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 their bio here for background about their financial situation. Anne and Matt are on Team Neal, with Certified Financial Planner Neal Frankle. Review their November update for last month’s progress.
Their goals are to strike a balance between putting aside money for the future and enjoying the present and to save enough for retirement. Keep reading to see their net worth report, comments about the report and their progress, and thoughts from Neal Frankle. This is their final report for Naked With Cash 2013, and includes their thoughts on their experience.
Anne’s comments and analysis
The last update! What a year. The biggest awesome thing for our family was the birth of our third child.
When I look back at my post from December 2012, I can’t really believe the progress we’ve made. Our investment accounts have exploded, and it’s showing me just how important it is to make regular contributions.
In these 12 months, our net worth has improved by almost $71k. The bulk of that has to do with the booming stock market. I know a market correction will mean our accounts lose value, but hey, shares on sale!
Good news on Matt’s old 401(k). His former employer was bought by another company, and the new company decided to have old 401(k) accounts fully vested as of December 31, 2013. So, it’s an extra $2,300 or so we weren’t counting on for retirement that’s now available. We’re going to move it over to Vanguard to consolidate accounts and save on fees.
Matt’s employer still owes him $1,036 to retirement match, but I went ahead and included it here since it’s legally required of him and it’s to come.
The 401(k) line item reflects the SIMPLE IRA account with full match, plus the old 401(k) with new fully vested amount.
Every item in our assets has increased substantially, and I credit automatic contributions to that. Also, Matt deserves big kudos here, as he has worked very hard and his 2013 income has exceeded our expectations by quite a bit.
Last year, I thought Matt was on track to bring in $120,000, but thanks to a big raise and some bonuses, he grossed $163,000 this year. Of that, $34,000 was withheld for taxes. Matt’s employer added a SIMPLE IRA in October, and we maxed that out for $12,000. We give 10% gross to our church, and we sponsor two children through a charity for $840 per year, and we had a few smaller one-time contributions to charitable causes this year.
All of those things considered, we had right around $100,000 of take-home to work with for the year.
We each maxed out our Roth IRAs, so $11,000 there, and we contributed just a smidge over $5,000 total to 529 plans for our three kids.
The mortgage debt decreased as expected — no extra payments. I paid the January payment in December, so that we’d get the tax benefit on this year’s filings. The mortgage reduction lead to a $7,087 improvement in net worth for the year.
We made around $18,000 worth of improvements on our house, and houses have been selling really well in my neighborhood. Based on those sales and what we’ve done, I think our house could sell for $175,000 to $180,000, but without an appraisal or an offer I’m reluctant to change that line item.
Last year, I wrote: Our greatest threat is probably trying to avoid unnecessary boosts to our standard of living. I’d hate to see us fritter away our extra income, spending money because “we can afford it now.
Yes. I know I spent more freely this year, because we could. I feel a little bit of guilt about it. Matt’s high income isn’t guaranteed, and it would be easier to stay used to living on less, rather than having to adjust it down out of necessity.
For me, the biggest safeguards in that are those automatic investments and savings transfers, and sticking to a max monthly budget.
So what’s ahead for our little family of five in 2014?
We intend to max out those retirement accounts again, contributing one-twelfth each month to spread it out. We’re increasing the 529 contribution to $6,600 for the year total, possibly adding a bit more with Matt’s quarterly bonus.
We have about $4,000 to go to finish the next car fund, and I expect that account to be complete by the end of January, since it’s a three-paycheck month for us.
After that, I want to set aside $5,000 to go on a big family vacation this year. Maybe a cruise? I don’t know. I hope to have that saved by no later than March, so we can take advantage of any airfare or accommodations deals.
Once we hit that, I want to start contributing $500 to $1,000 a month to a taxable investment account. I don’t have a purpose for it in mind at the moment.
We are blessed way beyond what we deserve. I look at the numbers and they just don’t make sense — they’re way better than I could have hoped for.
A big thank you to the experts!
Neal, thanks for giving me some serious questions to consider and ideas to explore. I think my biggest take-home point from you was to have a plan and automate it, and to find a budgeting method that works for me and stick to it.
Jacob, my biggest take-away from you was the life-changing idea to be a month ahead on our expenses. That very simple move has been such a big deal for me. Matt’s employer sometimes was a few days behind on payroll, and being a month ahead meant we didn’t have to scramble to move money around to meet our obligations. Further, by establishing a fixed monthly budget, anything earned beyond that went straight to our savings goal rather than be absorbed in the day-to-day spending.
Luke, thank you for hosting this experiment here. I wouldn’t have written about this otherwise, and I suspect I wouldn’t have been as deliberate with our money if I didn’t have monthly updates to consider.
I’ve enjoyed reading updates from the other participants. Best wishes, everyone, for a prosperous 2014!
Feedback from Neal Frankle, CFP
First, congratulation on a great year — and most important, of course, the baby!
I’m delighted that your investments have done well this year and you are taking advantage of your investment opportunities by contributing regularly. $71,000 is indeed a huge increase in net worth. Bravo!
On Matt’s old 401(k) I agree with your decision to roll the old 401(k) to an IRA. It will be far easier and less expensive plus it gives you more investment options. Nice.
I like the way you take your finances seriously and how, as a result, you’ve seen tremendous progress.
I wish you and your family only the best going forward. Keep it up!
Feedback from Luke Landes
Anne, you and Matt are on a path towards financial independence. There’s no doubt about that. Your net worth increase over the past two years has been fantastic, and it seems like there is no end in sight for your family’s capacity for increasing income. Matt’s income growth over the years ($52,000 in 2008 to $160,000 in 2013) is fantastic. A six-figure take-home pay gives you a lot of room to work with.
You’ve done a great job with contributions to retirement accounts, and if you keep that going, you’ll have no problem retiring when you want.
Thanks for participating this year! I know the readers have enjoyed following your progress over the past year, and I have as well. Best wishes for a fantastic 2014!