In Naked With Cash, seven anonymous Consumerism Commentary readers publicly track and analyze their finances on a monthly basis. For almost a decade, I tracked my own finances on Consumerism Commentary; now I’m sharing the benefits of public accountability with the participants. 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.
Keep reading to see how Anonymous S progressed throughout the month of September. This month, our special theme is estate planning. (You can read Septembers’s update here.) Following his own analysis, Anonymous S will be able to read feedback from Roger and insights from Jacob Wade at I Heart Budgets.
Roger Wohlner, CFP appears courtesy of The Chicago Financial Planner.
Anonymous S analysis and comments
In October, I deposited $4,700 into my non-retirement investment account. Combined with almost $700 of stock market gains, this account increased almost $5,400. Of that $4,700, $2,600 came from I-Bonds that I bought a year ago and redeemed this month. This is in line with my risk profile, and over many decades should pay off. This also means that I deposited $2,100 of new cash into the account, which is great to know. I hope that this is a trend that will continue.
The actual increase of my net worth, while correct, represents flukes that don’t happen in a normal month. Some reasons for the huge increase in net worth this month are my birthday and a reimbursement from work. Additionally, some deposits from last month didn’t clear until the first of this month, which artificially lowered last month’s net worth and made this month appear much higher.
My girlfriend was assigned to a new project that requires commuting, so no more lunches at home. I used to bring lunch to work at my old job, but it’s more inconvenient now. I may start to bring lunch, but for right now the expense is worth it. I usually stay under $8 per lunch.
I’ve set a short-term goal of one year of my salary in net worth, which should be possible in two to three months. After that, the next goal would probably be $100,000. Based on my projections, this could take one and a half to two years at my current savings rate and salary, and with conservative market increases. Twice my salary could take three to four years. Hopefully earning more money at work will only make these goals come sooner.
For this month I’ve included a bit more insight into some parts of my income and expenses:
- Gross salary: $6,000
- After-tax salary: $4,083
- My share of the apartment: $1,375
- My share of the utilities: $88
- Food: $760
- Alcohol: $26
- Taxi: $70
- Public transportation: $20
- Renter’s insurance: $20
- Car loan/gas/auto Insurance: $0
Of course, these amounts vary over time. Alcohol costs were low this month because I only went out to a bar once (Halloween). The previous month I bought over $100 in wine and spirits, which lasted through this month and meant I didn’t have to go shopping again. Taxi usage may seem high, but even with my meager subway costs it’s below the cost of an unlimited pass on the subway. While IRA contributions are in my monthly budget as if I put in one-twelfth of the max every month, I usually max it out by the end of January every year.
Feedback from Roger Wohlner, CFP
Kudos on continuing to live within your means and your continued savings and investing even without the benefit of an employer sponsored retirement plan. Your current habits, if maintained, will provide you with a great start towards financial security and independence throughout life.
Feedback from Jacob Wade
The thing that impresses me the most is how small your transportation expenses are. That is the absolute key to your financial success. Most people with a $200 per month car payment also pay $100 per month for auto insurance and $200 per month to gas up their vehicles. Throw in maintenance, and the budget drain is enormous! But if you can keep your transportation expenses under $100 a month, you’ve freed up a ton of cash flow to build your investment portfolio and net worth very quickly.
So my question is, what are you long term goals? Sure, a huge net worth is going to be awesome, but then what? I suggest writing out your priorities and setting up 3, 5, 10 and 20 year goals to aim for. Once you have the big picture in mind, you can work backwards to fill in the detailed steps that will get you to those goals. You’re on a great path, and setting up big goals will keep you motivated to keep rockin’ it!
Feedback from Luke Landes
Jacob hits the major points. To live within year means, you’re doing without a car. That’s a great choice for you, especially with the feasibility of public transportation. Still, these are choices you consciously made that will have a long-term positive effect on your ability to grow wealth over the long time (and use that wealth to meet the real goals you may have for yourself).
Shifting some of your investment portfolio from I-Bonds to taxable investments — I’m assuming stocks — is probably a good move for the long-term, provided you’re well diversified. Your retirement account is in a great place for your age, at least comparatively, so keep moving forward at the same pace if you can.