. After 12 months, if you haven’t paid off the balance, the deferred interest for the entire year gets added to the balance. This is a great tool if you intend to pay off the balance on time, but not if you don’t! Right now I’m paying the amount required each month to make sure we will never pay any interest on this card. Again – with three small kids and a variety of unexpected medical bills that pop up from time to time, it is a good way to even out our overall cash flow.

So even though you will see the balances on all three of these cards go up and down, my intent is to pay them off in full each month and use them to assist with cash flow only (and to allow us to shop at Costco, which we would otherwise be unable to do).

That being said, if you are unable to manage or control your spending when a credit card is involved, then I recommend that you steer clear of this strategy.  Right now, the verdict is still out for us. I indicated my intent to pay off the balance of these cards in full each month, but if I falter, then we will have to go back to not using any credit cards at all.

My Debt Payoff Account

You will notice that I added a line item for my “debt payoff account”. This is actually an online savings account at Capital One (affiliate link – if you sign up for an account through this link you will receive a $25 bonus for your new account). I opened this account to keep track of all extra money I put towards our debt snowball plan. So this month I added $440 to this account.

This money was in part from my normal earnings, but I was also able to sell an old TV and printer for cash (a little over $200 total – I can’t remember the exact amounts). I deposited the cash to our checking account and immediately transferred it to this account.

It shows $440 because I got busy with work at the end of the month and forgot to make the extra payment on my student loan. But I have since processed a payment for $420 (I leave a little cash in there so they don’t close the account) that will be reflected on the next financial snapshot.

Other Notes from the Month of August

I was holding onto about $2,000 for my brother and sister from a tax refund due to my Mother’s Estate. I had written the checks awhile back, but my siblings got lazy and didn’t cash them. I gently reminded them to do so and this month my investment account lost approximately that amount of money as a result.

In addition, I opened up a Roth IRA with $2,500 that I took as a required minimum distribution from an IRA I inherited from my Mother. I didn’t need to take that much, but I needed at least $2,500 to invest in a stock market index fund at Fidelity.

The stock market as a whole has done well over the past several months, and my investments, in particular, have also done well. I own a considerable amount of Facebook (FB) and Apple (APPL), both of which are currently trading at all-time highs. I did sell off my shares of Snapchat (SNAP) at the end of July and generated a loss of over $3,000 that can be used to offset income on next years tax return.

I did not change the value of our vehicles – although they probably decreased marginally in the past month and will continue to do so. I’ll update those amounts every quarter or so.

My Acorns account (affiliate link), while small, continues to grow and save money for us automatically. I’m not looking to retire on this money anytime soon, but it is a good way to force savings.

How Are YOU Doing With Your Financial Plan?

Tracking your net worth is an eye opening experience. Writing about it in a blog post is even more enlightening, because you start to dig into the weeks about what really happened with your money during the month.

Do you track your net worth? Is your debt paydown plan on track? Please comment below and let me know – I would love to hear from you!

 

The post Financial Snapshot for August 31, 2017 – I Broke Through $200k! appeared first on The Bearded Money Guy.





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