Naked With Cash is the year-long series on Consumerism Commentary where seven readers’ households share their financial progress on a monthly basis, and February is “insurance month.” 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 bonus. He also builds websites on the side for an hourly fee of $20 to $35. Read his bio here. Anonymous S is on Team Roger, with Certified Financial Planner Roger Wohlner.
Last month, Anonymous S described his progress throughout the past year. Now that he has had a chance to receive feedback from the financial planner and a budgeting expert, this report will focus on the participant’s financial progress over the past few months. Keep reading to see his net worth report for January 2013. Following the analysis from Anonymous S., Roger Wohlner will offer his own thoughts and guidance.
Roger Wohlner, CFP appears courtesy of The Chicago Financial Planner.
Anonymous S’s comments and analysis
Budget. While I do have a “budget” set up in Mint as well as in a spreadsheet I use for planning, I don’t tend to look at it when making purchases. Instead, I just try to remain conscientious about all of my purchases, and know that if I do go over budget, it was probably for a very good reason. With that said, I thought it would be easier to demonstrate past expenses by category, to show what I usually spend.
According to Mint, in the last six months (August 2012 through January 2013) I spent on average $733 a month on home expenses, which includes rent, renter’s insurance, and that one time I needed a locksmith. This accounted for 26% of my spending (not my income, just spending).
Next highest was food and dining, which averaged $523 a month. This includes groceries, restaurants, and alcohol, so I think I did pretty well here. This number has been steadily decreasing over time, since started cooking in late fall.
Auto and transport, which includes gas, insurance, and parking, added up to $287 a month. This seems reasonable, as I drive an inefficient car 48 miles a day commuting. When I get a chance, I’m going to call my insurance company to see if I can get any additional discounts. (Can’t hurt to try!)
Next up are bills and utilities. Since I split bills with my roommate, this number isn’t very accurate, and I’d guess the real number is somewhere around $190 a month. This includes gas, electric, internet, my professional organizations, and my web hosting costs. I prepaid a lot of annual expenses during this time period, so I had to estimate a lot on this number. Our house has a lot of empty rooms with radiators in them, so its not very efficient in the winter. We did add a programmable thermostat, and that seems to have helped a lot.
Shopping averaged $267 a month, which included a new cell phone and new computer, as well as a tuxedo rental for a wedding.
Travel averaged $158 a month, which included a lot of trains to NYC, a rental car on vacation, and a couple taxis.
Gifts and donations averaged $93 a month, but this was mostly just due to holiday presents. I did “donate” $60 to participate in a fundraising bike race as well.
Entertainment only encompassed $231 total, or $39 a month. This included one $181 concert ticket, a networking event for work, and a movie rental (to test out my new phone).
Health and fitness totaled $203, $34 a month, and included any miscellaneous expenses at CVS, and one time I had to go to the ER.
Education totaled $174, or $29 a month, of which the vast majority was test prep for an upcoming professional certification exam.
So, in total that’s about $2,350 in expenses a month, including several one-time items such as a new phone and computer. I don’t plan on upgrading the phone for another two years, and the computer is replacing one that is 4.5 years old and had started to fail. After taxes and health insurance, my paycheck goes from $5,583 down to $3,780 a month, which leaves $1,430 up in the air. Theoretically, my net worth should increase by $1,430 a month on average, including all retirement savings. This is pretty nice to see actually written down, and should help encourage additional future savings.
January was a pretty good month. I managed to continue cooking at home, and only spent $216 on Food & Dining, way below my six-month average. This is also due to eating with my parents on a couple weekends. Hopefully this trend continues in the future. Shopping expenses went up due to a computer purchase, but I’ve been thinking about buying one for a couple months now, and part of it failed recently, meaning that I’d have to replace something anyways.
Travel was also a substantial expense, due to multiple job interviews in New York City, a couple on very short notice. One big change on my balance sheet is that I fully funded my 2013 IRA this month. I like to get expenses like that out of the way early. After I funded the IRA, I transferred my account from ETrade to Vanguard. I plan on investing in Vanguard index funds because of the low expense ratios, and ETrade charges a fee to do so. This made the decision very easy.
I also prepaid a couple months of the gas bill, and one month of car insurance, so that I could get the signup bonus for a Marriott Rewards card. I’m visiting my girlfriend in Asia this month, and we’re using the bonus points to pay for the hotel room the entire weekend. I plan on cancelling the card after the trip to avoid the annual fee (waived for the first year). Luckily her company is paying for the flight.
I also received word from my employer this month that I will be receiving a raise and bonus. The raise is 3%, and the bonus could be $2500 to $3500. This is awesome.
Regarding the comments in last month’s update about New York City, I have been with my girlfriend for two years already, and the move is not solely based on that fact alone. In addition, I think that I am smart enough to keep my spending under control, especially if I can continue cooking.
In February, I plan on continuing to interview for new positions in New York City, which will extend my travel expenditures. I’m hoping to have a new job offer by March, and to start a month or two after that. I should also have some additional income from web site projects that I am working on. I have started preparing my taxes, but am waiting on some forms from the various investment products I tried out last year. I hope to have them by February 15, and should be able to finish my taxes by the end of February. Since I started my current job in April, I expect to get a sizable tax refund. I’m not quite sure what I will do with my refund or my bonus, but I expect that I will need part of it for my move to NYC, and the rest I can indirectly dump into my 401(k) (by increasing contributions for a month or two).
Feedback from Roger
Overall I say keep doing what you are doing. It’s great that you’ve funded your IRA already and bumping up the 401(k) contribution with part of the bonus/tax refund is also a good idea. Ear marking the rest for a possible move to New York City also makes sense.
Keeping with this month’s theme of insurance, I like the fact that you have a renter’s policy, very important.
Updated March 22, 2013 and originally published February 27, 2013.