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Anne and Matt January 2013 Net Worth

This article was written by in Naked With Cash. 5 comments.

This month is Insurance Month in the series Naked With Cash. Each month, seven Consumerism Commentary readers anonymously share their financial reports to gain insight about their progress towards their goals. 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. Last month, Anne and Matt shared their progress throughout 2012.

Their goals are to strike a balance between saving 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.

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

Anne and Matt’s net income for January was $7,604, or $10,354 before taxes.

Anne’s comments and analysis

Thanks to tax changes, my husband’s take-home for his salary has decreased by $121 every two weeks, or $3,146 per year. His first bonus check of the year had a large amount of tax withheld, and I know it should even out at tax time. We have since adjusted our withholding to have less tax taken out, because we are anticipating a refund of around $3,000 for 2012. That’s larger than expected and we don’t want that to continue for 2013.

Matt’s boss said the 401(k) should be available at the beginning of March. I don’t know if there will be a match.

We spent more than we brought home this month. A large portion of that was finishing off the IRAs for 2012. This year, we plan to contribute a fixed $458 each per month to the IRAs. We didn’t have the money to max them out for 2012 until now.

We also had a few annual expenses, such as our car registration, life insurance policies and our HOA.

Insurance coverage

Auto: The premium is $330 every six months with $250,000/$500,000 limits, and $500 deductibles. The rate is the total for our two vehicles.

House: $511 per year with a $1,000 deductible. This policy is bundled with our auto.

Life: We just increased our coverage and reset the term. I went from $400,000 to $1,000,000 in coverage, and Matt went from $600,000 to $1,500,000 on 20-year term policies. Let’s hope the policies expire before we do. My premium is $420 per year and his is $605 per year.

Disability: Matt has a private long-term disability policy at $240 per year.

Health: Matt’s employer does not have group insurance. Matt and our two children are on one private policy at $197 per month with a $5,500 family deductible. We don’t have an HSA set up for it yet, but that’s on the to-do list for the year. I am on an individual COBRA policy from his last job. My premium is $490 per month and I will have a $1,000 deductible for the year.

I’m on this policy so that I’ll have maternity coverage, as private policies in my state do not have maternity coverage available. I don’t feel comfortable paying out of pocket for a birth, since I have a history of complications and a high-risk birth can be extremely expensive. Even a simple hospital birth with no medications can cost several thousand dollars, not counting labs, ultrasounds and all of those prenatal checkups.

Turns out, I got pregnant this month and I’m due in late September! Once I have the baby, we’ll get a new family policy for the five of us and hopefully it’ll be much cheaper than what we’re paying now.

All told, we’re paying $10,680 year or $890/month in insurance premiums.The biggest component of course is our health insurance. We save up for our insurance policies throughout the year and pay in full when the bill is due to save a little bit of money on the premium and so it won’t screw up our cash flow.

Overall, I think January went well. Overall we saw a solid net worth improvement, thanks to our retirement accounts. We could still improve by being more deliberate with our discretionary spending. I feel like that aspect of our budget needs more structure.

For February, I want to start saving for our health insurance deductibles. I’d like to set aside my $1k, and research an HSA for my husband.

We’re still waiting for tax documents, so I expect we won’t be able to file for awhile — maybe not until March or even April.

Feedback from Neal

Good work on making the tax adjustments. It doesn’t make sense to give the government an interest free loan and that’s what you do when you get a tax refund check. It’s much better to reduce your withholding as you have done. Of course, you have to make sure you have the money to pay the tax at the end of the year.

Let’s keep in mind that because of the salary net decrease, you’ll have to cut your spending by at least $300 a month. Have you had time to address this yet? I’d like to hear more about that.

Last month, you spent more than you brought in. I am not too concerned because you didn’t really spend too much –- you invested that money. Still, I’d like to change this situation. I found that when I started budgeting my monthly savings, my life got a whole lot easier.

I just need to be reminded if you are using a software package to track your spending. If not, please do so. I think you’d really benefit by doing so. This might help address the issue of having the money set aside for IRAs etc. And in light of the pay reduction, this is even more important.

I am not an expert on homeowner’s insurance or automobile coverage but I have an annual insurance check-up with my agent to make sure my coverage is appropriate and to make sure I’m not paying for insurance I no longer need. I suggest you contact your agent and do the same thing if you haven’t already.

I am so happy that you increased your term life insurance. This is a wonderful step. One question -– how did you come up with the amounts? Also, did you consider 30 year term? I know that it would be more expensive but in my experience, you are better off buying the longest term you can when you are young.

What I did was purchase very long term insurance when I was in my 30s. Then, as I got older I bought more life insurance but for shorter duration. This is because my need for life insurance expands as my children grow and my standard of living expands. Then, as I get older, my cost of living should diminish and so can my life insurance. Owning a series of tiered term policies allows you to save money and have the right coverage at the right time.

Given that your family is growing — congratulations on that too! — I am delighted that you bought more term insurance. Just make sure you have a life insurance plan and if you feel comfortable doing so, please share it with me.

While we are on the subject of insurance, what are the terms of Matt’s disability policy? I am happy you have a policy but I would like to understand more about it.

You said that your discretionary spending needs more structure.

  • What would “more structure” look like to you?
  • What would be the benefit?
  • What do you identify as the obstacles to implementing this structure?

Feedback from Jacob

Anne and Matt, congratulations on the baby! That’s amazing news. And it sounds like you’ve raised your insurance coverage at the right time. You both have a great income, so though you are spending a bit in insurance each month, you should be in a great position to pay all of your bills and save.

It seems like the only place to work on here would be your budget, which is great news because I HEART BUDGETS! First, I suggest signing up for or an equivalent that can track all of your accounts, not just your checking account. There is a feature that allows you to set limits for each category and create a budget for the month. If you’re not totally sure how much to put in each category, can help you look at what you have been previously spending and see how much you’re spending on food, gas, eating out, utilities, etc. You can look at your past expenses and create a budget based on those.

Since you have irregular income, I suggest budgeting for the amount that you are sure will be coming in regularly, and then when the rest comes in, you can apply that to your savings or other goals. When we got married and were on a bi-weekly budget, we too were frustrated trying to plan when to pay bills and planning out each next paycheck. So, before even tackling our debt, we decided to get a month ahead on our budget. This instantly removed the stress of wondering when things were due and planning our month. All the money was there at the beginning of the month, we could plan with a clear mind, and due dates haven’t been a thought in our mind in four years. I suggest giving it a shot. And if you would like more detail, feel free to email me and I could put together a budget for you.

Your net worth is increasing, so you are definitely moving in the right direction. You have the income to build a very high net worth at a young age, and all it would take to speed up the process a bit would be putting together a sweet budget and keep investing in your tax-sheltered accounts. Thanks again for sharing your journey with us!

Updated March 20, 2013 and originally published February 15, 2013.

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About the author

Luke Landes is the founder of Consumerism Commentary. He has been blogging and writing for the internet since 1995 and has been building online communities since 1991. Find out more about Luke Landes and follow him on Twitter. View all articles by .

{ 5 comments… read them below or add one }

avatar 1 Anonymous

Hey Neal,

Thanks for the feedback. I’d like to answer some of your questions now:

1. I tried to adjust the withholding to get us close to a $0 liability at tax time. I realize we could be plus or minus $1k and that would be ok to cover. I’ll check it again mid-year to make sure we’re on track for that.

2. No need to worry about the “$300/month pay cut” since Matt just got a raise. Woo hoo! A $500/month benefits stipend (I don’t know if the 401k will proceed on March 1 or where we’re at now) and this will be just cash until some other benefit rolls out to replace it. Also, Matt got a $2/hour billable hour raise, so now he earns $22/hour on top of his base salary of $83k. It’s at least a $4k/year raise. So, a $10k+/year total boost. Whoa.

I think I’ll divert that $500/month amount to our HSA until that’s full, and then to long-term saving since ideally eventually that will become a 401k match. No idea how long it’ll be in the form of a paycheck vs. a non-cash benefit.

3. I’m using my bank’s webpage to track our spending. It has spending categories and it breaks it down, sort of like Mint (but only for that bank account and not my credit card).

4. We didn’t see quotes or even think about a 30-year term. I think we just figured 20-year would work since our youngest (this baby will be our last) child would be a young adult by that point. We view the term insurance as a way to protect our children if one or both of us should go while they are still living at home. If I died, my policy would let my husband hire either an in-home caregiver or quality daycare, plus housekeeping and such. If my husband died, it would replace his income until the kids were older. I could enter the workforce and use some of that money to cover a babysitter/etc. if needed.

I know a huge windfall could put my kids and grandkids through college and set them up for an easy life, but that’s not our intention with the policy. It’s just to cover our bases and make finances not a stressor in what would understandably be a difficult time.

If we both died, then the money would enable the guardians to adequately afford taking care of the kids and possibly retire early (right now our parents are listed as guardians and they are in their early 50s, but we will likely switch them out to someone else as they get older).

5. I will need to dig out the disability policy terms and get back to you. We got the policy back when he was earning probably half of what he is now, so I suspect we’ll want to update this soon.

6. The budgeting thing that is really throwing me off is that sometimes, Matt isn’t paid every 2 weeks with the amount we expect. Sometimes the bonus is delayed a pay period or more. Sometimes the base salary is delayed a day or two (which that one isn’t a big deal). But the bonus is a pain, because that’s where the IRA and college money usually comes from.

I think I should just view them as two separate checks. We can pay all of our monthly expenses and our grocery, gas, entertainment, etc. with the base salary and still have some left over. Biweekly, the base net pay is around $2,600. Perhaps it would be a good idea to put a portion of this to savings as well.

The bonus is variable, because it’s based on Matt’s billable hours. He usually hits 40, if not 45-55+. I think it would be easiest if I used the bonus strictly for IRAs, 529s, other long-term savings goals, and some of the shorter-term savings goals.

Would love other’s thoughts on that. (Hey Jacob?)

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avatar 2 qixx

Paying out-of-pocket for a birth would kill the finances of many. For the baby we just had the total out-of-pocket for the entire time plus hospital birth without complications would have been $36,037.24. Definitely a great reason and use of insurance coverage.

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avatar 3 Anonymous

Annie needs disability insurance just as much as Matt does. Otherwise, how will you pay for someone to do the work you do?

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avatar 4 Anonymous

I wish I could, but you have to have an income to replace the get disability insurance. My income in the past few years has been very low. Too bad sahms can’t get this coverage

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avatar 5 Anonymous

You are right on that. However, the article I linked above suggests getting long term care insurance as an alternative.

You could also establish a home business, like freelance writing, selling on E-bay, or something like that.

This is why I advise all young people to buy a disability insurance policy as soon as they get their first job.

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