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May 2013


Naked With Cash is the year-long series on Consumerism Commentary where seven readers’ households share their financial progress on a monthly basis. I’ve partnered with financial planners who will offer some guidance along the way. Read this introduction to learn more about the series.

LastDollar is thirty-three years old, an entrepreneur and single mom with two children with learning differences in private school. To learn more about LastDollar, read the bio published last month in advance of Naked With Cash. LastDollar is on Team Neal, with Certified Financial Planner Neal Frankle.

LastDollar’s update this month includes her net worth as of the end of April as well as her own commentary and analysis. This is followed by feedback from Neal Frankle, CFP, as well as from budgeting expert Jacob Wade from iHeartBudgets.

Last month’s update described LastDollar’s financial progress throughout March.

Keep reading for this month’s details.

Neal Frankle, CFP appears courtesy of Wealth Pilgrim and Wealth Resources Group.

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Naked With Cash is the year-long series on Consumerism Commentary where seven readers’ households share their financial progress on a monthly basis. I’ve partnered with financial planners who will offer some guidance along the way. Read this introduction to learn more about the series.

Calvin is in his early 40s, earning a salary of $120,000 plus bonus as an IT project manager in New Jersey. He has recently finalized a divorce and has a teenage child. Read his bio here. Calvin is on Team Sara, with Certified Financial Planner Sara Stanich.

The net worth report below and following commentary refer to the last full month, April 2013. Last month’s report analyzed Calvin’s progress during the month of March. Continue reading this article to see the net worth report and Calvin’s own analysis, which are followed by Sara’s feedback and advice as well as thoughts from budgeting expert Jacob Wade from iHeartBudgets.

Sara Stanich, CFP appears courtesy of Stanich Group and Cultivating Wealth.

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Since before the recession, an increasing number of mothers say they’d like to work full-time. The Pew Research Center analyzed new data from the U.S. Census Bureau and conducted a survey to discover this and other family financial dynamic trends.

In 2007, 20% of mothers called full-time employment their ideal situation, while by 2012, that number increased to 32%. Over the same period, the percentage of mothers who would like not to work at all decreased from 29% to 20%.

The new report contains a variety of interesting statistics like the above. While just over half of all respondents, including men and women, say that children are better off with a mother who stays home without a job, only 8% believe that a father’s staying home with children has a positive effect. If I were a father, I might take offense that society considers full-time parenting ineffectual or even negative in the development of children.

The report results seem to confirm that most Americans maintain traditional beliefs about parental roles while reluctantly accepting that society has been changing around them.

Pew Research also analyzes the trend of single mothers.

On the topic of single mothers, most Americans (64%) say that this growing trend is a “big problem”; however, the share who feel this way is down from 71% in 2007. Also,
young adults are less concerned than older adults about the trend. About four-in-ten adults under age 30 (42%) view it as a big problem, compared with 65% of those in their 30s and 40s and 74% of adults who are 50 and older.

The public’s opinions about unmarried mothers also differ by party affiliation and race. Republicans (78%) are more likely than Democrats (51%) or independent voters (65%) to say that the growing number of children born to unwed mothers is a big problem. Whites are more likely than non-whites to view it as a big problem (67% vs. 56%). The views of men and women on this issue are the same.

When mothers are the primary income sources in a household with children under the age of 18, 63% of the time, they are single mothers. Otherwise, they are women who earn more than their partners. In total, mothers earn the primary income — or the only income — in 40% of all households with children. That’s a dramatic shift over the past half-century; in 1960, only 10% of households with children consisted of mothers as breadwinners.

New parents are faced with this critical question. Who stays home with children? The household situation could have an important effect on the emotional development of a child, and conscientious parents can find themselves struggling with determining an answer to the question. And when the discussion comes up, statistics offered by surveys such as this Pew Research Study aren’t helpful, because every situation feels unique.

What support do you have?

Having family and close friends nearby helps. With grandparents available to help once in a while, new parents will, in theory, be less stressful as they adjust to life with their first child. Saving the cost of a babysitter is one benefit, but the emotional support from family members, close in both physical and emotional proximity, can make it easier for a couple to decide to be working parents. That’s particularly if the financials determine that both parents need to generate incomes to avoid financial problems due to the increasing cost of raising kids.

Having a wide network of support also helps from a daily expense perspective. Close family and friends can help provide some of the materials you’ll need as new parents as hand-me-downs. It seems that inheriting clothes from family friends or children wearing the same clothes their older siblings wore has fallen out of favor recently. It may because, relatively to incomes, clothing is a lot less expensive now than in prior generations. But cribs, car seats, strollers, and other baby needs are more expensive, and young families can benefit from items that have been used by friends and family.

Do your children have special needs?

Sometimes life doesn’t fit your plans. You may be financially secure enough to raise a typical child on one income, but later determine your child has special needs that change the course of your life. For example, a child with autism may increase expenses more than $25,000 a year, not including what might be covered by insurance. That’s as much as a part-time job might provide, or a full-time salary in some jobs.

At the same time this extra income is needed to cover the expenses that come along with special needs, the demand for being home with children increases. It’s no surprise that parents of children with special needs often adjust their own life goals, becoming advocates for research, cures, or support for those facing the same challenges. It may be the only way for some to handle the financial and emotional requirements of being a parent for a child with special needs.

Is working financially practical?

Life decisions are often about more than just numbers on a spreadsheet, but you can’t make a good decision without thinking about the finances. It’s not enough to just compare the parents’ lowest individual salary with the cost of child-care. Even with this comparison, values come into play. Imagine a spectrum of child-care options spanning from full-day care in an overbooked facility to a live-in nanny who stays with the family for many years. What is the most basic level of child-care that you would consider acceptable?

Compare the cost of the child-care you wish to provide with the cost of losing an income. You can’t do this comparison without considering the full cost of losing an income. It’s more than just the salary. It could include a loss of benefits. It could include a loss of future opportunities. These should be factored in to the decision, even if it might be difficult to come up with a precise value.

The numbers can only help inform decision, not determine it. You could estimate that your household net worth would accumulate $5,000 more each year if one parent chooses to work and pay for child-care rather than staying home and providing his or her own full-time care. That annual $5,000 could be saved in a college fund for the child, adding up to a substantial amount to help pay for education 18 years later. But if $5,000 a year doesn’t make financial survival difficult, parents may choose to forgo the increased net worth in favor of staying home anyway.

How many children do you or will you have?

With more children, costs escalate, as do needs for child-care. If you are relying on both parents’ careers to afford to raise your children, at what point will the increasing child-care needs prevent a family from maintaining several jobs?

What sacrifices can you make to shift your budget?

Having children requires personal sacrifices. Whether it’s no longer partying at clubs every Friday night, putting aside hobbies, or spending less time at the office, children change life’s priorities. The changing priorities should be reflected in your budget or spending habits.

If you’ve been saving money for a vacation, a new child might change the type of vacation you’re planning, or it might inspire to redirect the savings towards a different purpose, like child-care. You may need to delay traveling the world until your children are grown and earning a living on their own. You may not be able to start the business you were planning.

How did or will you decide who stays home to raise your first child, if anyone? How did your priorities and your budget change? What advice could you give to new parents or potential future parents?

Pew Research Center
Photo: Flickr

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Naked With Cash is the year-long series on Consumerism Commentary where seven readers’ households share their financial progress on a monthly basis. I’ve partnered with financial planners who will offer some guidance along the way. Read this introduction to learn more about the series.

Kathleen is thirty-one years old, single, and living in Portland, Oregon. She loves her job, even if it isn’t very lucrative. With her $33,000 income last year, she’s looking to make more money from “side hustles” this year, such as her blog, Frugal Portland. To learn more about Kathleen, read her bio here. Kathleen is on Team Sara, with Certified Financial Planner Sara Stanich.

Kathleen’s report this month, below, includes Kathleen’s progress over the three months leading up to the end of April 2013. Following Kathleen’s own self-analysis, Sara Stanich will offer thoughts from her perspective. Sara’s comments are followed by feedback from budgeting expert Jacob Wade from iHeartBudgets.

Sara Stanich, CFP appears courtesy of Stanich Group and Cultivating Wealth.

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Anonymous S, April 2013 Net Worth

by Luke Landes
Anonymous S Net Worth

Naked With Cash is the year-long series on Consumerism Commentary where seven readers’ households share their financial progress on a monthly basis. I’ve partnered with financial planners who will offer some guidance along the way. Read this introduction to learn more about the series. Anonymous S is a 24-year-old engineer earning $67,000 a year plus ... Continue reading this article…

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SteveDH, April 2013 Net Worth

by Luke Landes
SteveDH Net Worth

Naked With Cash is the year-long series on Consumerism Commentary where seven readers’ households share their financial progress on a monthly basis. I’ve partnered with financial planners who will offer some guidance along the way. Read this introduction to learn more about the series. SteveDH is retired, and he and his wife have two grown ... Continue reading this article…

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How Today’s College Graduates Can Beat the Odds

by Luke Landes
Graduation

I graduated college in the first heyday of internet-connected businesses in the late 1990s. Jobs of all types were abundant. And although the “dot-com” bubble burst soon afterwards, unemployment rates remained historically low. This year’s graduates are facing more obstacles than those from fifteen years ago. Starting on a solid path right out of college ... Continue reading this article…

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Anne and Matt, April 2013 Net Worth

by Luke Landes
Anne and Matt Net Worth, April 2013

In the series Naked With Cash, seven Consumerism Commentary readers share their financial progress on a monthly basis. They are joined by Certified Financial Planners who provide feedback on their journey. Read this introduction to learn more about the series. Anne and Matt are twenty-seven years old, living in the Midwest, with two children. Read ... Continue reading this article…

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Credit Card Basics: Everything You Should Know

by Luke Landes
Inappropriate use of a credit card

The credit card is one of the most divisive products among all the financial tools available. Ask around and you’re sure to find people who pay all their expenses using credit cards as well as others who swear the products are the embodiment of pure evil. Opinions among financial experts and thought leaders are just ... Continue reading this article…

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Elimination of the Payroll Tax Cut Reduced Consumer Spending

by Luke Landes
Consumers Planned Response to Tax Hike

In 2010, Congress passed the Tax Hike Prevention Act, which among other things reduced the payroll tax from 6.2 percent to 4.2 percent starting in 2011. For two years, workers saw higher take-home income than they would have had the law never existed, and consumers responded favorably by using the extra money throughout the two years to ... Continue reading this article…

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Banks Borrow Money at Low Rates, Why Can’t Students?

by Luke Landes
Studying

Senator Elizabeth Warren, the architect of the Consumer Financial Protection Bureau, introduced a bill in Congress to give student borrowers a break. The premise is that students, whose education is important to the economic growth of the United States, should receive some of the same advantages as banks, who receive preferential treatment in the form ... Continue reading this article…

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The Great Gatsby Backlash

by Luke Landes
Art Deco

I’m looking forward to seeing Baz Luhrmann’s new film treatment of The Great Gatsby. The book, of course, is a seminal piece of American literature, and the new movie is yet another in a long line of interpretations. I like the director’s previous works, and I expect I’ll enjoy the new film. I read The ... Continue reading this article…

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The Honesty of Companies, Middle Class Stagnation

by Lance
Mother's Day

Happy Mother’s Day! Take some time to thank your mother for any good personal finance lessons you learned while you were growing up, whether by positive or negative example. A few times a month, Lance from Money Life and More will stop by to share some of the best articles from across a variety of publications, including ... Continue reading this article…

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Higher Home Ownership Linked to Higher Unemployment

by Luke Landes
Home ownership

American culture has long promoted the idea that home ownership is key to the fulfilling middle-class lifestyle. You can be sure the National Association of Realtors will continue to do its darnedest to keep this interpretation of the American Dream alive; whether you’re buying or selling, it’s always a good time for Realtors to earn ... Continue reading this article…

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Mint.com Tracks Two Million Users to Create Spending Index

by Luke Landes
National Average Monthly Spending

When staff writer Sasha introduced Consumerism Commentary readers to Mint.com in 2007, I began to think about the power of massive consumer financial data. As more people signed up for this online service that connects directly to users’ credit card accounts and bank accounts, Mint.com, or any other similar services, would be able to analyze ... Continue reading this article…

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8 Scientifically Proven Principles of Happiness

by Luke Landes
Happiness - 8 scientifically proven principles

There is a link between wealth and happiness, but it’s not that having more of the former results in more of the latter. The Journal of Consumer Research published a study involving a scientific analysis of the link between money and happiness designed and analyzed by researchers at the University of British Columbia, Harvard University, ... Continue reading this article…

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Will an Internet Sales Tax Change How You Shop?

by Luke Landes
Internet sales tax - shopping bags

After a rocky beginning to the relationship, I’ve grown to appreciate Amazon.com. For the most part, the online retailer still boasts the best prices, shipping can be free, and if your purchases are delivered to New Jersey or one of several other states, Amazon doesn’t add sales tax to the purchase. Lobbyists that represent all ... Continue reading this article…

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Three Psychological Barriers: Taking the First Step

by Luke Landes
Psychological barriers

Everyone starts their path to financial independence from a different position. The popular belief that everyone born in this country has an equal opportunity for financial success is a Utopian myth. It may be an ideal foremost in early European settlers’ minds as they escaped a society where wealth was determined by little more than ... Continue reading this article…

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Discover it for Students

by Joe Taylor Jr.

Discover’s made strong inroads into student borrowing over the past few years. Discover it® for Students represents the bank’s latest foray onto college campuses, with pricing and features that resemble full-featured credit cards more than the typically watered-down student accounts on the market. Loading up your wallet for the long haul For years, student credit cards earned bad ... Continue reading this article…

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